Peter Lynch, during his 13 years as head at Fidelity Magellan, from 1977 till 1990, managed to realize annual returns of 29%. One up on Wall Street is an excellent composition on how can lay investors approach investing.
The Book is divided into following sections:
Part 1: Preparing to Invest
Part 2: Picking Winners
Part 3: The Long-term View
What is so amazing about this book is the candid way in which Lynch will explain you his methodology and no sir.!! They don’t include use of greek letters to value the firm. According to him every company is a business, if you understand how the business will play out in next few years, you are in with a chance to make money.!
Peter Lynch comes across as a person who believes in doing thorough research on his investments
Some of his Quotes in the book:
“Go for a business that any idiot can run – because sooner or later, any idiot is probably going to run it.”
“If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes.”
“Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”
“The person that turns over the most rocks wins the game. And that’s always been my philosophy.”
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.”
“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. If stockpicking could be quantified, you could rent time on the nearest Cray computer and make a fortune. But it doesn’t work that way. All the math you need in the stock market you get in the fourth grade.”
“Getting the story on a company is a lot easier if you understand the basic business. That’s why I’d rather invest in panty hose than in communication satellites or in motel chains than in fiber optics. The simpler it is, the better I like it. When somebody says, “any idiot could run this joint,” that’s a plus as far as I’m concerned, because sooner or later any idiot probably is going to be running it.”
“You can get tenbaggers in companies that have already proven themselves. When in doubt, tune in later.”
Peter Lynch in Part 2 of the book talks about Classifying Business into Six Categories:
1. Slow growers – Usually large and ageing companies. When an industry at large slows down, most of the companies within the industry lose momentum too.
2. Stalwarts -Stalwarts are companies like Coca Cola, Procter and Gamble, Colgate Palmolive. Depending on when you buy them and what price you can make a sizeable profit in stalwarts.
“I always keep some stalwarts in my portfolio because they offer pretty good protection during recessions and hard times.“
3. Fast growers – Lynch says, These are among my favorite investments. Small, aggressive, new enterprises that grow at 20 – 25% plus a year. If you choose wisely this is the land of the 10-to-40 baggers, and even 200baggers. With a small portfolio, one or two of them can make a career.
A fast growing company does not necessarily have to belong to a fast growing industry. As a matter of fact, I would rather it didn’t, in which case it is winning over market share and capturing a bigger segment of the market.
There’s plenty of risk in fast growers, especially in younger companies that tend to be overzealous and underfinanced. Also smaller fast growers risk extinction and the larger fast growers risk a rapid devaluation when they begin to falter.
4. 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. The autos and the airlines, the tire companies and steel companies, and chemical companies are all cyclicals.
5. Turnarounds – Turnaround candidates have been battered, depressed, and others can barely drag themselves to the bankruptcy courts. These aren’t slow growers, these are no growers. These aren’t cyclicals that rebound; these are potential fatalities.
6. Asset-Plays – An asset play is any company that’s sitting on something valuable that you know about, but that the market has overlooked.
These Classifications provides investor with a framework. Must read read read!!! Absolutely Relevant even today!! Happy Learning! 
but seriously things look really uphill. Okay let’s continue the rocky story.
(Asset turnover means for every rupee of assets what revenues do we earn) The Net Profit margin is another concern, In 2011, NPM of 10.45% doesn’t tell you the real story, The company had a nonrecurring item of 37 crore in its P&L.(This is one time event.!!!) Its contributed to over 50% of reported PAT.
