저자: 미상 · 외국인
요약 보기
피터 린치의 'One Up On Wall Street'를 소개하며 일상 관찰과 리서치로 개인 투자자가 기관을 이길 수 있다고 설명. 린치는 1977~1990년 연평균 29.2% 수익률을 냈다고 언급. 기업을 저성장·우량·고성장·경기순환·턴어라운드·자산주 6개 범주로 나누고, 부채·재고 증가·무분별한 인수 경계, PEG 비율(1 미만 매력적) 등을 다룸. 매매 판단은 기업 스토리 변화 기준이며 시장 예측은 무의미하다는 입장. 특정 자산에 대한 가격 예측은 없음.
다듬은 글
Hmm, people often think that the stock market is a kind of X-ray machine. Yes, absolutely, which only some special professionals of Wall Street can read. It is believed that finding the next big multibagger stock requires a very complex algorithm or a supercomputer and a Bloomberg terminal. But the source material we are discussing in today's Deep Drive completely overturns this entire notion.
That's right, today we are doing an in-depth analysis of Peter Lynch's very famous and classic book One Up on Wall Street. Hmm. Peter Lynch was no ordinary investor. He led the Fidelity Megalan Fund to a remarkable 29.2% annual return from 1977 to 1990. 29% Oh my god, this is a huge number. Yes, and the most interesting thing is that he did all this by ignoring the established rules of Wall Street.
So this sets up our mission for this in-depth analysis today. We need to understand how simple observations from daily life, combined with the right financial research, make investing very logical and easy. Of course, Lynch's biggest argument is that the average investor has a much bigger advantage than the Wall Street giants, what we call an edge.
And I would like to pause here because how can a common man who neither has a big degree in finance nor a research team beat those institutional investors? I mean, it sounds a bit strange, does n't it? See, the mechanism behind this is very practical. If we look at it from the perspective of Wall Street's weakness, then the hands of institutional investors are tied by many restrictions.
Restrictions? What kind of restrictions do we have? Let us assume a fund manager is managing a portfolio of $ billion. Now he ca n't invest $50 million in a great but small emerging company. Well, because that company is too small for them. Exactly because even if that stock increases 10 times, it will not have any impact on such a huge portfolio of Rs 10 billion.
She wo n't even take the needle. Apart from this, they are under a lot of pressure from bureaucracy and clients. They always have to play it safe. That means you have to play safe. Yes, that is the point. Meaning, if he invests money in a big and well-known company and incurs loss, then no one will question him.
Everyone will say that the market itself is bad. That's correct. But if the money is lost in some unknown company then he may lose his job directly. So this means that Wall Street often ignores small and fast-growing companies until they become very large. Absolutely. And this is where the edge of a common investor begins.
A common man can spot a trend months before Wall Street analysts by observing crowds at the mall or hearing about a new product in his office break room. Due to which Lynch says in his book Invest in What You Know i.e. invest in what you know. They say. Yes, but there is also a big misunderstanding here which needs to be cleared up.
Hum I think I understand what you're hinting at. Doesn't this mean that if someone likes Dunkin Donuts coffee, he can go and buy its shares directly? no way. And this is how people often misinterpret Lynch's Law. Having a great product or having a long line outside a store is just the top of the funnel.
This is just an idea. Not a reason to invest. So, observation is just the first step. Yes, after observation the real work begins. That is called research. We have to see what percentage that particular product contributes to the company's total revenue. Good. Can you give an example of this ? Suppose a large global pharmaceutical company has created an excellent skin care cream.
People are liking it very much. But if the sales of that cream are only 1% of the company's total revenue. So no matter how big a hit that cream becomes, it wo n't have any significant impact on the company's stock. Understand? So observation is just a filter that saves us from the noise of thousands of companies and brings us to a few selected good ideas.
Now that we're looking for ideas, what is Lynch's real goal? He uses the word 10-bagger a lot in the book. Yes, a 10-bagger simply means an investment that becomes 10 times its original value. That means a return of 1000%. 10 times? This is every investor's dream. Absolutely. And Lynch believes that not every stock in a portfolio has to be a winner.
So, does a loss making stock not matter? Look, this is called the mathematics of asymmetric returns. If a few investments in a portfolio turn out to be 10-baggers , they easily offset all the losses in the rest. Meaning one big winner can cover the losses of nine losers. But one thing is bothering me here.
If someone buys the stock of an established big telecom company or power company, it is not going to increase 10 times. This means assuming every fast- growing company is the next Amazon. This is a very risky job, isn't it? This is a very good question and investing blindly is the biggest mistake. That's why Lynch says it's crucial to determine which category a company falls into before investing.
Yes, they have divided the companies into six different categories. Correct? Absolutely. And expectations from each category should also be different. So let's decode them one by one. The first category is slow growers i.e. companies that grow at a slow pace. From the name itself it seems that it must be very lazy.
