One up on wall street how to u
One up on wall street how to u
One Up On Wall Street : How To Use What You Already Know To Make Money In The Market by Peter Lynch
As the title suggests, this book proves that successful investing can be achieved by almost anyone and not just the Wall Street investment gurus with some stock research and discipline in the field. In the initial chapter of the book, Lynch provides an honest opinion to everyone who is new to investing. His advice is that “only invest in what you can afford to lose without that loss
having an effect on your daily life in the foreseeable future”. He emphasizes on one’s financial security before one plunges into the the world of investing. For example, he suggests that one should own house before one invests into stocks. Further, he advices to “Invest in what you know”. This is one of Lynch’s basic investing strategies. He suggests that opportunities for making a great investment can be found in the companies right next to you. Local companies that you understand and have a first hand experience make for a great investment provided further research is done on them. Common people can grab the opportunity of good returns even before the Wall Street expert validates the worthiness of the company by investing in them.
Next, he proposes classifying the stocks into different buckets first to arrive at the right price of the stock. Slow growers or sluggards are “large and aging” companies that are characterised by a small growth rate of 2–5%, but provide a generous and stable flow of dividend. Lynch’s obvious advice is to constitute a smaller portion of the portfolio with these stocks. Stalwarts are average
growth established companies having a that have a earnings growth rate of 10–12%. They provide high returns but only in the long run. Since these companies have one of the best fundamentals and make normal profits, he suggests holding a few stalwarts in the portfolio. Fast growers are as Lynch puts it, “small, aggressive new enterprises that grow at 20–25% a year”.
Lynch’s favorite category of the six different stocks were fast-growers and he primarily prefers fast-growers which were in a slow-growth industry. Cyclical companies expand and contract repeatedly unlike the fast growers that continually expand. Their revenues and profits move up and fall down in an unpredictable way. Lynch advises to time the investment in these companies
to reap the benefits of the right cycle. Turnarounds are distinct from the slow gowers and are identified as “no growers”. They turnaround or rebound from their battered, depressed state to provide good returns in a period of a few years. Asset plays are assets like land, property or even cash that has been overlooked by the market when valuing the company’s stock. Lynch recommends owning these stocks since their worth is normally undervalued.
One up on wall street how to u
Перед тем как начать покупать акции надо задать себе 3 вопроса:
Питер Линч разделяет все компании на 6 категорий:
Как найти отличную акцию:
Общие советы Питера Линча (могут повторяться с другими фрагментами этого обзора):
Разные «психологические» советы
Линч в книге привел интересную таблицу, где показаны компании, акции которых сильно росли. Вывод такой, что это могут быть компании из любой отрасли – как из быстрорастущих, так и депрессивных
«Для меня инвестиции – это азартная игра, но когда ставки в твою пользу» © Питер Линч
Линч почти не обращал внимание на макроэкономику, а предпочитал анализировать бизнесы
Питер Линч про P/E
Инвестиции в «горячие»/хайповые отрасли
Про «разворотные» компании:
Про балансовую стоимость (book value)
Про пенсионные обязательства:
Про темпы роста:
Про шорты, опционы и доллары:
Как найти фонд в которой вложиться:
Про диверсификацию портфеля:
Финальный чек лист Питера Линча:
Какие акции избегает Питер Линч:
Про продажу/покупку акций:
Когда продавать медленно растущую компанию:
Когда продавать тяжеловеса:
Когда продавать цикличную компанию:
Когда продавать быстрорастущую компанию:
Когда продавать «разворотную» компанию:
Когда продавать компанию с ценными активами:
Разные глупые фразы о ценах акций:
Питер Линч о других инвесторах:
Самая практичная книга про инвестиции, что я встречал. Здорово, если вы осилили весь обзор
One Up on Wall Street – Peter Lynch on principles for investing
Peter Lynch, Magellan’s former fund manager, suggests that average investors who become experts in their own field can pick winning stocks effectively with a little research. Lynch looks to buy great companies that he believes the market has undervalued and underappreciated. This is a practical approach that many investors can learn from. His investment principles and methods are outlined in his book, One Up on Wall Street: How To Use What You Already Know to Make Money in the Market, which we review briefly below.
Jump ahead
Look for dull and boring stocks
Peter Lynch likes companies that sound dull, ridiculous, boring, depressing or unappealing. He likes spinoffs. He likes companies that institutions do not own, and analysts do not follow. He likes companies that have a niche, where people must keep buying its product and service, and is a user of technology. All this even if it is a no-growth industry.
Ownership and buybacks are good signals
He views company share buybacks and high employee and executive stock ownership as a positive signal. This is because rewarding shareholders becomes a priority when management owns a large amount of its company’s stock.
Conversely, Lynch is careful not to overreact to insider selling as this can occur for a variety of reasons. He may take notice however if most managers are selling most of their shares.
Avoid the long shots and hottest stocks
Peter Lynch prefers to avoid the hottest stock in the hottest industry; stocks that are heralded as the next big something; longshot companies at the cusp of solving the latest national problem; and stocks with the most exciting name. He also dislikes whisper stocks that attract imaginative, complicated and emotionally appealing stories.
Stocks that receive significant positive attention have greater risk of being over-bought and over-priced. High growth businesses in popular industries with low barrier to entry attracts a lot of competition and imitation. The underlying earnings and cashflows of these companies are often something left to be desired.
Beware bad acquisitions and the middleman
Lynch also avoids ‘diworseifications’. These are companies that consistently pursue acquisitions that are overpriced and beyond the acquirer’s realm of understanding.
Such corporations tend to alternate between ‘diworseification’ and restructuring. He may however look at an overpaid target or restructure that expects a successful turnaround. However, this can be difficult to foresee.
He is also wary of the ‘middleman’, which describes a company that sells most of its products or services to a single customer. This can sometimes become a risky position very quickly.
