One Up On Wall Street: How To Use What You Already Know To Make Money In

by Peter Lynch

In fact, most great investors I know (Warren Buffett, for starters) are technophobes.

most dot.coms can’t be rated using the standard price/earnings yardstick.

Meanwhile the box makers that ran Microsoft programs (Dell, Hewlett-Packard, Compaq, IBM, and so on) waged fierce price wars to sell more boxes. This endless skirmish hurt the box makers’ earnings, but Microsoft was unaffected. Bill Gates’s company wasn’t in the box business; it sold the “gas” that ran the boxes.

did the 'box' makers then not put pressure on Microsoft for more margin? That's what I had heard of in '4 hour workweek'

An amateur investor can pick tomorrow’s big winners by paying attention to new developments at the workplace, the mall, the auto showrooms, the restaurants, or anywhere a promising new enterprise makes its debut.

Peter Lynch doesn’t advise you to buy stock in your favorite store just because you like shopping in the store, nor should you buy stock in a manufacturer because it makes your favorite product or a restaurant because you like the food. Liking a store, a product, or a restaurant is a good reason to get interested in a company and put it on your research list, but it’s not enough of a reason to own the stock! Never invest in any company before you’ve done the homework on the company’s earnings prospects, financial condition, competitive position, plans for expansion, and so forth.

If you own a retail company, another key factor in the analysis is figuring out whether the company is nearing the end of its expansion phase—what I call the “late innings” in its ball game. When a Radio Shack or a Toys “R” Us has established itself in 10 percent of the country, it’s a far different prospect than having stores in 90 percent of the country. You have to keep track of where the future growth is coming from and when it’s likely to slow down.

Few random quotes from this book I'm reading.

Nothing has occurred to shake my conviction that the typical amateur has advantages over the typical professional fund jockey.

Beyond that, I’m still harboring an ample supply of clunkers that sell for considerably less than the price I paid. I’m not keeping these disappointment companies because I’m stubborn or nostalgic. I’m keeping them because in each of these companies, the finances are in decent shape and there’s evidence of better times ahead.

a cheap stock can always get cheaper. Someday, Bethlehem Steel may rise again. But assuming that will happen is wishing, not investing.

Looked up on that company's Wikipedia page. It never rose again!

It’s true that interest rates are lower today than they were in 1989, so you’d expect yields on bonds and dividends on stocks to be lower.

If anybody’s responsible for the disappearing dividend, it’s the U.S. government, which taxes corporate profits, then taxes corporate dividends at the full rate, for so-called unearned income. To help their shareholders avoid this double taxation, companies have abandoned the dividend in favor of the buyback strategy, which boosts the stock price.

Long-term investing has gotten so popular, it’s easier to admit you’re a crack addict than to admit you’re a short-term investor.

People are advised to think long-term, but the constant comment on every gyration puts people on edge and keeps them focused on the short term.

These so-called advance/decline numbers paint a more realistic picture. Never has this been truer than in the recent exclusive market, where a few stocks advance while the majority languish. Investors who buy “undervalued” small stocks or midsize stocks have been punished for their prudence. People are wondering: How can the S&P 500 be up 20 percent and my stocks are down?

One of the numerous biotech mutual funds might be worth a long-term commitment for part of your money.

Then, in the bear market of 1973–74, the Nifty Fifty fell 50–80 percent! This unsettling decline disproved the theory that big companies were bearproof.

When you sell in desperation, you always sell cheap.

Stop listening to professionals!

Dumb money is only dumb when it listens to the smart money.

small investors tend to be pessimistic and optimistic at precisely the wrong times, so it’s self-defeating to try to invest in good markets and get out of bad ones.

Investing in stocks is an art, not a science, and people who’ve been trained to rigidly quantify everything have a big disadvantage.

All the math you need in the stock market (Chrysler’s got $1 billion in cash, $500 million in long-term debt, etc.) you get in the fourth grade.

Actually Wall Street thinks just as the Greeks did. The early Greeks used to sit around for days and debate how many teeth a horse has. They thought they could figure it out by just sitting there, instead of checking the horse.

If your first stock is as important to your future in finance as your first love is to your future in romance, then the Flying Tiger pick was a very lucky thing.

“Stocks you trade, it’s wives you’re stuck with,”

efficient-market hypothesis

the random-walk hypothesis

so between theory and practice, I cast my lot with the practitioners.

The hitch was that these were Maine farmers, and Maine farmers are very cautious.

I did it because when I saw a bargain I couldn’t resist buying it, and in those days there were bargains everywhere.

The secret of his success is that he never went to business school—imagine all the lessons he never had to unlearn.

These notable exceptions are entirely outnumbered by the run-of-the-mill fund managers, dull fund managers,

My wife once did some research into the popular theory that great inventions and great ideas come to people before they reach thirty.

These may be reasonable concerns that merit investigation, but often they’re used to fortify snap judgments and wholesale taboos.

if no great book or symphony was ever written by committee, no great portfolio has ever been selected by one, either.

He wastes so many hours talking to Flint about picking good stocks that he has no time left to do his job.