Recommended by: WiseSuit Staff 

"By sticking with stocks all the time, the odds are six to one in our favor that we'll do better than the people who stick with bonds."

In this book, Peter Lynch, the Wall Street legend, shows us how to come up with a stock picking strategy, and tells how the individual investor can improve his or her investment performance to rival that of the experts of the so-called old boy's finance elite.

This book is laden with sound advice including information about his life as a fund manager and how he picked stocks to become the Wall Street legend he became. It is the definitive work on stock picking but, at the same time, easy to read.  At the core is the message that you can perform better than fund managers if you pick stocks of businesses whose products or services you know and possibly use yourself.

Lynch has several criteria when analyzing stocks:

Fundamental Analysis:

• Search for stocks whose charts show earnings above price. These businesses have value that have yet to be priced-in
• The P/E ratio shouldn't be greater than the business' earnings growth rate
• Specifically in retail stocks one should look for an increase in same-store sales
• The best conditions for businesses to grow earnings are in niche or regional markets where there is little competition and much room for expansion
• Insider buying is a good sign that the business is doing well
• Look for arbitrage opportunities where a business is selling at a discount relative to its peers despite similar composition and performance
• When taking a "top-down" approach look at the "affordability index," median home value, and % of mortgage defaults published by the National Association of Home Builders

Technical Analysis:

• Buy stocks on Mondays, and from October through December when historical prices are lowest.

This book should be placed at the top of your list if you are looking for books that will sharpen your skills as an investor.  Peter Lynch was one of the greatest mutual fund managers ever during his tenure at the Magellan Fund. This book will give you a good understanding of Lynch's investment style which includes: investing only in companies you understand, using the knowledge you have of your own industry to outperform Wall Street analysts, trips to the mall create great opportunities for research by looking at which stores are the busiest, and keeping your eyes wide open to hot trends around you.

Lynch believes in buying stocks at reasonable P/E ratios, and loves to buy if the P/E matches the earnings growth rate of a company. He stays away from companies when the stock price out performs the earnings and the stock becomes over-priced.  Lynch teaches that eventually the stock price will reflect the value of a company, so the great buys are in purchasing an excellent company at a low stock price.  You will find many examples of how he picked stocks for his Barron's round table in 1993.

Peter Lynch is a genius at stock picking for the long term investor. If you follow his 25 golden rules you will perform very well in the market.

About the Author:

During Peter Lynch's thirteen successful years as manager of the Fidelity Magellan Fund, it was the top-ranked general equity mutual fund in the nation.  $1,000 invested in Magellan in 1977 was worth $28,000 when he handed over the reins of Magellan on May 31, 1990.  Since his retirement from the Magellan Fund, Lynch continues as a member of the board of trustees of the Fidelity Group of funds and writes a column for Worth magazine.  He is also the author of One Up on Wall Street.

Categories:  Biography,  Corporate Finance,  Personal Finance