Peter Lynch is also wary initial public offerings of brand-new enterprises. New companies with limited information are inherently risky.
Develop the company growth story
Discovery is not a buy signal. You should spend a couple hours to develop the story of your stock. It is important to understand how the success of a product or service will affect the company’s bottom line.
Before purchasing a stock, you should be able to give a two-minute monologue on the prospects and detractors to a company’s story and its outlook.
Peter Lynch typically devotes several hours to development of a company’s script and checks his story every few months. Chatting with investor relations can be a helpful exercise.
You may learn something out of the ordinary in about one out of every ten calls. If a company is renowned or purchased for a specific product or service, it is important to understand what percentage of sales it accounts for.
A company’s growth cycle consists of about three phases: start-up, rapid expansion and maturity. A company in the first phase is generally regarded as riskiest since its success is not yet established.
The second phase is safer and where money is more reliably made. This is where the company grows through duplication of its formula for success.
Finally, the third phase is troublesome since the company should eventually run into its own limitations and must find new or better methods to grow or maintain earnings.
Peter Lynch likes to ask a variety of general questions to help understand the story of a stock:
Categorise your investments to ask better questions
Peter Lynch will also compare the size of the company relative to its industry competitors. He will then classify the company of interest into one or more of the following growth categories to guide his analysis: (1) slower growers; (2) stalwarts; (3) fast growers; (4) cyclicals; (5) asset plays; and (6) turnarounds. This helps him to ask the right questions about the company’s outlook and how value might be returned to shareholders.
(1) Slow growers are large and ageing companies that may grow slightly faster than its country’s gross national product. The companies tend to pay a generous and regular dividend.
Example questions to ask:Are dividends consistently paid and growing? Is the dividend payout ratio low to provide a cushion for hard times?
(2) Stalwarts are usually large national or multinational companies. Stalwart growth prospects are somewhere between a fast and slower grower.
Example questions to ask: Is the P/E ratio relatively low (to avoid overpaying)? Is there evidence of poor acquisitions? What is the long-term growth rate? Is it consistent? How has the company fared during downturns?
(3) Fast growers are small, aggressive and new enterprises that grow between 20 to 25 percent a year. Although risky, Peter Lynch likes fast growers with a good balance sheet and have made substantial profits.
Example questions to ask: Is the high growth product a major part of the company’s business? What is the earnings growth rate? Does it have room to duplicate and grow? Is the stock trading at a P/E ratio at or below its growth rate? What is the percentage of institutional ownership (lower is preferable)?
(4) Cyclicals are companies whose sales and earnings expand and contract from period to period. Airline, automobile, steel and chemical companies are common examples here. Timing is critical for successful investing in cyclical industries and companies. Investors will need an edge at detecting the early signs of business fall-off or pick-up.
Example questions to ask: Are you paying attention to inventories? Are there new and significant entrants? Do you have an advantage in anticipating and understanding industry movements?
(5) Turnarounds are no-growers, poorly managed cyclicals and companies near bankruptcy but with some prospect for a comeback.
Example questions to ask: Can it survive creditor raids? How much cash and debt does it have? What is its debt structure and how long can it survive without facing bankruptcy? What is the turnaround strategy?
(6) Asset plays are companies that own something valuable but has been overlooked and unpriced by Wall Street.
Example questions to ask: What is the value of assets? Are there hidden assets? How much debt is there? Is the company borrowing more and devaluing net assets? Is there a raider who can help return cash to shareholders?
Review key financial ratios and numbers
Peter Lynch feels that investing is an art and that attempts to quantify everything rigidly can become a disadvantage. That said, investors should review a company’s financial position to understand the story of their companies.
Lynch shares his reflections on commonly used ratio such as the price-to-earnings ratio and book value, summarised briefly as follows.
Price to earnings
The P/E ratio is a useful measure of fair value relative to the company’s earning potential. It can be thought of as the number of years a company might take to earn back your initial outlay if earnings remained constant. The ratio is generally low for slow growers, high for fast growers, and variable for cyclicals.
The P/E ratio should be compared to historical averages and competitors for context. Investors tend to pay more for stocks when interest rates are low, bonds are relatively less attractive, and/or when optimism is widespread.
A P/E ratio of any company that is priced fairly should equal its growth rate (long-term growth rate plus the expected dividend yield).
Peter Lynch expects a company with a P/E ratio of 15 to grow at around 15 percent a year. A P/E ratio that is less than its growth rate is a potential bargain.
Companies typically have five methods to increase earnings: reduce costs, raise prices, expand into new markets, sell more to old markets, or close and dispose.
Net cash and debt
Net cash position and debt reduction can be a good sign of prosperity. This is the difference between cash (incl. cash items and marketable securities) and long-term debt. An increase in cash relative to debt is an improvement in the balance sheet.
To make it a quick exercise, Peter Lynch makes a simplifying assumption that the company’s other assets (e.g. inventory) are enough to cover short-term debt. The total debt factor is an important consideration. A debt-to-capital ratio of less than 10% is a strong balance sheet.
Debt determines whether a company is more likely to survive crises, turnarounds and/or early stage growth. The type and structure of debt is important too. Bank debt or ‘due on call’ debt, where lenders can ask for their money back at any sign of trouble, is risky. Funded debt is typically more favourable to shareholders since lenders cannot demand immediate repayment.
Buybacks and dividends
The next, a ten-year financial summary can provide a helpful picture of the company’s performance. Share buybacks overtime is usually a positive signal. Dividends can also affect the value and stock price of a company over time.
Many companies that do not pay dividends tend to misallocate capital and overpay for acquisitions. Slow growers that do not pay dividends may lower cash returns to shareholders – a potentially difficult situation.
Book value
Book value may bear little relationship to a company’s actual worth. It can understate or overstate reality. Overvalued assets are misleading and dangerous, particularly if there are high amounts of debt.
