Beating the Street: How to Use What You Already Know to Make Money in the Market [Abridged, Audiobook] [Audio Cassette]

Peter Lynch (Author)

Book Description

Publication Date: April 1, 1993

During the thirteen years Peter Lynch was the manager of the Fidelity Magellan Fund until his retirement in 1990, Magellan was the top-ranked general equity mutual fund. An investment of $1,000 in Magellan in 1977 was worth $28,000 in 1990. Time called Lynch the nation's "#1 money manager." Now Peter Lynch shows investors how he puts his investing philosophy and techniques into action as he takes readers step-by-step through the process of selecting the stocks he recommended at the 1992 Barron's Roundtable. (And he describes how he followed these companies through most of the year to see how their stories unfolded and tells us whether, at the end of nine months, he recommended the reader buy, sell, or hold the stocks.). Lynch also examines his years at the Magellan Fund, analyzing the reasons why he outperformed all other fund managers. He discloses that it was a small number of major success stories ("10-baggers") that were the principal reason for the fund's superior record. He draws a lesson for the average investor: there are good companies looking for investors, and it takes only one or two good companies a decade to turn a portfolio from an average performer into a winner. Finally, in what may be the most valuable section of the book, Lynch offers advice on devising a mutual-fund strategy. Not surprisingly, he believes that the key to any mutual-fund portfolio is stocks, not bonds, and he recommends a mix of growth funds, value funds, and blue-chip funds. He explains how to adjust new investments among these different types of funds. Beating the Street also tells the wonderful story of a group of seventh graders who, following Lynch's advice to invest in what they knew,outperformed nearly every fund manager on Wall Street.

Editorial Reviews

From Publishers Weekly

Until retiring in 1990, Lynch ( One Up on Wall Street ) was manager of the spectacularly successful Fidelity Magellan Fund. Here he recalls with self-deprecating humor and disarming candor how he went about choosing winning stocks (and missing a few) for the $12 billion fund, which, during one five-year period in the 1980s, earned investors a 300% return. Lynch strongly favors stocks over other investment vehicles but insists that "investigative" research into a corporation's prospects, including credit checks and visits to the firm's installations, is essential. "Focus on companies, not the stocks," he stresses, adding that on this basis limited partnerships, banks and even S & Ls can be sound investments. Lynch's reputation and business writer Rothchild's deft touch should yield big sales for this inside story. Major ad/promo; first serial to Money magazine; BOMC and Fortune Book Club alternates; author tour.
Copyright 1993 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.

From Library Journal

Lynch is the master stock picker who led Magellan (until May 1990) to its position as America's biggest mutual fund. In One Up on Wall Street (Simon & Schuster, 1989), also written with Rothchild, he described his winning methods. Here, he provides a few more elaborations and 21 "Peter's principles." Some are overly clever, e.g., being first in line is a great idea except on the edge of a cliff. Lynch takes three chapters to explain how he "done it good" at Magellan. One valuable chapter details methods for picking a mutual fund from the thousands available, but most of the book is devoted to demonstrating his research into picking the 21 stocks he recommended in the January 1992 Barron's roundtable. Still, since the average investor will not get to talk to the CEO or visit the company in person, maybe we should all just buy Lynch's recommendations each year. A tossup. Previewed in Prepub Alert, LJ 11/1/92.
- Alex Wenner, Indiana Univ. Libs., Bloomington
Copyright 1993 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.

See all Editorial Reviews

Product Details

• Audio Cassette
• Publisher: Sound Ideas; Abridged edition (April 1, 1993)
• Language: English
• ISBN-10: 067186498X
• ISBN-13: 978-0671864989
• Product Dimensions: 7.4 x 4.5 x 0.8 inches
• Shipping Weight: 8 ounces
• Average Customer Review: 3.9 out of 5 stars  See all reviews (81 customer reviews)
• Amazon Best Sellers Rank: #1,338,024 in Books (See Top 100 in Books)
  • #6 in Books > Books on Cassette > Business > Investing
  • #12 in Books > Books on Cassette > Business > Personal Finance
  • #33 in Books > Books on Cassette > Business > Careers & Business Life

Customer Reviews

Most Helpful Customer Reviews

132 of 142 people found the following review helpful:

2.0 out of 5 stars They chatted about the mountains, February 17, 2005

By 

Giancarlo Nicoli "Pharmacist and Publisher" (Appiano Gentile, close to Como Lake, Italy) - See all my reviews
(REAL NAME)   

This review is from: Beating the Street (Paperback)

I wrote this review in the hope that you'll avoid the mistake I made.

I bought (and read) in reverse chronological order the first two books Mr. Peter Lynch wrote, "One Up On Wall Street" and "Beating The Street". I got "Beating The Street" before "One Up" because I have been misled by a favourable review of this book made by a well-known financial internet site (maybe they make money out of every book they help to sell?).

