Finally, another very useful analytical tool introduced by Lynch is the share price vs earnings chart where two lines for each indicator are put together (when share price significantly deviates from the earnings line it is normally a signal to buy or sell the shares).
The book also has a few useful check-lists for best companies and typical mistakes in investing. It also helps in portfolio management deciding on specific weights for each stock. The main investment tool introduced by Lynch is the six categories of investment cases for various companies which help to decide on key issues to focus in each case as well as make decisions on when to buy and sell such companies.
#ONE UP ON WALL STREET PETER LYNCH HOW TO#
The book focused on three main ideas: 1) Personal circumstances before you start investing, 2) How to find best investment ideas, and 3) Portfolio management. Trying to time the market or spend time thinking about future market direction is a waste of time, according to the investment guru. Lynch reiterates a few times that understanding business prospects through first hand knowledge of a particular product (that you may be consuming every day) is the key to success. The core of Lynch's investment philosophy which is discussed in the book is that 'behind every stock there is a business' and, thus, performance of a stock would ultimately reflect performance of the business, namely earnings dynamics.