From general obscurity to one of the most successful fund managers of all time
20 powerful insights from Peter Lynch
And what we can learn from each one
// THREAD
20 powerful insights from Peter Lynch
And what we can learn from each one
// THREAD
Peter Lynch is arguably the greatest investor ever
From 1977 - 1990 he managed the Magellan Fund, averaging a 29.2% yearly return
That means he consistently DOUBLED the performance of the S&P500 for 13 years!
Here's some pearls of wisdom from the man I've studied for 5 years
From 1977 - 1990 he managed the Magellan Fund, averaging a 29.2% yearly return
That means he consistently DOUBLED the performance of the S&P500 for 13 years!
Here's some pearls of wisdom from the man I've studied for 5 years
1. “If you're prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth-grader could understand, and quickly enough so the fifth grader won't get bored”
If you can't, you don't understand the company. Either avoid it or learn more
If you can't, you don't understand the company. Either avoid it or learn more
2. “The person that turns over the most rocks wins the game. And that's always been my philosophy.”
You're never gonna find multi-baggers if you're not actively looking for them & doing your research
You're never gonna find multi-baggers if you're not actively looking for them & doing your research
3. “If you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes”
In my experience, it's helpful to be informed but you quickly learn that no one can actually predict short-term market volatility with any degree of certainty or accuracy.
In my experience, it's helpful to be informed but you quickly learn that no one can actually predict short-term market volatility with any degree of certainty or accuracy.
4. “A stock market decline is as routine as a January blizzard in Colorado. If you're prepared, it can't hurt you. A decline is a great opportunity to pick up the bargains left behind by investors who are fleeing the storm in panic.”
Enough said. Panic selling = burning money
Enough said. Panic selling = burning money
5. “Although it's easy to forget sometimes, a share is not a lottery ticket... it's part-ownership of a business.”
You don't buy shares in a company on hope alone. You buy with conviction in the future prosperity of that business following thorough research.
You don't buy shares in a company on hope alone. You buy with conviction in the future prosperity of that business following thorough research.
6. “Hold no more stocks than you can remain informed on.”
This is critical. And often the downfall of many actively managed funds and retail investors.
You cannot stay informed on 100 companies. You'll struggle to keep up with 30. So keep it to a number YOU can manage.
This is critical. And often the downfall of many actively managed funds and retail investors.
You cannot stay informed on 100 companies. You'll struggle to keep up with 30. So keep it to a number YOU can manage.
7. “Behind every stock is a company. Find out what it's doing.”
Never lose sight of this. Stay informed, dial into earnings calls, subscribe to announcements on the investor relations page, and never be afraid to call them with your questions
Never lose sight of this. Stay informed, dial into earnings calls, subscribe to announcements on the investor relations page, and never be afraid to call them with your questions
8. “The best stock to buy is the one you already own.”
Don't neglect the winners in your portfolio. If it's up 100%, it could still go up 500% from there. If your research suggests it has further to run, buy more.
Don't neglect the winners in your portfolio. If it's up 100%, it could still go up 500% from there. If your research suggests it has further to run, buy more.
9. “All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don't work out.”
If you can achieve a 60% success rate with your stock picking, you'll achieve superior returns to the S&P.
If you can achieve a 60% success rate with your stock picking, you'll achieve superior returns to the S&P.
10. “The real key to making money in stocks is not to get scared out of them.”
The best-performing stocks of the last decade suffered multiple 40%+ sell-offs & multiple years of underperformance vs. S&P. But if you held through the volatility, you'd have a yearly return of >30%
The best-performing stocks of the last decade suffered multiple 40%+ sell-offs & multiple years of underperformance vs. S&P. But if you held through the volatility, you'd have a yearly return of >30%
11. “When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom.”
Stop worrying about short term losses if the company's fundamentals are intact
Stop worrying about short term losses if the company's fundamentals are intact
12. “Go for a business that any idiot can run - because sooner or later, any idiot probably is going to run it.”
A strategy that worked extremely well for Peter Lynch. Needs-based businesses have a history of doing very well. An example is Waste Management
A strategy that worked extremely well for Peter Lynch. Needs-based businesses have a history of doing very well. An example is Waste Management
13. “If you can find a company that can get away with raising prices year after year without losing customers (an addictive product such as cigarettes fills the bill), you've got a terrific investment.”
As above. Also, Apple.
As above. Also, Apple.
14. “There is always something to worry about. Avoid weekend thinking and ignoring the latest dire predictions of the newscasters. Sell a stock because the company's fundamentals deteriorate, not because the sky is falling.”
Particularly true following recent market conditions.
Particularly true following recent market conditions.
15. “It would be wonderful if we could avoid the setbacks with timely exits, but nobody has figured out how to predict them.”
No one can predict sell-offs, bear markets or corrections. If they say they can, they're lying. See quote 14 for what to do in these circumstances.
No one can predict sell-offs, bear markets or corrections. If they say they can, they're lying. See quote 14 for what to do in these circumstances.
16. “During the Gold Rush, most would-be miners lost money, but people who sold them picks, shovels, tents and blue-jeans (Levi Strauss) made a nice profit.”
Consider the suppliers to your favorite companies. I've made a lot of money investing in Apples chip suppliers.
Consider the suppliers to your favorite companies. I've made a lot of money investing in Apples chip suppliers.
17. “You have to keep your priorities straight if you plan to do well in stocks.”
One of the simplest, yet effective things you can do is to write down your goal and your strategy when you start investing. Refer back to this before making any move so you don't act on emotion
One of the simplest, yet effective things you can do is to write down your goal and your strategy when you start investing. Refer back to this before making any move so you don't act on emotion
18. “When you start to confuse Freddie Mac, Sallie Mae and Fannie Mae with members of your family, and you remember 2,000 stock symbols but forget the children's birthdays, there's a good chance you've become too wrapped up in your work.”
I can relate.
I can relate.
19. “There's no shame in losing money on a stock. Everybody does it. What is shameful is to hold on to a stock, or worse, to buy more of it when the fundamentals are deteriorating.”
Fundamentals are everything!
If the business plan is no longer effective, move on!
Fundamentals are everything!
If the business plan is no longer effective, move on!
20. “Time is on your side when you own shares of superior companies.”
Find an under-appreciated business that you see doing well and that Wall Street hasn't picked up on yet. Do your research and you might just find the next 10-bagger.
Find an under-appreciated business that you see doing well and that Wall Street hasn't picked up on yet. Do your research and you might just find the next 10-bagger.
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