Yes, these are very mature and huge companies. Their growth rate is approximately between 2 to 4%, which is equal to the normal pace of a country's economy. Then why would anyone invest in them ? If it doesn't grow, for dividends. Because these companies do not have many options left to expand their business.
So it returns its cash flow to investors in the form of dividends. Well, it's not for the share price to jump, but for regular income. perfect. Now let us come to the second category of stars i.e. giant companies. These are the companies which are in a slightly better position. Let's assume it is growing at the rate of 10 to 12%.
Yes, like Coca-Cola or Colgate. These companies may not give you 10x returns overnight but they provide stability to your portfolio. Stability means protection during recession. Exactly when there is a recession in the market, these companies save the portfolio from sinking. Because no matter how the economy is, people don't suddenly stop buying toothpaste or drinking soft drinks.
That's correct. So it became a kind of defensive play. But I think the real thrill is in the third category. Fast growers which are fast-growing companies. Yes, this is where real money is made. These grow at a rate of 20 to 25% annually and most of Lynch's 10-baggers come from this category. We are, is it always companies in the high-tech industry ?
No no, not at all. A simple retail chain that opens stores in new cities every year can also be a fast grower. But as you said earlier, this is also where the biggest risk lies. Risk because if their growth rate of 25% suddenly falls to 5% due to some reason, then the market punishes them badly. Very badly because their entire valuation depends on the fact that they will grow continuously and rapidly.
If there is even a slight interruption in their growth story, the share price collapses like a house of cards. Oh my God, I must keep a very close eye on them. Now let's come to the fourth category which I think is the trickiest one, cyclical companies. Like us in the automobile, steel or airline sectors, whose earnings fluctuate with the economy as a whole.
You are right. If I were to give an analogy for this, it is like selling umbrellas during the rainy season. If someone buys shares of an umbrella manufacturing company at the beginning of the dry season, he will remain in loss for years. Timing is everything here. This is a very accurate analogy. And do you know where the biggest fraud happens with cyclical companies?
In their PE ratio i.e. Price to Earnings Ratio. This is very interesting. Please explain this a little more because it is generally believed that low PE means the stock is cheap. Yes, and that is the biggest value trap. In cyclical companies, when their PE ratio appears very low, it often means that their earnings have reached their peak.
Oh, that means the cycle of the economy is about to turn now. Exactly, and their earnings are going to fall badly in the next few years. Therefore, buying them at low PE can be very dangerous. In fact, it is safer to buy cyclical stocks when their PE is high because then their earnings are at their lowest level and recovery is expected from there.
Wow, this is a very counter-intuitive but brilliant insight. Meaning, you have to think completely opposite here. Yes. Now let's talk about the fifth category. Turnarounds are emerging companies. These are the companies which are almost on the verge of bankruptcy. For example, Lynch gave the example of Chrysler car company in his book.
Investing in turnarounds is a binary outcome. Either the company will go bankrupt and your money will become zero or if a new management or a government bailout saves them, they recover very fast and give multiple returns. These have no special connection with the normal cycle of the economy. Meaning, their story depends solely on their own survival.
Yes. And now comes the last sixth category, asset play. We This is my personal favorite part. Here we are talking about companies that have valuable assets that have been completely ignored by the market. Yes, and this often happens because Wall Street analysts only focus on quarterly earnings and revenue models.
They ignore the true value of land, real estate, piles of cash, or old patents hidden within the balance sheet. Meaning, suppose there is an old retail company. Now if its business is not doing well then analysts will consider it a sinking business and dump its stock. Absolutely. But they do not know that the stores of that retail company are located in the most posh areas of the country and the price of the land of those stores is three times more than the current market value of the entire company.
Exactly this is the real asset play. Lynch also cited the example of the Pebble Beach golf course, where the land was worth more than the company's value. And another important thing is that companies do not always remain in the same category. She keeps changing her category. This means that a fast grower can become a stallard or slow grower as it grows.
Yes, that is why after investing, one has to constantly review which box the company is in today? And how will this review happen? Lynch suggests creating an investment thesis. Isn't it ? Yes, they say that if an investor cannot explain to a child within two minutes why he has bought a particular stock, then he should not buy that stock.
So what does all this really mean? What should be included in this 2-minute story? You should know how the company actually makes money? Who are his competitors? Where will its future growth come from? Are they reducing their costs? Or are you going into new markets or increasing the prices of your products?
And this thesis comes in handy to monitor the stock later. If the story is what you thought it would be, stay invested. If the evidence in the story proves it wrong, it's time to get out. Correct. But here's the thing. No matter how good the story is, if the company's numbers don't support it, then that story becomes fiction.
