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Writer's pictureShekhar Yadav

Book Review: One Up on Wall Street by Peter Lynch

Updated: Jul 14, 2021

Well, if you are looking for some influential books with respect to stock market investments, “One Up on Wall Street” by the famous Mutual fund manager Peter Lynch is one of the most revered. 

It was one of my earliest books which I has read while in college that have helped me shape my investment philosophy. 

Peter Lynch got prominence while his tenure as the Mutual Fund manager at “Fidelity’s Magellan Fund”. Market had not seen such stellar returns as given by him during his role as fund manager between 1977 & 1990. And the return on an annualized basis was a whopping 29.2%. With the lure of such out sized return, the fund size was bound to grow which skyrocketed from $18Mn in 1977 to $14Bn in 1990.


 

Key Takeaways: One Up on Wall Street

The main theme of this book is not to follow blindly the so called experts & look around you in quest of your next multibagger stock and then do your research before investing in that particular company. That’s the ONLY way to make fortune in the market. A lot of emphasis has been placed on finding & researching companies that you see in your day to day life. That helped me find companies such as Force Motors & KRBL. When I invested in Force motors in 2012, it was dominating the small bus segment and can be seen omnipresent. Similarly, when after speaking to retailers near me and going through KRBL financials, I invested in the company in 2014.

Book Review: One Up on Wall Street by Peter Lynch

Small is beautiful

One of my philosophies of investment in small cap stocks is borrowed from Peter Lynch’s approach. And if you want to get rich from the stock market this is the only way according to me. Large cap stocks can just make you just good enough money.

Big companies don’t give big returns. It’s the mid & the best ones are small. Fast growth companies are darling of stock market which are mostly the small ones.

Book Review: One Up on Wall Street by Peter Lynch

Peter Lynch's Personality Traits to be a successful investor


 

Do's & Dont's for Stock market investment

Pointers to look after according to the book and my two cents on those pointers.

  1. Don’t invest if might need the money in short term: In that case you need to liquidate your holding & not giving time for your investment to grow won’t reap any benefit.

  2. Invest in company with Niche: Companies having the ability to increase sales despite increasing the pricing of the product has a lot going into its favor. Example would be Eicher, Prestige, VIP Industries.

  3. Buy unknown & wait for the market to notice it: Although many influential investors have said this but this strategy is fraught with risk of too much time taken for market to recognize the companies potential or change in market scenario in between, thus causing you loss of opportunity. Its better to track these companies and get in once the market starts talking about it. Will reduce the return to some extent but also will reduce the risks significantly.

  4. Every company should be looked independently

  5. If a stock is down but the fundamentals are positive, its best to hold on or buy more

  6. Avoid companies that diworsify: Unrelated diversification first of all diverts management’s attention as well as stretches the acquirer’s balance sheet by the acquisition cost(mostly overpaid) or acquirer having to learn about the industry only after acquisition.

  7. Avoid rumors 

  8. Don’t listen to experts

  9. Investment without research is as good as gamble

  10. Avoid hot stocks

  11. Buy boring companies

  12. Avoid companies with major revenue company from a single client: If the primary clients walks out so does the fortune of the company. Example would be Kolkata based RS Software, where the company’s revenue dropped from ₹375 cr in 2015 to ₹60 cr in 2018 when its largest client Visa which contributed 90% of revenue for RS Software, terminated the contract. Similarly, there is one more company called “Shaily Engg” which derives more than 50% of revenue from IKEA & runs the risk of a similar fate as that of RS Software.

  13. Avoid companies where you don’t understand the business:People are more comfortable investing in something which they don’t understand. And put your entire money into it just to appear smarter.

 

STOP LISTENING TO PROFESSIONALS

The early Greeks used to sit around for days & debate on how many teeth a horse has. They thought they could figure out by just sitting there, instead of checking the horse. Similarly, Analysts sit around & debate whether a stock is going up as if the financial muse will give them the answer rather than going out and checking the company. 

Even if you look at mutual fund performance, only a few have beaten the index.

 

One of the most important learning from the book is that “You should be able to tell the story of the company in the simplest of language.” Although it seems like a no brainer but you should give it a shot.

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