The Greatest Investors: Peter Lynch
|Born:||Newton, Massachusetts, in 1944.|
|Most Famous For:||Peter Lynch managed the Fidelity Magellan Fund from 1977 to 1990, during which time the fund\'s assets grew from $20 million to $14 billion. More importantly, Lynch reportedly beat the S&P 500 Index benchmark in 11 of those 13 years, achieving an annual average return of 29%.
He is also famous for several books including, "One Up On Wall Street" (1989) and "Beating The Street" (1993), which are widely considered to be mandatory reading for any investor.
In 1965, Lynch graduated from Boston College where he studied history, psychology and philosophy. He served two years in the military before attending and graduating from the Wharton School at the University of Pennsylvania with a Master of Business Administration in 1968.
He went to work for Fidelity Investments as an investment analyst, eventually becoming the firm's director of research, a position he held from 1974 to 1977. Lynch was named manager of the little known Magellan Fund in 1977 and achieved historic portfolio results in the ensuing years until his retirement in 1990.
In 2007, Peter Lynch was serving as vice-chairman of Fidelity's investment adviser, Fidelity Management & Research Co. Since his retirement, he has been an active participant in a variety of philanthropic endeavors.
Often described as a "chameleon," Peter Lynch adapted to whatever investment style worked at the time. It is said that his work schedule, the equivalent of what we would call today "24/7," did not have a beginning and an end. He talked to company executives, investment managers, industry experts and analysts around the clock.
Apart from this punishing work ethic, Lynch did consistently apply a set of eight fundamental principles to his stock selection process. According to an article by Kaushal Majmudar, a CFA at The Ridgewood Group, Lynch shares his checklist with the audience at an investment conference in New York in 2005:
- Know what you own.
- It's futile to predict the economy and interest rates.
- You have plenty of time to identify and recognize exceptional companies.
- Avoid long shots.
- Good management is very important - buy good businesses.
- Be flexible and humble, and learn from mistakes.
- Before you make a purchase, you should be able to explain why you're buying.
- There's always something to worry about.
In picking stocks (good companies), Peter Lynch stuck to what he knew and/or could easily understand. That was a core position for him. He also dedicated himself to a level of due diligence and stock research that left few stones unturned. He shut out market noise and concentrated on a company's fundamentals, using a bottom-up approach. He only invested for the long run and paid little attention to short-term market fluctuations. (For related reading, see Pick Stocks Like Peter Lynch.)
- "One Up On Wall Street" by Peter Lynch with John Rothchild (1989)
- "Beating The Street"Peter Lynch with John Rothchild (1993)
- "Learn To Earn"Peter Lynch with John Rothchild (1996)
"Go for a business that any idiot can run – because sooner or later, any idiot is probably going to run it."
"If you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them."
"Investing without research is like playing stud poker and never looking at the cards."
"Absent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they're going to be higher or lower in two to three years, you might as well flip a coin to decide."
"If you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes."The Greatest Investors: Bill Miller
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