Conversely, companies that own natural or hidden assets (e.g. land, oil, metals, etc.) will record book values and not necessarily reflect true market value.
Free cash flow
Free cash flow is the cash left after normal capital spending. A ten percent return on cash should typically reflect the ten percent hurdle that individuals expect from owning a stock long term.
Companies with modest earnings can be great investments on a free cash flow basis. Companies with large depreciation allowances and lower reinvestment needs can enjoy greater tax breaks.
Inventories
When inventory growth exceeds sales growth, it is a potential red flag. Conversely, if inventories of a recently depressed company begin to deplete, it could be evidence of a potential turnaround.
Pension plans
It is important to check that a company does not have large pension obligations that it will not be able to meet.
Growth rate
Growth is not synonymous with expansion. The only growth that ultimately matters is earnings. A company that can raise prices year-on-year without losing customers or market share may be a good investment.
All else equal, a company that grows at 20% per annum at a P/E of 20 is more attractive than a company that grows at 10% per annum at a P/E of 10 (you can check the math yourself).
Profits
Profit after tax is your bottom line but pre-tax profit margin is helpful for cross-company comparisons. A company with a higher profit margin is lower cost operator by definition and better placed to survive industry and economic downturns. It is a measure of staying power during difficult times.
Buy stocks in good companies at great prices
Peter Lynch’s investment philosophy shares similarities with Warren Buffett’s approach. He looks for high-quality businesses at fantastic prices.
Winners tend to raise their bets when the position improves and exit when favourable odds worsen. He feels that a market is probably overvalued if he cannot find a company that is reasonably priced under his investment criteria.
Finding investment bargains
Bargains tend to occur on two occasions. The first is the end-of-year tax selling that often occurs between October and December. During the holidays, brokers and investors like a little spending money for the holidays.
Portfolio managers also like to remove losers for upcoming portfolio reviews. Hence, it is not uncommon for companies to trade at a discount during these periods.
The second bargain opportunity is a market collapse or freefall. These tend to occur every few years. In both the first and second bargain, margin players and margin calls may lead to even greater sales of cheap stocks.
Selling sometimes begets more selling. If you have the stomach during these episodes, you may find opportunities at prices you haven’t seen before.
Know when to sell your stocks
Peter Lynch avoids automatic selling strategies (e.g. selling winners and holding losers) and chooses to stick with companies if the companies’ stories continue to stay or improve.
For cyclicals and turnarounds, he may consider an exit when the company’s fundamentals worsen and its price increases; and entry when the company’s fundamentals improve but the price worsens.
Peter Lynch tends to sell slow growers after a 30-50% appreciation and/or when fundamentals have deteriorated (regardless of price). He may consider selling stalwarts when their P/E moves positively outside their normal range. He may replace it with an undervalued stalwart or consider re-entry at a lower price.
For fast growers, he looks for the second phase of growth or transition into maturity. P/E ratios can reach astronomical levels for fast growers before steep corrections emerge.
Manage noise and temperament
We sometimes confuse cause and effect because Wall Street appears to have an explanation for why the market has gone up or down every day.
When there is a lot of good news and many investors feel confident, the risk of economic under-performance is likely to be higher. We tend to prepare more for the last thing that has happened rather than what might happen next.
Small investors also tend to become pessimistic and optimistic at the wrong times. Unwary investors will move between emotional states of concern, complacency and capitulation.
If the stock’s price is down but its fundamentals are positive, it is probably better to hold on and/or buy more. While new and reasonable concerns merit investigation, we should not allow this to spur snap judgements. It can be self-defeating to time-the-market.
Common sense, patience, self-reliance, pain tolerance, open-mindedness, detachment, persistence, flexibility, humility and independence are invaluable traits for successful investors. The ability to admit mistakes, ignore general panic, make decisions without perfect or complete information, and resist your ‘gut feelings’ are important as well.
Watch for dangerous sayings
A good investment is a gamble with the odds tilted in your favour. In equity markets, it is the company’s earnings that will determine the long-term quality of that company’s stock value.
Investors sometimes confuse current price with value, and their skill with outcome. If you catch yourself making any of the following dangerous sayings, it is important to reassess the quality of your decision making and investment approach, and understanding of the stock’s growth story:
Further reading
Lynch, P. (2000). One Up On Wall Street: How To Use What You Already Know To Make Money In The Market.
One Up On Wall Street: How To Use What You Already Know To Make Money In the Market
By Peter Lynch, Jan/1989(318p.)
Written in the 1980s by the fabled Fidelity portfolio manager, this book was responsible for sparking my interest in fund management. At the time I first read it, I was still in graduate school, preparing for a career in Aerospace Engineering. I believed then in Lynch’s argument that, “anyone could do it,” and I took the plunge by opened an e-trade account in my mid-20s. At 52 years and still doing it, I have come to respect experience and long track records more than I used to when I was younger. That said, I agree with what Gautam Baid stated in his book, The Joys of Compounding (Victori review): “Knowledge comes from experience, but it doesn’t have to be your experience.”
Lynch is famous to this day for having one of the best track records in the business. He put up an annualize return of 29% from the late-1970s, when he was in his mid-20s, through his retirement in 1991, at just 46. Tragically, Fidelity found that the average investor in Lynch’s fund actually lost money because they redeemed in periods of underperformance. But at least they did better than the investors who chased high flyers from the previous generation. Kenneth Heebner, for example, ranked as America’s No. 1 fund manager in the 1990s before losing his touch and most of his assets. According to one article from 2013 (link), the then-71 year old manager never lost his swagger after ranking at the bottom of his peer group by losing 6% on average in the decade through 2007. This other article from 2008 (link) reports that the “legendary fund manager goes from penthouse to outhouse,” and this one from 2016 (link) says Heebner’s “venerable Boston mutual fund shut its doors after 48 years.” Go back another generation (to the 1960s Go-Go years), and there are even more glaring examples of Wall Street’s proclivity for roadkill, including Gerald Tsai (Wikipedia link), who helped build Fidelity into the behemoth it is today, but his fund, which was packed with the glamour stocks of the day, lost 90% of its value in 1969. After that, Tsai left Fidelity and started his own fund, Tsai Management, but in 1973 sold the firm and retired. Later Tsai resurfaced as the CEO of American Can Company, so I am sure he did ok. The bottom line is that Lynches best trade ever may have been to exit the business while he was still on top.
