|
|
Beating the Street (Paperback)
by Peter Lynch, John Rothchild
| Category:
Personal finance,Investing, Personal wealth, Self help |
| Market price: ¥ 168.00
MSL price:
¥ 158.00
[ Shop incentives ]
|
| Stock:
In Stock |
MSL rating:
 Good for Gifts |
| MSL Pointer Review:
A well-written, highly accessible investment sourcebook from one of the greatest investors of our time. |
| If you want us to help you with the right titles you're looking for, or to make reading recommendations based on your needs, please contact our consultants. |
Detail |
Author |
Description |
Excerpt |
Reviews |
|
|
|
Author: Peter Lynch, John Rothchild
Publisher: Simon & Schuster
Pub. in: May, 1994
ISBN: 0671891634
Pages: 336
Measurements: 8.5 x 5.5 x 0.8 inches
Origin of product: USA
Order code: BA00565
Other information: Rev Ed edition
|
|
Rate this product:
|
|
- Awards & Credential -
The #1 National Bestseller (in North America) from Peter Lynch, one of Wall Street’s most trusted fund managers. |
|
- MSL Picks -
During Peter Lynch's thirteen successful years as manager of the Fidelity Magellan Fund, it was the top-ranked general equity mutual fund in the nation. One thousand dollars invested in Magellan in 1977 was worth $28,000 when he handed over the reins of Magellan on May 31, 1990.
While One Up methodically lays out Lynch's approach to identifying good stocks, "Beating the Street" serves as a sequel that puts the philosophy into practice. Published four years after the first book, this one felt redundant in places and at times, I got the impression that the sequel was born because Lynch just wanted to score another payday. But I still found the book useful and I think it provides an interesting peek for an outsider into a portfolio manager's first-hand experiences. 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, since I had little investment experience at the time. One chapter also serves as a useful primer on mutual funds, but that's probably not why you're considering this book. Just use this chapter as a starting point in that effort. One element of Lynch's approach that is outdated is his ignorance of the tech sector. Though volatile, it has been a source of great riches and heartache and it is too important now, at 18% of the S&P 500, to be excluded from a stock picker's universe. It also goes without saying (but I'll say it for this review) that there's more to beating the market than "buying what you know." But at least Lynch's approach is designed to be enduring over a multi-year period - it would have allowed you to make some money during the go-go days of the late 90's and yet, could also have steered you toward some great values in the past two years while the rest of the world was still clinging to technology stocks. My recommendation would be to read One Up first. If you're comfortable with those concepts and understand the nuances of each industry, then this book is not a "must read."
(From quoting an American reader)
Target readers:
General readers
|
|
- Better with -
Better with
Learn to Earn: A Beginner's Guide to the Basics of Investing and Business
:
|
|
Customers who bought this product also bought:
 |
Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money - That the Poor and Middle Class Do Not! (Paperback)
by Robert T. Kiyosaki, Sharon L. Lechter
A life-changing education on personal finance. |
 |
Learn to Earn: A Beginner's Guide to the Basics of Investing and Business (Paperback)
by Peter Lynch, John Rothchild
The classic guide for beginners, written by America's #1 fund manager. |
 |
One up on Wall Street: How to Use What You Already Know To Make Money in the Market, Miniature Edition [ABRIDGED] (Hardcover)
by Peter Lynch
Another America's favorate investment book, from the #1 Money Manager in the country. |
 |
Common Stocks and Uncommon Profits and Other Writings (Paperback)
by Philip A. Fisher, Kenneth L. Fisher (Introduction)
High-quality, high-growth, 15-point checklist for buying stocks, this classic investment text is all about value. |
 |
The Intelligent Investor: The Definitive Book on Value Investing (Paperback)
by Benjamin Graham, Jason Zweig
First published in 1934, The Intelligent Investor is an all-time classic on value investing. |
|
|
Peter Lynch is vice chairman of Fidelity Management & Research Company - the investment advisor arm of Fidelity Investments - and a member of the Board of Trustees of the Fidelity funds. Mr. Lynch was portfolio manager of Fidelity Magellan Fund, which was the best performing fund in the world under his leadership from May 1977 to May 1990. He is the co-author of the bestselling Beating the Street and Learn to Earn, a beginner's guide to the basics of investing and business. He lives in the Boston area.
|
|
From the Publisher:
Develop a Winning Investment Strategy - with Expert Advice from "The Nation's #1 Money Manager".
