Peter Lynch - One Up on Wall Street Audiobook (Complete)

Lynch's provocative opening: rule #1 is stop listening to professionals. Any normal person using 3% of brainpower can pick stocks as well as Wall Street experts. Smart money isn't so smart, dumb money isn't so dumb. Dumb money only dumb when it listens to smart money. Amateur investors have built-in advantages to outperform experts.

Lynch advises going it alone: ignore hot tips, brokerage recommendations, newsletters, and even what Peter Lynch himself is buying. You have better sources all around you - workplace, neighborhood shopping mall. Can pick spectacular performers long before Wall Street finds them. Keep tabs on your own sources.

Being credit card carrying American consumer means you've done fundamental analysis on dozens of companies. This is where you'll find 10-baggers (stocks that return 10x your money). Term borrowed from baseball's four-bagger (home run). Lynch has seen it happen over and over at Fidelity. 10-bagger is whole lot better than four-bagger.

Lynch's wife Carolyn discovered L'eggs by going to grocery store - perfect example of power of common knowledge. Despite Lynch knowing textile business deeply, her observation was more valuable. Hanes became 6-bagger before Sara Lee takeover, would have been 50-bagger otherwise. Could have bought years after nationwide launch and still tripled money. All Carolyn had to do was buy pair and try them on.

Finding promising company is first step, then do the research. Magellan fund rose 24-fold per share in 12 years partly from little known, out of favor stocks Lynch discovered and researched himself. Any investor can benefit from same tactics. Doesn't take much to outsmart the smart money which isn't always so smart.

The Limited went public 1969 with only 1 analyst for 5 years. By 1979 (10 years later) only 2 institutions owned it despite brilliant record. 1983 high of $9 was 18x from 1979. Fell to $5 in 1984 with good fundamentals - chance to buy more. By 1985 at $15 analysts finally put on buy lists, institutional buying pushed to $52 (beyond fundamentals). 30+ analysts arrived just in time to see it drop. Meanwhile 56 analysts cover IBM. Shows Wall Street missing obvious opportunities for years.

'Professional investing' is oxymoron like 'military intelligence.' You're competing against oxymorons when buying/selling since institutions control 70% of shares - lucky break as many barriers limit professionals. Majority hemmed in by rules. Rare professional has guts for unknown companies. Most choose insurance of small loss on established company over chance at large profit on unknown. More important not to look bad if you fail. Unwritten rule: you'll never lose your job losing clients' money in IBM.

SEC rules mean Magellan can't own >10% of any company or invest >5% of assets in one stock. Well-intentioned to prevent all eggs in one basket, but forces large funds to limit to 500 biggest companies out of 10,000+ publicly traded. Lynch's success from fast growers, turnarounds, out of favor stocks that traditional managers overlook. Tries to think like amateur as frequently as possible. Individual investor has edge - 10-baggers come from beyond Wall Street boundaries.

Stocks paid off 30x better than treasury bills despite crashes, depressions, wars, recessions. Logical explanation: in stocks you have company's growth on your side, you're partner in prosperous business. In bonds you're nothing more than nearest source of spare change. Best you can hope lending money is getting it back plus interest. Average person will never get 10-bagger in a bond.

Buy house before investing in stocks. House is one good investment almost everyone makes - money maker 99/100 times. Profitable when held long term like stocks, but unlike stocks people actually hold houses for years. Good investor in houses because know how to poke around, hire experts for termites/leaks/rot/pipes/wiring/foundation. No wonder people make money in real estate, lose in stocks - spend months choosing houses, only minutes choosing stocks.

Review budget before buying stocks. If paying for college in few years, don't put that money in stocks - even blue chips too risky. Blue chips predictable over 10-20 years but flip a coin for 2-3 years. Can fall and stay down 5 years. If market hits banana peel, kid goes to night school. Lynch's simple formula same for Wall Street as racetrack: only invest when you can afford to lose without any effect on daily life in foreseeable future.

Lynch can't predict markets. Only thing he knows: each time promoted, market goes down. Don't need to predict market to make money in stocks. Sat through worst drops, couldn't foresee if life depended on it. Didn't warn about 1987 1000-point drop. Grad school said market goes up 9%/year - since then never gone up 9% in a year. No reliable source for predictions. Recession every 5 years theory hasn't happened.

Silly Statement #4: 'It's only $3, what can I lose?' Took Lynch 20 years to realize whether stock costs $50 or $1, if goes to zero you lose everything. Lousy cheap stock just as risky as lousy expensive stock. #5: 'Eventually they always come back' - RCA never came back in 65 years. Thousands of bankruptcies, companies never regain prosperity. #6: 'Always darkest before dawn' - freight cars dropped from 95K to 45K to 17.5K to 5.7K units, 94% decline. Sometimes darkest before dawn, other times darkest before pitch black.

Year of professional management supposedly brought sophistication to market with 50,000 stock pickers dominating. But Lynch says they're usually right only for last 20% of typical move. Wall Street studies, clamors, lines up for that last 20% with sharp eye on exits. Idea: make quick gain, stampede out door. Small investors don't fight this mob - calmly walk in entrance when crowd at exit, walk out exit when crowd at entrance.