Christmas is arriving soon.
In the spirit of giving, there can be gifts with an investing twist too. In a recent podcast, my Foolish colleagues, Alison Southwick and Robert Brokamp, had shared the favorite investment books from the investment team at the Motley Fool’s headquarters in the U.S.
These books can make for great gift of smarts, as Alison had put it, because they provide solid investing education. They are gifts that “no one can take away from you” once the lessons are absorbed.
One of the books mentioned was geared for folks who may be beginning or middling investors and that is, Peter Lynch’s One Up On Wall Street.
A book for the ages
Peter Lynch may be best known for his role as the manager of the US-based Fidelity Magellan fund from 1977 to 1990. As the head of the fund, he delivered annualized returns of 29% for his clients over that 13 year block.
For some perspective on Lynch’s achievement, the SPDR STI ETF (SGX: ES3), an exchange-traded fund mimicking the fundamentals of Singapore’s market barometer, the Straits Times Index (SGX: ^STI), has clocked in a total annual return (including reinvested dividends) of ‘only’ 7.2% from April 2002 to October 2015.
There is much to learn from Lynch through his book.
For instance, Lynch had a penchant for categorizing prospective investments into different buckets, namely, the Slow Growers, the Stalwarts, the Fast Growers, the Cyclicals, the Turnarounds, and the Asset Plays. Each bucket, in turn, had a different role within Lynch’s investment portfolio.
Take Stalwarts as an example. Lynch describes:
“These multibillion-dollar hulks are not exactly agile climbers. When you traffic in stalwarts, you’re more or less in the foothills: 10 to 12 percent annual growth in earnings.”
Furthermore, Lynch had a clear purpose for stalwarts in his portfolio. He illustrates this in his book:
“I always keep some stalwarts in my portfolio because they offer pretty good protection during recessions and hard times.”
In Singapore’s stock market, Dairy Farm International Holdings Ltd (SGX: D01) may fit into Lynch’s Stalwarts category. The pan-Asian retailer has paid out steadily increasing dividends over the past decade, even through the Great Financial Crisis of 2008-09. The company’s dividends were also backed up with ample free-cash-flow as shown in the graph below.
There is much more to learn from Lynch. So, take a look at One Up On Wall Street if you haven’t gotten to it. Or better still, pass it on to someone who may be looking to learn about investing.
Stay tuned for more tips from the investing master. In the meantime, you can learn more about investing through a FREE subscription to Take Stock Singapore. Sign up here for The Motley Fool’s weekly investing newsletter that will teach you how to GROW your wealth in the years ahead.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Dairy Farm.