Peter Lynch's "invest in what you know" strategy has made him a household name with investors both big and small.
An important key to investing, Lynch says, is to remember that stocks are not lottery tickets. There's a company behind every stock and a reason companies - and their stocks - perform the way they do. In this book, newly revised and updated for the paperback edition, Peter Lynch shows you how you can become an expert in a company and how you can build a profitable investment portfolio, based on your own experience and insights and on straightforward do-it-yourself research. There's no reason the individual investor can't match wits with the experts, and this book will show you how.
In Beating the Street, Lynch for the first time:
- Explains how to devise a mutual fund strategy.
- Shows how he goes about picking stocks, step-by-step.
- Describes how the individual investor can improve his or her investment performance to rival that of the experts of the investment clubs.
|
Chapter 1
THE MIRACLE OF ST. AGNES
Amateur stockpicking is a dying art, like pie-baking, which is losing out to the packaged goods. A vast army of mutual-fund managers is paid handsomely to do for portfolios what Sara Lee did for cakes. I'm sorry this is happening. It bothered me when I was a fund manager, and it bothers me even more now that I have joined the ranks of the nonprofessionals, investing in my spare time.
This decline of the amateur accelerated during the great bull market of the 1980s, after which fewer individuals owned stocks than at the beginning. I have tried to determine why this happened. One reason is that the financial press made us Wall Street types into celebrities, a notoriety that was largely undeserved. Stock stars were treated like rock stars, giving the amateur investor the false impression that he or she couldn't possibly hope to compete against so many geniuses with M.B.A. degrees, all wearing Burberry raincoats and armed with Quotrons.
Rather than fight these Burberried geniuses, large numbers of average investors decided to join them by putting their serious money into mutual funds. The fact that up to 75 percent of these mutual funds failed to perform even as well as the stock market averages proves that genius isn't foolproof.
But the main reason for the decline of the amateur stockpicker has to be losses. It's human nature to keep doing something as long as it's pleasurable and you can succeed at it, which is why the world population continues to increase at a rapid rate. Likewise, people continue to collect baseball cards, antique furniture, old fishing lures, coins, and stamps, and they haven't stopped fixing up houses and reselling them, because all these activities can be profitable as well as enjoyable. So if they've gotten out of stocks, it's because they're tired of losing money.
It's usually the wealthier and more successful members of society who have money to put into stocks in the first place, and this group is used to getting A's in school and pats on the back at work. The stock market is the one place where the high achiever is routinely shown up. It's easy to get an F here. If you buy futures and options and attempt to time the market, it's easy to get all F's, which must be what's happened to a lot of people who have fled to the mutual funds.
This doesn't mean they stop buying stocks altogether. Somewhere down the road they get a tip from Uncle Harry, or they overhear a conversation on a bus, or they read something in a magazine and decide to take a flier on a dubious prospect, with their "play" money. This split between serious money invested in the funds and play money for individual stocks is a recent phenomenon, which encourages the stockpicker's caprice. He or she can make these frivolous side bets in a separate account with a discount broker, which the spouse doesn't have to know about.
As stockpicking disappears as a serious hobby, the techniques of how to evaluate a company, the earnings, the growth rate, etc., are being forgotten right along with the old family recipes. With fewer retail clients interested in such information, brokerage houses are less inclined to volunteer it. Analysts are too busy talking to the institutions to worry about educating the masses.