One of the key lessons I learned from Lynch’s story and that of other Wall Street legends is that it not only pays to avoid glamour stocks, but also the glamour managers. As I look around today, I see some highly successful, and still young, glamour-stock fund managers who would probably do best to follow Lynch’s example of leaving while the going is still good. At the end of the book Lynch offers a list of analysts and fund managers of his time. I highlighted these two lists and reproduced it below because I was impressed by how few of the names I know. While it was before my time, it reminded me of an old saying my late father in law often uttered: “The cemetery is full of irreplaceable people.” By extrapolation, I’d say that if there were a cemetery for Wall Street firms, it would also be packed.
One Up on Wall Street has become timeless for its classic one-liners. Phrases like “dumb money is only dumb when it listens to the smart money,” or “Investing without research is like playing stud poker and never looking at the cards,” or “you don’t have to kiss all the girls,” remain lexicons to this day. Here are my top 5, but I underlined dozens in the highlighted passages below:
My favorite part though, was the list of twelve silliest (and most dangerous) things people say about stocks:
In conclusion, even though Peter Lynch’s book was written more than three decades ago, and even though the fund management business has changed dramatically since ETFs were introduced in the 1990s, it is definitely a worthwhile read. It shows how some things never really change, and it offers one of the best collection of stock stories I have come across. For those interested in investing who have not read it, or have read it only once a long time ago, I recommend it.
Highlighted Passages :
Introduction to the Millennium Edition
Never before has the market recorded more than two back-to-back 20 percent gains.
All along I’ve been technophobic. My experience shows you don’t have to be trendy to succeed as an investor. In fact, most great investors I know (Warren Buffett, for starters) are technophobes. They don’t own what they don’t understand, and neither do I. I understand Dunkin’ Donuts and Chrysler, which is why both inhabited my portfolio. I understand banks, savings-and-loans, and their close relative, Fannie Mae. I don’t visit the Web. I’ve never surfed on it or chatted across it. Without expert help (from my wife or my children, for instance) I couldn’t find the Web.
To my mind, the stock price is the least useful information you can track, and it’s the most widely tracked. When One Up was written in 1989, a lone ticker tape ran across the bottom of the Financial News Network.
Prologue: A Note from Ireland
I’ve always believed that investors should ignore the ups and downs of the market.
When you sell in desperation, you always sell cheap.
To all the dozens of lessons we’re supposed to have learned from October, I can add three: (1) don’t let nuisances ruin a good portfolio; (2) don’t let nuisances ruin a good vacation; and (3) never travel abroad when you’re light on cash.
prefer to write about something you might find more valuable: how to identify the superior companies. Whether it’s a 508-point day or a 108-point day, in the end, superior companies will succeed and mediocre companies will fail, and investors in each will be rewarded accordingly.
Introduction: The Advantages of Dumb Money
But rule number one, in my book, is: Stop listening to professionals! Twenty years in this business convinces me that any normal person using the customary three percent of the brain can pick stocks just as well, if not better, than the average Wall Street expert.
Dumb money is only dumb when it listens to the smart money.
In my business a fourbagger is nice, but a tenbagger is the fiscal equivalent of two home runs a
The first stock I ever bought, Flying Tiger Airlines, turned out to be a multibagger that put me through graduate school.
The effect is most striking in weak stock markets—yes, there are tenbaggers in weak markets.
The more right you are about any one stock, the more wrong you can be on all the others and still triumph as an investor.
Part I: Preparing to Invest
There’s no such thing as a hereditary knack for picking stocks.
The Lynch Law, closely related to the Peter Principle, states: Whenever Lynch advances, the market declines.
Distrust of stocks was the prevailing American attitude throughout the 1950s and into the 1960s, when the market tripled and then doubled again. This period of my childhood, and not the recent 1980s, was truly the greatest bull market in history, but to hear it from my uncles, you’d have thought it was the craps game behind the pool hall. “Never get involved in the market,” people warned. “It’s too risky. You’ll lose all your money.”
As I look back on it now, it’s obvious that studying history and philosophy was much better preparation for the stock market than, say, studying statistics. Investing in stocks is an art, not a science, and people who’ve been trained to rigidly quantify everything have a big disadvantage.
As for Will Rogers, he may have given the best bit of advice ever uttered about stocks: “Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.”
To the list of famous oxymorons—military intelligence, learned professor, deafening silence, and jumbo shrimp—I’d add professional investing.
“Gentlemen prefer bonds.”—Andrew Mellon
Is This a Good Market? Please Don’t Ask
During every question-and-answer period after I give a speech, somebody stands up and asks me if we’re in a good market or a bad market.
I always tell them the only thing I know about predicting markets is that every time I get promoted, the market goes down. As soon as those words are launched from my lips, somebody else stands up and asks me when I’m due for another promotion.
Obviously you don’t have to be able to predict the stock market to make money in stocks, or else I wouldn’t have made any money.
Since the stock market is in some way related to the general economy, one way that people try to outguess the market is to predict inflation and recessions, booms and busts, and the direction of interest rates. True, there is a wonderful correlation between interest rates and the stock market, but who can foretell interest rates with any bankable regularity?
