The Small-Cap Investing Handbook Part Six: Peter’s Principles

This is part six of a ten-part series on our Small-Cap Investing Guide.

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Throughout this series, I’m looking at both the benefits, and drawbacks of investing in small caps, considering all of the evidence available to us today for both sides of the debate.

When completed we are planning to turn the series into an e-book, which we hope will be a comprehensive guide to investing in small caps.

The series is a collaboration between ValueWalk and ValueWalk’s new small-cap investing magazine Hidden Value Stocks.

Hidden Value Stocks is a quarterly publication which profiles two top-notch small-cap focused hedge funds in each issue. Within each issue, the managers discuss their investing process as well as to small-cap ideas each. To find out more, head over to www.hiddenvaluestocks.com.

For the other parts of this Small-Cap Investing Guide series please follow the links below:

•  Part One: Introduction
• Part Two: The Small-Cap Premium
• Part Three: Size Matters 
• Quality Over Quantity
• Peter Lynch’s Rules

So far in this series, I’ve looked at the academic research on small-cap investing but while academic research is always interesting, it’s no substitute for real-world experience. With that being the case, in parts five and six of this series are devoted to Peter Lynch.

Small-Cap Investing Guide Part Six: Peter’s Principles

Why spend so much time on Lynch and his principles? Well, when it comes to real world experience you just can’t beat the experience and record of Lynch.

There have been plenty of other successful small-cap investors throughout history but Lynch is the only investor to be able to have successfully replicated his stock picking success with thousands of equities.

So, here are Peter Lynch’s 21 “Peter’s Principles”, which are intended to sum up the points made in his book, Beating the Street.

 

Small-Cap Investing Guide – Peter Lynch’s Principles

Principle #1
When the operas outnumber the football games three to zero, you know there is something wrong with your life.
This point relates specifically to Lynch’s desire to spend more time with his family rather than trying to keep up with all his equities, but the idea behind the principle is simply to remember to make time for what you love in life.