Imagine you have written an excellent book and you have sold one million copies of it. What would you do after that? Would your publisher push you to write another one? Wouldn't you write again to try and repeat the success?
I think this is what happened to Mr. Lynch. He wrote "One Up On Wall Street", which is an excellent book indeed (I published a few weeks ago a review of this book, where I explain why I warmly recommend it) and he sold over one million copies of it.
"Beating The Street" is, I presume, an attempt to profit from the success of the first book.
Problem is, "One Up" is a masterpiece: it explains very well Mr. Lynch's proven investing philosophy and methods. If so, what else to publish in a later book?

While "One Up" is a book that explains and recommends strategies, i.e. tells how to successfully pick winning stocks, "Beating The Street" is actually a book that picks stocks for you.
Remember, this book has been published in 1993. I believe it is easy to understand that, after so many years, the then cheaply valued companies recommended by Mr. Lynch may be fairly valued, overvalued, no longer in business, or taken private by now.

In my opinion, "Beating The Street" is now a poor and completely out of date book.

Here's an excerpt (from page 206 - ISBN 0-671-89163-4):
"I talked to Glacier (Bancorp) the day after Christmas. I'd come into my office in Boston wearing plaid pants and a sweatshirt. The building was empty except for me and the security guard.
(...) whoever answered the phone at Glacier Bancorp in Kalispell told me they were having a retirement party for one of the officers, but they'd inform chairman Charles Mercord that I called. They must have dragged him out of the party, because a few minutes later Mercord called me back.
Asking a president or a CEO about a company's earnings is a ticklish proposition. You're not going to get anywhere by blurting out, 'What are you going to earn next year?' First you have to establish rapport. We chatted about the mountains.(...)
My only worry was that Glacier may have overpaid for its acquisition, a topic I approached obliquely. 'I assume you had to pay over book value for this,' I said, inviting Glacier's president to admit the worst. But no, Glacier hadn't overpaid.
(...) I never hang up on a source without asking: what other companies do you most admire? (...) I've found many good stocks this way."

Well, apart that the well-known SEC-enforced "Regulation Full Disclosure" (Reg FD - not existent at the time Mr. Lynch wrote his book) now forbids analysts to talk privately about business matters with companies' officials, I'm not sure any of you would be able to pick up the telephone and have a nice conversation the day after Christmas with any CEOs, wouldn't you?
I estimated that, if every buyer of those one million copies "One Up" sold were to call Glacier Bancorp, the CEO would have to spend over nine years talking to the telephone (one million 5-minutes calls, 24 hours a day, 7 days a week, 52 weeks a year...).

Save your money and get "One Up On Wall Street" instead.

42 of 42 people found the following review helpful:

5.0 out of 5 stars Beating the Street, September 13, 2004

By 

Mike Fleming (Auburn, CA) - See all my reviews
(REAL NAME)   

This review is from: Beating the Street (Paperback)

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 @ 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, 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, 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, Roger Lowenstein
~ The essays of Warren Buffet: Lessons for Corporate America, 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, 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 @ UC Berkeley & UC Davis, respectively, see their websites for links to papers about investor mistakes to avoid.
Good Luck on the Street!

118 of 134 people found the following review helpful:

3.0 out of 5 stars Buyer beware - easy reading & some learning but lots of fluf, February 28, 2002

By 

Dan E. Ross "Dan Ross" (Frisco, Tx USA) - See all my reviews
(REAL NAME)   

This review is from: Beating the Street (Paperback)

Having worked on Wall Street I think this book is great and poor at the same time.

Great because

1) It is ideal to read for the casual to serious investor.
2) Some of Lynch's prominent themes like "Buy what you know" and investigating the companies that you buy are great strategies, especially for non-professionals.
3) 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

I say it is poor because Lynch himself used to buy and sell stocks frequently. So while he says "buy and hold" he did that, but he also traded the heck out of stocks he knew inside and out. When they got expensive, he would trim his position and when something got really cheap he would buy the heck out of it. This enabled him to compound his returns by a phenomenal amount

Lynch primarily invested in retail stocks. This was great as brand names and the "homogenization" of retail concepts via chain stores was sweeping the nation with the baby boom wave. However, most of that "easy money" was made along time ago. Current baby boom themes of biotech, health care, along with some financial service industry stuff is tougher to make money at and it doesn't grow as fast as retail. Well, biotech can but it is far riskier.

Lynch never talks about debt. The U.S. economy expanded in the 80's due to 1) heavy government spending, which created a huge national debt (2) consumer spending a ton of money and going into debt and (3) the entrepreneurial spirit. The government actually funded a lot of the developments we see today. The problem with this is that they have mortgaged the future to pay for past wealth creation. He never once mentions the impact of debt. It is great while you are charging the credit card up and enjoying the ride but eventually you have to pay the bills!

Lynch spends a lot of time telling the reader how he went about picking stocks for his Magellan Fund, but he has the ability to talk to CEO's and visit companies on site headquarters, something the average investor certainly does not have. I would say though that Reg FD has made the playing field more even, as now nobody gets a lot of information!

My thoughts on stock picking, having worked in the financial service industry for 3 years in research (got out because my values didn't correlate with the business) is that no one should expect to beat the pros unless they are 1) very observant and 2) willing to commit time to finding new investment concepts/vehicles.