Of course, I’d love to be warned before we do go into a recession, so I could adjust my portfolio. But the odds of my figuring it out are nil. Some people wait for these bells to go off, to signal the end of a recession or the beginning of an exciting new bull market. The trouble is the bells never go off. Remember, things are never clear until it’s too late.
THE COCKTAIL THEORY If professional economists can’t predict economies and professional forecasters can’t predict markets, then what chance does the amateur investor have? You know the answer already, which brings me to my own “cocktail party” theory of market forecasting,
In the first stage of an upward market—one that has been down awhile and that nobody expects to rise again—people aren’t talking about stocks. In fact, if they lumber up to ask me what I do for a living, and I answer, “I manage an equity mutual fund,” they nod politely and wander away.
Stage two: When ten people would rather talk to a dentist about plaque than to the manager of an equity mutual fund about stocks, it’s likely that the market is about to turn up. In stage two, after I’ve confessed what I do for a living, the new acquaintances linger a bit longer—perhaps long enough to tell me how risky the stock market is—before they move over to talk to the dentist. The cocktail party talk is still more about plaque than about stocks. The market’s up 15 percent from stage one, but few are paying attention.
In stage three, with the market up 30 percent from stage one, a crowd of interested parties ignores the dentist and circles around me all evening.
In stage four, once again they’re crowded around me—but this time it’s to tell me what stocks I should buy. Even the dentist has three or four tips, and in the next few days I look up his recommendations in the newspaper and they’ve all gone up.
Part II: Picking Winners
Investing without research is like playing stud poker and never looking at the cards.
THE SIX CATEGORIES Once I’ve established the size of the company relative to others in a particular industry, next I place it into one of six general categories: slow growers, stalwarts, fast growers, cyclicals, asset plays, and turnarounds.
THE SLOW GROWERS Usually these large and aging companies are expected to grow slightly faster than the gross national product. Slow growers didn’t start out that way. They started out as fast growers and eventually pooped out, either because they had gone as far as they could, or else they got too tired to make the most of their chances. When an industry at large slows down (as they always seem to do), most of the companies within the industry lose momentum as well. Electric utilities are today’s most popular slow growers, but throughout the 1950s and into the 1960s the utilities were fast growers, expanding at over twice the rate of GNP.
In the 1970s, as the cost of power rose sharply, consumers learned to conserve electricity, and the utilities lost their momentum.
Now even computers are slowing down, at least in the mainframe and minicomputer parts of the business. IBM and Digital may be the slow growers of tomorrow.
THE STALWARTS Stalwarts are companies such as Coca-Cola, Bristol-Myers, Procter and Gamble, the Bell telephone sisters, Hershey’s, Ralston Purina, and Colgate-Palmolive.
THE FAST GROWERS These are among my favorite investments: small, aggressive new enterprises that grow at 20 to 25 percent a year. If you choose wisely, this is the land of the 10- to 40-baggers, and even the 200-baggers. With a small portfolio, one or two of these can make a career.
I’ve already mentioned how electric utilities, especially the ones in the Sunbelt, went from being fast growers to being slow growers. In the 1960s plastics was a high-growth industry. Plastics were so much on people’s minds that when the word “plastics” was whispered to Dustin Hoffman in the movie The Graduate, the word itself became a famous line.
THE CYCLICALS A cyclical is a company whose sales and profits rise and fall in regular if not completely predictable fashion. In a growth industry, business just keeps expanding, but in a cyclical industry it expands and contracts, then expands and contracts again.
Cyclicals are the most misunderstood of all the types of stocks. It is here that the unwary stockpicker is most easily parted from his money, and in stocks that he considers safe.
Timing is everything in cyclicals, and you have to be able to detect the early signs that business is falling off or picking up. If you work in some profession that’s connected to steel, aluminum, airlines, automobiles, etc., then you’ve got your edge, and nowhere is it more important than in this kind of investment.
TURNAROUNDS Turnaround candidates have been battered, depressed, and often can barely drag themselves into Chapter 11.
There’s the restructuring-to-maximize-shareholder-values kind of turnaround, such as Penn Central. Wall Street seems to favor restructuring these days, and any director or CEO who mentions it is warmly applauded by shareholders. Restructuring is a company’s way of ridding itself of certain unprofitable subsidiaries it should never have acquired in the first place. The earlier buying of these ill-fated subsidiaries, also warmly applauded, is called diversification. I call it diworseification.
THE ASSET PLAYS An asset play is any company that’s sitting on something valuable that you know about, but that the Wall Street crowd has overlooked. With so many analysts and corporate raiders snooping around, it doesn’t seem possible that there are any assets that Wall Street hasn’t noticed, but believe me, there are. The asset play is where the local edge can be used to greatest advantage.
HIGHFLIERS TO LOW RIDERS Companies don’t stay in the same category forever.
Advanced Micro Devices and Texas Instruments, once champion fast growers, are now regarded as cyclicals.
Getting the story on a company is a lot easier if you understand the basic business.
If it’s a choice between owning stock in a fine company with excellent management in a highly competitive and complex industry, or a humdrum company with mediocre management in a simpleminded industry with no competition, I’d take the latter. For
You never find the perfect company, but if you can imagine it, then you’ll know how to recognize favorable attributes, the most important thirteen of which are as follows: (1) IT SOUNDS DULL—OR, EVEN BETTER, RIDICULOUS The perfect stock would be attached to the perfect company, and the perfect company has to be engaged in a perfectly simple business, and the perfectly simple business ought to have a perfectly boring name. The more boring it is, the better.
(2) IT DOES SOMETHING DULL I get even more excited when a company with a boring name also does something boring. Crown, Cork, and Seal makes cans and bottle caps. What could be duller than that? You won’t see an interview with the CEO of Crown, Cork, and Seal in Time magazine alongside an interview with Lee Iacocca, but that’s a plus. There’s nothing boring about what’s happened to the shares of Crown, Cork, and Seal.
