|
Beating
the Street
By Peter Lynch
Fireside, 1994 - 332 pages
Having worked on Wall Street I think this book is great and
poor at the same time.
Great because
1) It is ideal to read for the casual to serious
investor.
2) Some of Lynch's prominent themes like "Buy what you
know" and investigating the companies that you buy are
great strategies, especially for non-professionals.
3) He walks you through his thought process on numerous
stocks in several industries, highlighting mistakes as well as
successes. I found his various rules of thumb with respect to
each industry (retail, restaurants, cyclicals) helpful
I say it is poor because Lynch himself used to buy and sell
stocks frequently. So while he says "buy and hold"
he did that, but he also traded the heck out of stocks he knew
inside and out. When they got expensive, he would trim his
position and when something got really cheap he would buy the
heck out of it. This enabled him to compound his returns by a
phenomenal amount
Lynch primarily invested in retail stocks. This was great
as brand names and the "homogenization" of retail
concepts via chain stores was sweeping the nation with the
baby boom wave. However, most of that "easy money"
was made along time ago. Current baby boom themes of biotech,
health care, along with some financial service industry stuff
is tougher to make money at and it doesn't grow as fast as
retail. Well, biotech can but it is far riskier.
Lynch never talks about debt. The U.S. economy expanded in
the 80's due to
1) heavy government spending, which created a huge national
debt
(2) consumer spending a ton of money and going into debt
and
(3) the entrepreneurial spirit.
The government actually funded a lot of the developments we
see today. The problem with this is that they have mortgaged
the future to pay for past wealth creation. He never once
mentions the impact of debt. It is great while you are
charging the credit card up and enjoying the ride but
eventually you have to pay the bills!
Lynch spends a lot of time telling the reader how he went
about picking stocks for his Magellan Fund, but he has the
ability to talk to CEO's and visit companies on site
headquarters, something the average investor certainly does
not have. I would say though that Reg. FD has made the playing
field more even, as now nobody gets a lot of information!
My thoughts on stock picking, having worked in the
financial service industry for 3 years in research (got out
because my values didn't correlate with the business) is that
no one should expect to beat the pros unless they are 1) very
observant and 2) willing to commit time to finding new
investment concepts/vehicles.
| 
