Thanks to Street Smarts, I was introduced to One Up On Wall Street by legendary investor – Peter Lynch & John Rothchild.
If there is one book, which people interested in equities, especially beginners, have to read, then it is One Up On Wall Street. Simple language, smart concepts and splendid logic.
Peter Lynch managed the Magellan Fund at Fidelity Investments from 1977 to 1990, averaging a 29% return(as opposed to a normal 9-10% return). This book is a tribute to the mankind from the genius.
Amid all the ideas discussed in this book, one particular idea to call out is – understanding why you own an equity. When you buy an equity, you buy it for a reason – something that you believe in. This holds true for the entire time you own the equity. This will also determine when you should sell it. Despite the complex analysis you do, you need to remember the fundamentals – the company needs to be simple enough for an idiot to run. The idea of simplicity amid complexity.
The best example of simplicity(which I often quote) is Google. Although there are numerous complex algorithms running behind the search engine, for the user, the search page is unbelievably simple. 6 letters – GOOGLE, a search box & hit! Same goes with Apple.
Now, this book was first published in 1989, before the internet era. Times have changed, the method by which you evaluate tech companies is completely different (eg: Amazon). Although some of the methods specified in the book is not applicable to certain industries(like tech), One up Wall Street, even today, holds good for a majority of the sectors. The ideas expressed are so lucid that you can possibly use it as a framework for developing your own method.
Certain terms, such as a ten bagger, is coined by Peter Lynch. These set the standards that you can expect from this book. While One Up On Wall Street definitely helps you in understanding equities, I would like to highlight the importance of learning over knowing, a principle that is hidden in almost every page. At every stage, Peter Lynch “learns”, he does not “know”. This fundamental principle makes him succeed, almost every time.
One Up On Wall Street is a charm, embrace it. Definitely a must read.