(3) IT DOES SOMETHING DISAGREEABLE Better than boring alone is a stock that’s boring and disgusting at the same time. Something that makes people shrug, retch, or turn away in disgust is ideal. Take Safety-Kleen. That’s a name with promise to begin with—any company that uses a k where there ought to be a c is worth investigating. The fact that Safety-Kleen was once related to Chicago Rawhide is also favorable (see “It’s a Spinoff” later in this chapter).
(4) IT’S A SPINOFF Spinoffs of divisions or parts of companies into separate, freestanding entities—such as Safety-Kleen out of Chicago Rawhide or Toys “R” Us out of Interstate Department Stores—often result in astoundingly lucrative investments.
(5) THE INSTITUTIONS DON’T OWN IT, AND THE ANALYSTS DON’T FOLLOW IT If you find a stock with little or no institutional ownership, you’ve found a potential winner.
(9) IT’S GOT A NICHE I’d much rather own a local rock pit than own Twentieth Century-Fox, because a movie company competes with other movie companies, and the rock pit has a niche. Twentieth Century-Fox understood that when it bought up Pebble Beach, and the rock pit with it.
(10) PEOPLE HAVE TO KEEP BUYING IT I’d rather invest in a company that makes drugs, soft drinks, razor blades, or cigarettes than in a company that makes toys. In the toy industry somebody can make a wonderful doll that every child has to have, but every child gets only one each. Eight months later that product is taken off the shelves to make room for the newest doll the children have to have—manufactured by somebody else.
(11) IT’S A USER OF TECHNOLOGY Instead of investing in computer companies that struggle to survive in an endless price war, why not invest in a company that benefits from the price war—such as Automatic Data Processing?
(12) THE INSIDERS ARE BUYERS There’s no better tip-off to the probable success of a stock than that people in the company are putting their own money into it. In general, corporate insiders are net sellers, and they normally sell 2.3 shares to every one share that they buy.
Stocks I’d Avoid: If I could avoid a single stock, it would be the hottest stock in the hottest industry, the one that gets the most favorable publicity, the one that every investor hears about in the car pool or on the commuter train—and succumbing to the social pressure, often buys.
BEWARE THE NEXT SOMETHING Another stock I’d avoid is a stock in a company that’s been touted as the next IBM, the next McDonald’s, the next Intel, or the next Disney, etc.
BEWARE THE WHISPER STOCK I get calls all the time from people who recommend solid companies for Magellan, and then, usually after they’ve lowered their voices as if to confide something personal, they add: “There’s this great stock I want to tell you about. It’s too small for your fund, but you ought to look at it for your own account. It’s a fascinating idea, and it could be a big winner.”
BEWARE THE MIDDLEMAN The company that sells 25 to 50 percent of its wares to a single customer is in a precarious situation. SCI Systems (not to be confused with the funeral-home firm) is a well-managed company and a major supplier of computer parts to IBM, but you never know when IBM will decide that it can make its own parts, or that it can do without the parts, and then cancel the SCI contract.
When you buy a stock in a fast-growing company, you’re really betting on its chances to earn more money in the future.
Here are some pointers from this section:
Part III: The Long-term View
There’s a long-standing debate between two factions of investment advisors, with the Gerald Loeb faction declaring, “Put all your eggs in one basket,” and the Andrew Tobias faction retorting, “Don’t put all your eggs in one basket. It may have a hole in it.”
In my view it’s best to own as many stocks as there are situations in which: (a) you’ve got an edge; and (b) you’ve uncovered an exciting prospect that passes all the tests of research. Maybe that’s a single stock, or maybe it’s a dozen stocks.
That said, it isn’t safe to own just one stock, because in spite of your best efforts, the one you choose might be the victim of unforeseen circumstances. In small portfolios I’d be comfortable owning between three and ten stocks.
Some people automatically sell the “winners”—stocks that go up—and hold on to their “losers”—stocks that go down—which is about as sensible as pulling out the flowers and watering the weeds. Others automatically sell their losers and hold on to their winners, which doesn’t work out much better. Both strategies fail because they’re tied to the current movement of the stock price as an indicator of the company’s fundamental value.
If you can’t convince yourself “When I’m down 25 percent, I’m a buyer” and banish forever the fatal thought “When I’m down 25 percent, I’m a seller,” then you’ll never make a decent profit in stocks.
WHEN TO SELL Even the most thoughtful and steadfast investor is susceptible to the influence of skeptics who yell “Sell” before it’s time to sell. I ought to know. I’ve been talked out of a few tenbaggers myself.
WHEN TO SELL A SLOW GROWER I can’t really help you with this one, because I don’t own many slow growers in the first place.
Here are some other signs:
WHEN TO SELL A CYCLICAL The best time to sell is toward the end of the cycle, but who knows when that is? Who even knows what cycles they’re talking about? Sometimes the knowledgeable vanguard begins to sell cyclicals a year before there’s a single sign of a company’s decline. The stock price starts to fall for apparently no earthly reason. To play this game successfully you have to understand the strange rules. That’s what makes cyclicals so tricky. In the defense business, which behaves like a cyclical, the price of General Dynamics once fell 50 percent on higher earnings. Farsighted cycle-watchers were selling in advance to avoid the rush. Other than at the end of the cycle, the best time to sell a cyclical is when something has actually started to go wrong. Costs have started to rise.
One obvious sell signal is that inventories are building up and the company can’t get rid of them, which means lower prices and lower profits down the road.
Falling commodity prices is another harbinger.
Final demand for the product is slowing down.
The company has tried to cut costs but still can’t compete with foreign producers.
WHEN TO SELL A FAST GROWER Here, the trick is not to lose the potential tenbagger. On the other hand, if the company falls apart and the earnings shrink, then so will the p/e multiple that investors have bid up on the stock. This is a very expensive double whammy for the loyal shareholders.