Meanwhile, the brokerage-house computers are busily collecting a wealth of useful information about companies that can be regurgitated in almost any form for any customer who asks. A year or so ago, Fidelity's director of research, Rick Spillane, interviewed several top-producing brokers about the data bases and so-called screens that are now available. A screen is a computer-generated list of companies that share basic characteristics - for example, those that have raised dividends for 20 years in a row. This is very useful to investors who want to specialize in that kind of company.
At Smith Barney, Albert Bernazati notes that his firm can provide 8-10 pages of financial information on most of the 2,800 companies in the Smith Barney universe. Merrill Lynch can do screens on ten different variables, the Value Line Investment Survey has a "value screen," and Charles Schwab has an impressive data service called "the Equalizer." Yet none of these services is in great demand. Tom Reilly at Merrill Lynch reports that less than 5 percent of his customers take advantage of the stock screens. Jonathan Smith at Lehman Brothers says that the average retail investor does not take advantage of 90 percent of what Lehman can offer.
In prior decades, when more people bought their own stocks, the stockbroker per se was a useful data base. Many old-fashioned brokers were students of a particular industry, or a particular handful of companies, and could help teach clients the ins and outs. Of course, one can go overboard in glorifying the old-fashioned broker as the Wall Street equivalent of the doctor who made house calls. This happy notion is contradicted by public opinion surveys that usually ranked the stockbroker slightly below the politican and the used-car salesman on the scale of popularity. Still, the bygone broker did more independent research than today's version, who is more likely to rely on information generated in house by his or her own firm.
Newfangled brokers have many things besides stocks to sell, including annuities, limited partnerships, tax shelters, insurance policies, CDs, bond funds, and stock funds. They must understand all of these "products" at least well enough to make the pitch. They have neither the time nor the inclination to track the utilities or the retailers or the auto sector, and since few clients are invested in individual stocks, there's little demand for their stockpicking advice. Anyway, the broker's biggest commissions are made elsewhere, on mutual funds, underwritings, and in the options game.
With fewer brokers offering personal guidance to fewer stock-pickers, and with a climate that encourages capricious speculation with "fun" money and an exaggerated reverence for professional skills, it's no wonder that so many people conclude that picking their own stocks is hopeless. But don't tell that to the students at St. Agnes.
THE ST. AGNES PORTFOLIO
The fourteen stocks shown in Table 1-1 were the top picks of an energetic band of seventh-grade portfolio managers who attended the St. Agnes School in Arlington, Massachusetts, a suburb of Boston, in 1990. Their teacher and CEO, Joan Morrissey, was inspired to test the theory that you don't need a Quotron or a Wharton M.B.A., or for that matter even a driver's license, to excel in equities.
You won't find these results listed in a Lipper report or in Forbes, but an investment in the model St. Agnes portfolio produced a 70 percent gain over a two-year period, outperforming the S&P 500 composite, which gained 26 percent in the same time frame, by a whopping margin. In the process, St. Agnes also outperformed 99 percent of all equity mutual funds, whose managers are paid considerable sums for their expert selections, whereas the youngsters are happy to settle for a free breakfast with the teacher and a movie.
Table 1-1. ST. AGNES PORTFOLIO
Company 1990-91 Performance (%)
Wal-Mart 164.7
Nike 178.5
Walt Disney 3.4
Limited 68.8
L.A. Gear - 64.3
Pentech 53.1
Gap 320.3
PepsiCo 63.8
Food Lion 146.9
Topps 55.7
Savannah Foods - 38.5
IBM 3.6
NYNEX - .22
Mobil 19.1
Total Return for Portfolio 69.6
S&P 500 26.08
Total return performance January 1, 1990-December 31, 1991
I was made aware of this fine performance via the large scrapbook sent to my office, in which the seventh graders not only listed their top-rated selections, but drew pictures of each one. This leads me to Peter's Principle #3:
Never invest in any idea you can't illustrate with a crayon.