So what are the things we should look at most carefully in financial analysis? See, the biggest red flag Lynch sees is debt. Debt: But there is some debt in every business. Yes, but in this also we have to understand the type of loan. One is long-term debt which is called funded debt. Such as corporate bonds.
The company has 10 to 20 years to repay these. It is not that dangerous. So what is dangerous then? Bank Day i.e. short term bank loan is dangerous. The bank can ask for it back at any time. When there is a recession in the market, these same bankers make even good businesses bankrupt. We understood that apart from debt, there is another metric on which a lot of emphasis has been given in the book and that is inventory i.e.
the goods kept with the company. Yes, inventory buildup can be a silent killer for any company. If a company's sales are growing at 10% , but its inventory is increasing at 30% , then this is a big danger sign. Because it simply means that the goods they are producing are not selling. It is lying in the warehouses and ultimately they will have to sell that goods at huge discounts due to which their profit margin will be completely destroyed.
perfect. And there's another thing about financials that Lynch hates. He has given it a very interesting name: diversification. Diversification means calling diversification bad. Yes, when a highly profitable company uses its extra cash to recklessly buy other businesses it knows nothing about, it actually gets worse.
This destroys value for investors. Instead, the company should buy back its own shares, which is called share buyback. Absolutely share buyback is a very good sign. This reduces the number of shares in the market and the price of the remaining shares automatically increases. We get really interesting here.
Now let's talk a little about valuation because without proper valuation even a great company can incur losses. We have talked about the value trap of cyclical companies but how do we look at the PE of fast growers ? This raises a very important question. Lynch has a very simple rule. The PE ratio of any company should be equal to its growth rate.
Meaning if a company is growing at the rate of 30% then its PE of 30 will also be considered reasonable. Yes, it is absolutely fair. But if a company is growing at just 5% and is available at a PE of 15, then it is expensive. This is where the PEG ratio comes in handy, right? Price to Earnings to Growth Ratio.
Yes, if we divide the PE by the growth rate and the number comes out to be less than one, then understand that the stock is attractive. I will calculate it and see. Suppose PE is 20 and growth is 30% then 20 divided by 30 is 0.66. This is less than one. This is a perfect calculation. This would be considered a very good valuation.
Ok. Now let us assume that we have understood the story, looked at the financials and bought the stock at the right valuation. But the real test of an investor begins when the stock price fluctuates. So what is the right time to sell the stock, according to Lynch? Let me first tell you when not to sell.
Yes, it is more important. People often panic and sell. Absolutely. Never sell just because the stock price has fallen 20%, nor sell because it has risen 50%. People often make this mistake, don't they? We book profits by selling the best performing stocks in our portfolio and hold on to the loss-making stocks, hoping that the prices will recover someday.
Yes, Lynch says it beautifully. Cutting flowers and watering weeds. You should not sell unless the fundamental story of the stock changes. That means, if inventory starts increasing too rapidly or the company gets involved in some foolish acquisition which results in huge bank debt on the balance sheet, then it should be sold.
Yes. Or sell when the valuation becomes so absurd that you have to understand the math. Suppose the PE of your company has become 50 but the growth rate is only 15% then it is the right time to exit that stock. But this is where the biggest obstacle comes in, our own psychology, our psychology, the volatility of the stock market and daily news scares the investors a lot.
Lynch has a very strong stance on this. He says that if you spend even 13 minutes a year on macroeconomics or economic forecasting, you have wasted 10 minutes. Oh wow, so what will the interest rates be? Who will win the next election? One should stay away from all this noise. You should stay away completely.
And Lynch has a very calm view of the market declines that we call crashes. He famously said that a market recession is like a cold snap in Minnesota in January. Minnesota cold, if I may explain it a little, means when the cold comes in January, you do n't panic and sell your house, right? Yes, you just put on your warm coat and wait for the weather to pass.
Market crashes are exactly like this. Meaning they come regularly but investors who maintain patience and trust their research always emerge as winners. perfect. Patience is the biggest weapon. So if we weave this whole deep drive into one thread, Peter Lynch's philosophy teaches us that investing is not a magical art.
It is a science of using your own penny eye to categorize the right companies , understand their story , closely examine the financials, and above all, be disciplined. Yes, and this clearly proves that even though Wall Street has all the data and tools, no heavy-duty system can beat the edge that a calm, cautious, self-researching ordinary investor has.
This is really a very powerful thing. And with that, we come to the end of this in-depth discussion. But before I go, I want to leave you with a thought-provoking question. Please tell me. In today's era, where there is noise about Artificial Intelligence everywhere, where supercomputers are making millions of trades in a thousandth of a second.
Is it possible that the most accurate and biggest edge in investing is not AI but the human eyes that observe human behavior while strolling through a local mall? Just think about it.
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