I’m constantly amazed at popular explanations of why stocks behave the way they do, which are volunteered by amateurs and professionals alike. We’ve made great advances in eliminating ignorance and superstition in medicine and in weather reports, we laugh at our ancestors for blaming bad harvests on corn gods, and we wonder, “How could a smart man like Pythagoras think that evil spirits hide in rumpled bedsheets?” However, we’re perfectly willing to believe that who wins the Super Bowl might have something to do with stock prices.
The Twelve Silliest (and Most Dangerous) Things People Say About Stock Prices
IF IT’S GONE DOWN THIS MUCH ALREADY, IT CAN’T GO MUCH LOWER
YOU CAN ALWAYS TELL WHEN A STOCK’S HIT BOTTOM
IF IT’S GONE THIS HIGH ALREADY, HOW CAN IT POSSIBLY GO HIGHER?
EVENTUALLY THEY ALWAYS COME BACK
IT’S ALWAYS DARKEST BEFORE THE DAWN
WHAT ME WORRY? CONSERVATIVE STOCKS DON’T FLUCTUATE MUCH
IT’S TAKING TOO LONG FOR ANYTHINGTO EVER HAPPEN
LOOK AT ALL THE MONEY I’VE LOST: I DIDN’T BUY IT!
I MISSED THAT ONE, I’LL CATCH THE NEXT ONE
…you can’t actually spend the proceeds you get from shorting a stock until you’ve paid the shares back and closed out the transaction.
The scary part about shorting stock is that even if you’re convinced that the company’s in lousy shape, other investors might not realize it and might even send the stock price higher.
This demonstrates that the market, like individual stocks, can move in the opposite direction of the fundamentals over the short term,
I hear every day that major companies are going out of business. Certainly some of them are. But what about the thousands of smaller companies that are coming into business and providing millions of new jobs? As I make my usual rounds of various headquarters, I’m amazed to discover that many companies are still going strong. Some are actually earning money. If we’ve lost all sense of enterprise and will to work, then who are those people who seem to be stuck in rush hour?
I hear every day that AIDS will do us in, the drought will do us in, inflation will do us in, recession will do us in, the budget deficit will do us in, the trade deficit will do us in, and the weak dollar will do us in. Whoops. Make that the strong dollar will do us in. They tell me real estate prices are going to collapse. Last month people started worrying about that. This month they’re worrying about the ozone layer. If you believe the old investment adage that the stock market climbs a “wall of worry,” take note that the worry wall is fairly good-sized now and growing every day.
If you take anything with you at all from this last section, I hope you’ll remember the following:
Analyst List
John Adams, Adams, Harkness & Hill
Mike Armellino, Goldman, Sachs & Co.
Norm Caris, Gruntal & Co.
Tom Clephane, Morgan Stanley & Co.
Art Davis Don DeScenza (deceased), Nomura Securities
Метод Питера Линча
Обзор книги известного американского инвестора Питера Линча — «Метод Питера Линча. Стратегия и тактика индивидуального инвестора» или в оригинале — «One Up on Wall Street. How to Use What You Already Know to Make Money in the Market» by Peter Lynch with John Rothchild.
Главная идея
Авторское название в оригинале переводится так: «Как использовать то, что вы уже знаете, чтобы начать делать деньги на рынке». В этом названии и отражается главная идея книги и непосредственно сам метод Питера Линча: «Инвестируйте в компании и отрасли, в которых вы хорошо разбираетесь».
Кому будет полезна книга
«Метод Питера Линча» — книга, с которой следует ознакомиться каждому, кто собирается инвестировать в акции на фондовом рынке и преуспеть в этом деле.
Об авторе
Источник: https://www.fidelity.com/viewpoints/investing-ideas/peter-lynch-investment-strategy
В 1989 году написал одну из самых популярных книг по стоимостному инвестированию «One Up on Wall Street».
За свой послужной список по праву считается легендой финансового рынка.
О чем книга
В книге подробно излагается инвестиционная техника Питера Линча, представленная в таких главах как подготовка к инвестированию, выбор акций и формирование портфеля. Вы узнаете об ошибках и стереотипах инвестирования, какие акции стоит покупать и когда их продавать, на какие ключевые показатели обращать внимание при анализе акций и как определить переоценена акция или нет.
Книга разделена на 3 составные части: готовимся к инвестированию, выбираем победителей и долгосрочная перспектива.
Часть I. Готовимся к инвестированию.
Перед началом инвестирования в акции задайте себе следующие вопросы:
Нужны ли вам вложения в акции?
На какой результат вы рассчитываете?
На какой срок собираетесь вкладывать деньги?
Как вы будете реагировать на неожиданные значительные падения цен?
Нерешительность и неуверенность — главные враги начинающего инвестора на фондовом рынке. Когда у вас есть четкая цель и план действий, вы будете менее подвержены панике во время резкого падения цен акции и не будете их продавать в самый неподходящий момент.
Движение цен на рынке непредсказуемо, поэтому никто не может точно предсказать, когда случится кризис. Чтобы преуспеть в инвестировании и не переживать по поводу снижения котировок, покупайте акции компаний с хорошими финансовыми показателями.
В долгосрочной перспективе владельцы акций выигрывают у владельцев облигаций. Когда вы покупаете акцию, вы становитесь акционером, а когда облигацию, то кредитором и можете рассчитывать только на возврат основной суммы долга и небольшого процента. Но у владельцев акций больше рисков, т.к. компания может уйти с рынка или обанкротиться.
Перед тем, как вкладывать средства в акции пройдите «Зеркальный тест», ответьте на следующие вопросы:
Есть ли у меня собственный дом?
Перед началом инвестирования позаботьтесь о собственном жилье, также в отличие от акций, недвижимость не обанкротится, цены на нее так резко не упадут и это является неплохим средством для защиты от инфляции.
