This is perhaps one of the most enjoyable books I have ever read and so recommending it to anyone investing in crypto . One Up On Wall Street tells about the exceptional growth of the mutual fund Fidelity Magellan Fund from $18 million to $14 billion with the legendary Peter Lynch as fund manager.
In the book Peter would recount how he chose stocks that he thought were 10 baggers or 20 baggers. He had an unconventional system back then, and through that unconventional method he uses to evaluate a stock before buying them, he was able to steer the fund to become one the biggest success stories in the history of mutual fund investments.
Nowadays people are so reliant on charts and other technical mumbo-jumbos, but Mr. Lynch will probably smash computer screens showing charts if he sees one. In trading there are two school of thoughts and they are called fundamental approach and technical approach.
Fundamental would refer to the strength and future growth of the company while technical would refer to statistical data based on historical behavior of the stock, in other words, "charts."
In the book you'll see that Mr. Lynch really leans on the fundamental approach and sees a stock by the strength of the company's business. I can imagine like if he comes across a new company and then sees the potential of that company, he would then investigate further. Once he assess that the company will be a dominant entity in its particular industry, then he would decide to buy it and hold on to it until he realizes the gains.
As I've mentioned he had this unconventional method, which, of course, I would not say here so as not to spoil your reading pleasure. Man, I truly had a blast reading this book because probably I do agree as I am a proponent of the fundamental approach myself. For me, it's just better to buy something with a solid foundation rather than depending on charts.
I don't really trust charts much, especially in crypto because the graphs you'll see are lines rendered "after a transaction." Example is like Bitcoin doing at, say, $45K, and say the charts are giving buy signals because based on movements of the moving averages indicators that it should go up and also RSI is saying it had been oversold and it is okay to buy now, and other things that may give a buy signal. Now the problem with this scenario is at the buy signal, a whale suddenly dumps a huge amount of Bitcoin, and so the buy signal before the dump was therefore not accurate.
It's not that technicals doesn't have merits but we don't know when the whales are dumping and that's why I don't rely much on technicals, except when day-trading.
As I've said on the title too why One Up On Wall Street should be a must read for crypto traders because this will give people a different approach before buying any particular cryptocurrency. If people read this first then I'm sure they won't go buying blindly because they would remember how Mr. Lynch investigated first and truly scrutinizing everything about a particular stock.
I think Mr. Lynch's approach would apply just the same for crypto traders. Basically when Peter sees a stock, he would already think what would be its value in a year's time, in 3 years' time, or in 5 years' time. Although crypto is not like stocks where we can have dividends and have company ownership features, cryptocurrencies however have potential to increase in growth because we know what the technology can do and assess from that utility. I would dare say that I think Peter Lynch would look at a particular cryptocurrency based on the merits of what the technology will improve upon on based on real world problems that will be solved.
Say Mr. Lynch is looking at Ethereum back in the day and he sees that Ethereum is all about smart contracts or automated contracts. He would probably think is that useful or will it change the way we're doing things now, or will this get used by people and businesses, questions like that. Then probably he'll look at Vitalik Buterin and the other people behind Ethereum. He'll probably see they are exceptional programmers. But I think he also would stress test the Ethereum network probably by hiring a developer to make a program out on Eth's network and see if the platform would truly deliver a smart contract.
Just really thinking what Mr. Lynch would do but probably ordinary people won't have the luxury of hiring developers to test out the platform but we can at least do a test transaction and see if the network is doing what it is supposed to do. If we get satisfied then it bolsters further our assumption that a particular blockchain is indeed easy to use and would be beneficial to the users.
Also, if we read the whitepaper and ask around experts-- Wait, when I say ask experts, say you wanted to invest on a DeFi coin, read the whitepaper, check out other coins and then see who give the best APYs, and then also check also the backers and team members. Perhaps Google the names you see there. For me, the red flag would be if a person was involved in a scam or scandal before.
I learned this lesson with the coin BRG. I read the whitepaper but not the team members. Later on when trading of the cryptocurrency was halted, that is when I gave a further look at the coin. I googled the names on the whitepaper's founder Sina Estavi, and found out he had a case ongoing about not paying up or something. If I had done the due diligence beyond reading the whitepaper, and had been more thorough as Peter Lynch would be, I would not have bought BRG in the first place even for day-trading purposes, because that is just fundamentally flawed at the start.
I can just imagine that if Peter Lynch had a crypto fund now, he'd probably say 3,000 baggers or 20,000 baggers.
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