Beating the Street

Welcome to our Beating the Street review. Beating the Street has practical information on how to build a stocks and shares portfolio, being written by one the most successful fund managers of all time.

‘Everyone has the brainpower to make money in stocks’

About the Author Peter Lynch

Peter Lynch picked stocks and shares for one of the largest and most successful US mutual funds of the 80s.

In 1977 he took over the Magellan fund with only $18 million dollars under management. By the mid-1990s he had grown the business to $12 billion. He is one of the most successful fund managers of his generation.

What is Beating the Street about?

Beating the Street starts by illustrating how amateur investors can succeed in buying stocks. It covers why you should buy stocks and the major pitfalls to avoid. Finally, it discusses how the author successfully grew and managed an investment fund delving into his methodology and learnings.

The second half of the book is the most interesting as it runs through practical examples of how he invested in certain companies and industries. In addition, it is filled with practical tips including the Rule of 72 and The Rule of Five. The Author also gives his 25 Golden Rules.

Why is Beating the Street still relevant today?

The book is more relevant to read now than at any other time in the last 10 years, being written in the aftermath of the crash of 87 while market conditions are eerily similar to early 2020.

Also, it provides a useful reminder that the market it is cyclical in nature. Crashes are the normal and the worries of each generation are pretty similar. The problems he faced when investing in the late 80’s are similar to the conditions we face today.

‘We worried that the dollar was collapsing (FX impacts), foreign companies were dumping their products in our markets (US-China Trade War)… an oil shortage (age of old issue but currently oversupply)…the consumer was deeply in hock (high levels of consumer debt) and unable to buy merchandise (lack of demand) and President Reagan was not allowed to run for a third time (Political uncertainty).’

‘The AIDS virus is going to kill half the consumers (Covid-19), and the hole in the ozone the other half (Global Warming).’

In a reminder telling investors not to panic he compares a stock market crash to the weather.

‘If you live in a cold climate you expect freezing temperatures, so when your outdoor thermometer drops below zero, you don’t think of this as the beginning of the next ice age. You put on your parka, throw salt on the walk, and remind yourself that by summertime it will be warm outside.’

What will you learn from Beating the Street?

New investors will understand there are opportunities everywhere. You don’t have to a fund manager to be a successful stock picker, but you do need to do your research . You must understand a company’s financial position.

Peter explains that the amateur investor is free from of a lot of the rules and pressures that restrict the performance of the professionals. This gives the amateur investor an edge.

The book also stress the importance of doing your homework. It provides you an overview of what to look for and how to research and understand a company’s value.

‘If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.’

Beating the Street Review Conclusion

This book does not have some instant formula for success, because there isn’t one, but it does offer a lot of sound principles that should form the backbone of any investment strategy.

Note from the Reviewer: My key takeaway from Beating the Street was to focus on industries you know. I’ve worked in the spread betting industry for the last 7 years. As a direct result I recently added some IG shares to my portfolio. They were up 40% as of 06-07-2020. You can see the portfolio here

BTB Recommendation: Best for beginners looking for a better understanding of how to buy stocks and shares

By Same Author: One up on Wall Street shows that the average investors have advantages over Wall Street experts. Since the best opportunities can be found at the local mall or in their own places of employment, beginners have the chance to learn about potentially successful companies long before professional analysts discover them.

What to read next: A Random Wall Down Wall Street covers all the major themes from stock market bubbles to portfolio design. It is one the best books written for beginners and is a must read.