Нужны ли мне деньги?
Если в ближайшее время (2-3 года) вы планируете крупную покупку (машина, новый дом, оплата обучения в ВУЗе), то накопления не рекомендуется вкладывать даже в самые стабильные акции. Для инвестиций рассчитывайте на срок более 10 лет и используйте только те деньги, потеря которых не сильно отразится на вашем благосостоянии, например, 10-20% от ежемесячной заработной платы.
Есть ли у меня качества необходимые для успешного инвестирования в акции?
Для успешного инвестора важны такие качества как: терпение, стрессоустойчивость, способность принимать самостоятельные решения, тяга к исследованиям, гибкость и отсутствие жадности.
Часть II. Выбираем победителей.
Для этого следите за новыми прорывными технологиями в той отрасли, в которой вы работаете и хорошо разбираетесь. Например, если вы работаете в медицине, то вы одним из первых узнаете о новом лекарстве.
Избегайте покупки популярных акций в популярных отраслях, которые все покупают под влиянием стадного эффекта. Такие акции могут быстро расти, но также быстро и падают. Остерегайтесь таких компаний, которые растут на слухах о том, что вот-вот решают какую-то проблему мирового масштаба.
Никогда не покупайте акции без исследования компании. Прежде чем купить акцию, потратьте время на изучение ее бизнеса, поймите как компания зарабатывает деньги, и какие факторы оказывают влияние на ее прибыль. Идеальная компания занимается простой и понятной деятельностью. Но в том же время, ищите такие компании, которые работают на рынке, где тяжело пробиться новому игроку.
Обращайте внимание на прибыль компании и показатель P/E. Подробнее об этом показателе можете почитать в статье Мультипликатор P/E Данный показатель помогает понять переоценены или недооценены акции относительно потенциальной прибыли компании. Показатель P/E полезен для первичного отбора акций, но на нем не стоит останавливать свое исследование.
При изучении компании обращайте внимание на факторы, влияющие на прибыль: сокращение издержек, расширение бизнеса или избавление от убыточных видов деятельности.
Также в финансовой отчетности смотрите на количество акций в обращении, если из года в год это число уменьшается, то компаний выкупает свои акции с рынка, что является хорошим признаком для инвестиций.
Посмотрите, платит ли акция дивиденды. Подробнее про дивиденды вы можете почитать в статье Дивидендные акции для начинающих инвесторов. Если компания выплачивает дивиденды, то вы получите дополнительный доход от владения акциями. Во время падений рынка инвесторы склонны покупать акции, которые стабильно выплачивают дивиденды, т.к. при снижении цены акции растет ее дивидендная доходность.
Ищите компании, которые не сильно зависят от капиталовложений и имеют большой свободный денежный поток.
Часть III. Долгосрочная перспектива
После выбора акций переходите к формированию инвестиционного портфеля. Не вкладывайте все деньги в акции одной компании, но в то же время не добавляйте в свой портфель малоизученные компании только с целью диверсификации и разнообразия. Контролируйте акции и корректируйте портфель в зависимости от изменяющихся фундаментальных показателей, но избегайте частых покупок и продаж акций, т.к. в таком случае вы теряете часть прибыли на комиссиях брокеру.
Также в данной части рассматриваются популярные заблуждения у начинающих инвесторов относительно рынка акций:
Акция, которая сильно упала не может упасть еще больше.
Всегда можно понять, когда цена акции достигла дна.
Акция, которая сильно выросла, вряд ли вырастет еще больше.
После падения акция все равно вырастет.
У консервативных акций не бывает сильных колебаний цен.
Акция растет, значит я поступил правильно и наоборот, если акция падает, то я ошибся с выбором.
Я смогу заработать больше, если буду заниматься спекуляциями.
Заключительные комментарии
Книга написана легким, понятным и простым языком, приправленным долей юмора. Автор избегает сложных фраз с узкоспециализированными терминами, не использует громоздкие формулы и расчеты. Поэтому книга прекрасно подходит начинающим инвесторам и знакомит с азами финансовой грамотности.
Безусловно, в статье рассмотрено не все, а лишь малая и незначительная часть того, что рассказано в книге. Поэтому для полного понимания все же лучше самостоятельно прочитать книгу полностью, например, на ЛитРес.
Цитаты Питера Линча об инвестициях в акции
«Преимущество вас как инвестора заключается не в том, что вы следуете советам экспертов с Уолл-стрит. А в том, что у вас уже есть. Вы можете превзойти экспертов, если воспользуетесь своим преимуществом, инвестируя в компании или отрасли, в которых вы хорошо разбираетесь.»
«За каждой акцией стоит компания. Выясните, чем она занимается.»
«Если вы готовы инвестировать в компанию, то должны быть в состоянии объяснить, почему вы это сделали, на простом языке, который мог бы понять даже пятиклассник, и достаточно быстро, чтобы ему не было скучно.»
«Если вы не изучаете какие-либо компании, то у вас будет такой же успех в покупке акций, как и в игре в покер, когда вы делаете ставки, не глядя в свои карты.»
«Нет ничего постыдного в потере денег на акциях. Все так делают. Самое стыдное — держать акции или, что еще хуже, покупать их больше, когда фундаментальные показатели ухудшаются.»
«Часто нет никакой корреляции между успехом деятельности компании и успехом ее акций в течение нескольких месяцев или даже нескольких лет. В долгосрочной перспективе существует 100-процентная корреляция между успехом компании и успехом ее акций. Это неравенство и есть ключ к зарабатыванию денег; терпение и владение успешными компаниями окупаются.»
«Выбор акций нельзя свести к простой формуле или рецепту, которые гарантируют успех при строгом соблюдении.»
Подобные книги на тему инвестиций
Эту книгу хорошо дополнит «Разумный инвестор. Полное руководство по стоимостному инвестированию.» Бенджамина Грэма.