One Up On Wall Street
Getting The Facts
Peter Lynch writes that as an investor one needs to focus on getting hold of facts though rumours are usually more exciting. He says that quarterly reports and annual reports are the best resources if one wants to find facts.
An investor must get the most out of their brokers. If one's broker makes a recommendation about a stock, ask them about the category of the stock, expansion plans, insider buy, p/e ratio, etc.
If a person has specific questions, then they can call the investor relations office for answers, and before calling one should always prepare their questions first. Lynch recommends investors to start with questions that show that they have thoroughly researched the topic.
Annual reports are the best resource, and every investor must thoroughly read them.
According to Lynch, every investor must check marketable securities in the current situation of assets. If it has exceeded a long-term debt and liability section, it is favourable. This means that the company won't go out of business no matter what happens.
On the other hand, it can be said that the financial condition of the company is in lousy shape if the cash has been shrinking and the debt has been growing.
Peter Lynch asks all the investors to check whether the outstanding number of the share has reduced or increased in the last ten years. An increase in Earning per share occurs if one buys back shares.