This rule ought to be adopted by many adult money managers, amateur and professional, who have a habit of ignoring the understandably profitable enterprise in favor of the inexplicable venture that loses money. Surely it would have kept investors away from Dense-Pac Microsystems, a manufacturer of "memory modules," the stock of which, alas, has fallen from $16 to 25 cents. Who could draw a picture of a Dense-Pac Microsystem?
In order to congratulate the entire St. Agnes fund department (which doubles as Ms. Morrissey's social studies class) and also to learn the secrets of its success, I invited the group to lunch at Fidelity's executive dining room, where, for the first time, pizza was served. There, Ms. Morrissey, who has taught at St. Agnes for 25 years, explained how her class is divided every year into teams of four students each, and how each team is funded with a theoretical $250,000 and then competes to see who can make the most of it.
Each of the various teams, which have adopted nicknames such as Rags to Riches, the Wizards of Wall Street, Wall Street Women, The Money Machine, Stocks R Us, and even the Lynch Mob, also picks a favorite stock to be included in the scrapbook, which is how the model portfolio is created.
The students learn to read the financial newspaper Investor's Business Daily. They come up with a list of potentially attractive companies and then research each one, checking the earnings and the relative strength. Then they sit down and review the data and decide which stocks to choose. This is a similar procedure to the one that is followed by many Wall Street fund managers, although they aren't necessarily as adept at it as the kids.
"I try to stress the idea that a portfolio should have at least ten companies, with one or two providing a fairly good dividend," says Ms. Morrissey. "But before my students can put any stock in the portfolio, they have to explain exactly what the company does. If they can't tell the class the service it provides or the products it makes, then they aren't allowed to buy. Buying what you know about is one of our themes." Buying what you know about is a very sophisticated strategy that many professionals have neglected to put into practice.
|
|
| View all 10 comments |
Anise C. Wallace (The New York Times) (MSL quote), USA
<2007-01-12 00:00>
Mr. Lynch's investment record puts him in a league by himself. |
Mike Fleming (MSL quote), USA
<2007-01-12 00:00>
This is one of the "must read" books for anyone wanting to invest well, and gets 5 stars for that reason only. It is by and about Lynch and his legendary carreer at Fidelity's Magellan Fund, and the period Lynch knocked the cover off the ball hitting home run after home run for a long string of years.
How did he do it? Well, several other reviews point out the difficulty of extracting Lynch's secret formula, and they rightly describe the lack of formulaic presentation. If there was a fabulous book on Lynch instead of this autobiographical one, I might put it on the "must read" list instead. There is not (yet, maybe Lowenstein will grace us with one?). However, too many fail in investing by looking for instant-coffee recipies that any boob can implement from the couch. If it was that simple, everyone would be rich. Success takes work and in-depth understanding of some, probably simple, strategies that ordinary investors can learn. In fact, investors who focus on fundamentals of the sort described by Lynch, & stay tuned out of the frenetic trading centers' "action," are likely to increase chances of success. The real beauty of Lynch's book is the myriad of different strategies, one or a few of which each of us can learn and implement as our investing "sweet spot."
Lynch covers a series of investment decisions in some detail. The detail is not uniform from company to company, position to position, making comparison of his formula difficult between investments. And he does not summarize his formula anywhere in the book. This oversight (which may be intentional to more quickly drop the instant-coffee addicts) leaves it up to the reader to digest the material and extract the essential focus of the master. I suggest a relaxed, 3 part method to do the extraction:
1) read the whole book (its easy reading), then set it down for a week or so.
2) read it a second time, pencil or highlighter in hand, and mark where you spot formulaic focus you can implement.
3) read it again in 6 months or a year, and repeat #2. This time around, with the aging of the first 2 readings, you will be surprised at how the formulae stand out. You will "see" more of what Lynch describes, and take your understanding of the master's strategic vision to a new and satisfying level. Not all examples will give the same level of insight to the master's strategies, so don't strain to make Lynch's magic stand out on every page. It is really only about what you can see & replicate. Even one good trick, well understood, will be worth the effort for your invesment results. If you can find 2 or 3 good tricks, like I did, you are on your way to richer success.
