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Hello. Today we are talking about Peter Lynch 's very famous book One Upon Wall Street. Yes. In this he has explained how common investors like you and me can also do well in the stock market with our own understanding. Yes absolutely. And I think Lynch's main idea is that ordinary people have a special edge.
What kind of edge? Look, he says that the changes we see around us in our daily lives, new products, new services, we can recognize them before the professionals. Well, like a new store opens and it becomes a huge hit or a toy becomes very popular among children. Exactly. He says this is your local knowledge.
Wall Street analysts may not pay much attention to it, but it could be a signal to you. Hmm and related to this is his concept of 10 bagger. Isn't it ? Meaning the share which gives 10 times return. It sounds very good. Yes, it seems so but see, 10 bagger is not a lottery. Lynch says these are often small, fast-growing companies.
Well, the ones that maybe the big fund managers aren't looking at right now. The first step is that you have found a good company or product. But the real work comes after that. Meaning just looking is not enough. no way. You have to understand that company. What is his business? Are you making money or not?
How is the competition? Is there any scope for further progress in all this? You will have to do in-depth research. Yes, investing without research is no longer an investment but gambling. And Lynch makes this distinction very clear. Yes, he has said that investment means homework and patience. And gambling means just betting money with your eyes closed.
Correct. And they also say that the market is going up and down every day. Experts are coming on TV and saying anything. Don't pay attention to that noise. Keep the focus on the company. Absolutely. Pay attention to how the company is doing. Then there's a good company, or what Lynch calls an ideal stock.
How does she look like? What things should be looked at? See, according to Lynch, a good company means one whose profits are continuously increasing. Isn't it? Yes. The debt should be low or manageable. People should know and like his brand and most importantly, it should have good potential for growth in the future.
Another interesting thing they say is buy companies when no one likes them, when they are out of fashion. Well, I mean when everyone is selling or not paying attention. That's what it's called contrarian investing. Yes, that's it. Walk away from the crowd. When everyone is chasing a stock, it might be time to sell.
The main thing is to look at the health of the company. The market mood is not right. And also in the health of the company, you said profit Lynch puts a lot of emphasis on Ornings on earnings. Oh yes, very much. He says that in the long term, the share price moves along with the company's earnings.
If earnings are increasing then prices will also increase. Sooner or later they refuse to look at just the PE ratio and ask to look at the PEG ratio. What is this PEG ratio? Yes, look at the PEG ratio. The PE ratio tells you how many times you are paying compared to your earnings. Yes, but the PEG ratio also includes growth.
Meaning you divide the PE ratio by the estimated annual growth rate of the company. Well, what does this reveal? This gives an idea of how much premium you are paying for growth. If the PEG ratio is less than one, the stock may be undervalued. If there is a lot more than one, then it is probably expensive.
This gives a deeper understanding than just looking at PE. What is interesting is to see both earnings and growth together. Absolutely, and his idea of 2 minute drill is related to this earning and understanding of the company. Yes, yes. 2 Minute Drill What is this? This is a very simple test. Can you explain to someone in simple language in just 2 minutes why you bought a stock?
Good. If you can explain like I took Titan because the market for watches and jewellery is growing in India. Titan is the leader in that. She is earning well. If you can do this then it means you have done your homework. Exactly your understanding is clear. You are not investing money just on a tip or hearsay and if you are unable to understand then perhaps more research is needed.
Absolutely or maybe it's not for the stock app at all. If it is amazing then the bottom line is that look around you, understand, do research, look at the company's earnings, be patient and avoid the daily drama of the market. Yes, in short, your own observation, your common sense is your biggest strength.
This is very practical advice. Absolutely. But a question also arises here. Look at today's times. How fast does information spread? Every analyst report, every news is available instantly. Yes, that's true. So, is the common investor's edge that Lynch talks about still as strong today? Or in today's world we have to think of some new ways to use it.
This is something we should think about. Has that edge been reduced or has it simply changed form? Perhaps this is a question that today's investors must think about.
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