Beating The Street – Book Summary
Do your own research
To invest before you have done research is dangerous. It is therefore important to understand the company behind the stock you are buying. Your edge in investing does not depend on Wall Street opinions but on the knowledge you have about a company. You have to research company before you put money in it.
If you can’t do the research invest into an index fund. Not studying the company that you want to invest in is like playing poker without checking your cards. By understanding the reasons for past sales growth will help you to have a good judgment as to the likelihood of past growth rates continuing.
When you invest in stock market you should always diversify.
You should invest in several stocks because out of every 5 you pick, 1 will be very great, 1 will be really bad and 3 will be ok.
Never fall in love with a stock, always have an open mind.
Do your homework before you pick a stock.
Buying stock in utility companies is good it gives higher divided.
Over a long term it’s better to buy stocks in small companies.
You should not buy stocks because it is cheap but because you know more about it.
Buy share automatically every month, by so doing you will benefit from that self-discipline.
Your portfolio should not have less than 5 stocks (Rule of 5)
When analysis are boring is the time to start buying.
Making money in stocks is a combination of science, art and legwork
Stock-picking is a science, as you have to investigate before investing the numbers presented in the company financial statement. You can also look for others factors like growth sale and earning, low debt, a reasonable price share buybacks. More than that, learn what drives sale and what can make them grow in the future, things that will trigger that (this is now art part of it). Your answer to what might trigger sale should be so simplified that you can explain it to the fifth grader. After that, comes the legwork, stay busy, visit some companies you’re interested in and read their financial reports. If you visit 10 companies you will find that 1 will be doing great, if you visit 50 companies you might find that 5 are doing great. The busy you stay at legwork, the more seeds you sow the more the harvest will be, if you visit 100 companies you might find 10 or doing pretty great than how the media is expressing.
During his time at Magellan, Peter Lynch would visit more than 200 companies and read around 700 annual reports a year, this was help know as much as possible about the company and learn potential facts overlooked by Wall Street. To Peter Lynch asking the CEO about competitors that they respect the most was important. It is a strong endorsement when a CEO that reveals positive information about a competitor.
Hold no more stocks than you can remain informed on.
Too many people are all over the place, they are too much diversified that they cannot be able to focus and track the companies they have invested in.
Invest regularly.
Investing in stock should always be a continuous activity.
Search for great companies in lousy industries.
For instance, many will opt to invest in tech industries and not in industries such as energy equipment services, metal and mining et al, but in Beating The Street, Peter Lynch advice people to ignore the ‘hottest’ industries as they attract competition quicker and that will make their stock price to drop while the latter industries continue to enjoy profitability. In incisive manner, AVOID HOT STOCK in hot industries, look for great companies in cold, non-growth industries.
Buy the best companies in troubled industries. Wait for it to show revival signs.
Good management is very important – buy good businesses.
Gentlemen who prefer bonds don’t know what they’re missing.
As long as you’re picking a fund, you might as well pick a good one.
Unless you’re a short seller or a poet looking for a wealthy spouse, it never pays to be pessimistic.
Be flexible and humble, and learn from mistakes.