I have read this book at least 5 times (so far), and I get a firmer understanding of Lynch's myriad strategies each time. As a master of the game, and with a mountainous pile of cash demanding a high yield, Lynch needed many strategies to keep out-distancing all the averages. He did just that. Although a cookbook would be easier to put into use, it probably wouldn't work as well, as it wouldn't require depth of understanding. Patience is the key to implementing this important work.
Beating the Street stands among others on the "must-read" list:
- The Intelligent Investor by Benjamin Graham (ignore the mathematical formula, but savor the stuff on perspective & margin of safety; another book that should be re-read periodically);
- Common Stocks and Uncommon Profits by Phil Fisher (ditto on the re-reading);
- Conservative Investors Sleep Well, also by Fisher; out of print so watch here on Amazon for a clean used copy;
- Buffett, the Making of an American Capitalist by Roger Lowenstein
- The Essays of Warren Buffet: Lessons for Corporate America by Buffett & Cunningham (great compendium of Buffett's own analysis of corporate governance, accounting and other issues investors need to watch);
- When Genius Failed, the Rise & Fall of Long Term Capital Management by Roger Lowenstein. This is the sort of post-mortem on investing mistakes that every investor needs to guard against, and all the more important because it was a cadre of smart guys who lost their butts;
- Academic papers of Terrance Odean & Brad Barber, finance professors at UC Berkeley & UC Davis, respectively, see their websites for links to papers about investor mistakes to avoid.
Good Luck on the Street! |
Bruce Gilliz (MSL quote), Canada
<2007-01-12 00:00>
When Peter S. Lynch speaks, wise investors will listen. This book covers the famous fund manager's career at the helm of Fidelity Magellan from 1977 to '90, and post career into '92. It's far more introspective than One Up On Wall Street and it was no doubt meant to be for this purpose. For example, there isn't nearly as much fundamental principles for stock picking outlined in this book as the former. My belief is that the reader would do best by reading One Up On Wall Street first and follow up with this title, as its the newer of the two, regardless.
Peter's style of writing (with John Rothchild) is no-nonsense and easy to take in. To my knowledge three books have been published by the duo and all three have been entertaining and never dry. The reader can comfortably take in some very important stock-picking principles from one of the greats without feeling intimidated at any point. I think this is a sign of a well written book that covers a topic that isn't child's play (unless you like playing with money).
And although this book doesn't cover nearly as much technical information as the first, it still offers a lot of tasty tidbits for stock pickers. I made plenty of notes while reading Beating The Street, and I'm confident that I'll be well served by doing so. Peter reiterates many of the guidelines he mentioned in his first best-seller, such as scrutinizing company earnings and the balance sheets, and he gives his wise opinion of picking bargain stocks that have lower P/Es than their growth rates.
Overall, this title definitely deserves four stars, and his first book deserves at least five stars. Lynch and Rothchild have authored several investing books that will stand the test of time. You'll sleep better with your investment decisions by having these valuable classics in your collection. |
Bruce Fenton (MSL quote), USA
<2007-01-12 00:00>
Peter Lynch writes well and this book has some classic wisdom that lets you into his mind. One drawback is that Mr. Lynch may sometimes forget just how smart he is and tends to over simplify some aspects of investing analysis that come to him naturally. For example, asking a clerk at a retail store what sells well is a technique Mr. Lynch will use on occasion to evaluate a stock. However, it's key to note that he also has a great deal of resources in the form of advanced technology and research tools, not to mention personal genius.
This book is highly recommended and can be a great tool for a business owner or investor but I'd caution most non-professionals on reading this and thinking they can become the next Peter Lynch with little more than a computer and a brokerage account. Good book, thanks Mr. Lynch. |
View all 10 comments |
|
|
|
|
