Pros: More narrative with the usual savvy and verve
Cons: perhaps a positive, but a bit brain bending at times, a mental workout on occasion
Here's the inside scoop on how Peter Lynch turned a relatively small fund into the titan that the Magellan Fund became. Unlike "One Up on Wall Street", Lynch gives more of the actual story on Magellan's astronomic growth. It also gives a lot of specific examples with the benefit of Lynch's analysis.
A Bunch of Kids
Lynch makes the astonishing claim that any observant person can do well in the stock market. He talks about how 7th grade kids from the St. Agnes school were able to pick winning companies by using what they already knew. These junior highers could see what brands were popular at school, and then trace them back to the companies that made them. This observation can tip one off to what is selling in large quantities. Growing sales typically help drive revenue upward. In spite of ridicule from some of his colleagues, Lynch maintains that just about anyone can have positive results by using what they know and doing their homework--like the St. Agnes group.
A History of Magellan
Lynch's narrative about his time at Magellan is at once both a chronicle of a workaholic, and an exciting story of savvy growth through investing. Lynch has the tenacity of a bloodhound in thoroughly researching to find and pick the best companies. He combines statistical and narrative analyses to continuously assess companies.
With the common internet investing nowadays, Lynch's Quotron that he used to use seems like ancient history. Rather than doing it simply on-line himself, Lynch actually had a person at Fidelity who would call in his orders.
Astonishingly to many, at the apogee of his career, he walked away from it to spend more time for what is most important in his life...people like his family. When he stopped, he was managing a pool of funds larger than the GNP of many countries!
While Lynch spends a few chapters on the how to's of investing, the larger part of the book gets into how he thinks about and approaches companies in illustration after illustration. Rather than spending lots of time explaining the nuances of book value, he talks a bunch of times about how the book value of Company X made it a bargain relative to its price.
By reading his thoughts on a number of industries and many specific companies--especially ones he invested in--it can help one to get into the grooves of analysis, synthesis and judgment that Lynch employed so effectively. For this type of thing, which could be written in a dreary way, Lynch makes it more engaging than one might expect. As he tells the stories, which include mistakes, he tucks in tips and principles of investing that can rise up in an investor's mind to help. At the very end, he succinctly summarizes his principles of investing.
While some fundamental analysis is applicable to all companies, Lynch gets into the particulars of how to analyze specific industries. For example, he breaks down S&L's, energy companies, retailers and financial companies.
One of Lynch's strengths is his ability to remain sober and clear-minded when it seems the rest of the market is losing its head. That way, he can find bargains when fear is driving prices down, and sell when stocks are being snapped up like hotcakes.
He also talks about how one needs the stomach to ride out down times, and patience to let companies flower. Yet at the same time, he calls for pulling the weeds, not the flowers that are blooming.
Lynch insists that long-term investing rewards accurate assessments of strong companies. Short term vagaries are less important than the economic soundness and performance of the companies.
Companies he writes about range from GM to Supercuts & Fannie Mae to Pier One Imports. As long as it performs well, Lynch hardly cares what industry a particular company is in. To be honest, I wish he were a bit more discerning on occasion about the moral implications of what certain companies do.
Lynch writes about finding winners in industries that people a) find boring and don't care about and b) are very doom-and-gloom about. He recommends avoiding overvalued hot companies in hot industries that are ripe for a correction.
I find Lynch's advice eminently sensible and sane. From what I can gather too, it works. While one might need extra motivation to plow through the more technical portions, "Beating the Street" isn't just one more investment book, it is solid suggestions with numerous examples from the best mutual fund manager ever. Thus, as one who has learned more about investing from Lynch than anyone else, I heartily recommend his works, including this one, for any who would foray into the securities world. From one who actually did so, it tells you how you too can beat the street.