One Up On Wall Street

One Up On Wall Street : How To Use What You Already Know To Make Money In The Market
by Peter Lynch

This book is another great starter book since a large part of the book is devoted to convincing you that individual investors can successfully play the market. Lynch tells a lot of stories about how he comes up with stock ideas throughout his typical day just by observing things around him. Notice that everyone around is starting to wear Crocs? Maybe you should look up the stock. Notice that even George W. Bush is wearing them? Maybe that trend is over and you should evaluate if the company was a one hit wonder.

The first time I read this book I thought it was light on the information, but after giving it another try I realized that there was a lot more than I had noticed. He defines the different categories of stocks you should look at (growth, turnarounds, cyclicals, and stalwarts) and outlines what to look for in each one. He also gives an overview on other basics like how to read balance sheets and the numbers to look at. Most importantly of all, you’ll understand what I mean when I talk about 10-baggers. Ok, maybe that one’s obvious, but the rest of the stuff is valuable information.

Like many other books made before the internet era, a lot of his comments on getting information about companies are outdated. One thing that I don’t agree with him on is that you should have hundreds of stocks in your portfolio. That may be the only option for the fund manager controlling billions of dollars, but even Warren Buffet agrees that a successful investor should focus his holdings on a smaller number of high quality positions. Otherwise you might as well just buy the S&P 500 index fund since that’s a better option for diversifying across the stock market anyway. Regardless, this book should definitely be one of the first few you read if you’re just starting up with stocks, especially since it gives a good contrast to How To Make Money In Stocks.