The name Peter Lynch is often mentioned regarding discussions around amazing investors. He is another guy I would rank as one of the world’s guru investors. In the following sections, I will introduce Peter and tell you some more fascinating information about him and his career. Enjoy!
Peter Lynch – Background
Peter Lynch, born 19 January 1944 (Newton, Massachusetts) is an American investor, mutual fund manager, and philanthropist. He was previously a manager of the very well-known Magellan Fund at Fidelity Investments between 1977 and 1990.
He also co-authored a number of books and papers on investing and originated a number of well-known investing phrases, such as ‘Invest in what you know’ and ‘ten bagger’. Lynch is consistently described as a “legend” by the financial media for his performance record.
Peter Lynch – Education
During Lynch’s time at Boston College, he apparently used some of his savings to buy shares of ‘Flying Tiger Airlines’ at $8 per share. The stock later rose to $80 per share, allowing him to utilize the profits for his future education.
In 1965, Lynch graduated from Boston College where he had studied history, psychology and philosophy. He later earned a Master of Business Administration from the Wharton School of the University of Pennsylvania in 1968.
Peter Lynch – Investment Successes
In 1977, Lynch was named head of the relatively unknown Magellan Fund which had $18 million in assets. After leaving in 1990, the fund had grown to more than $14 billion in assets with more than 1,000 individual stock positions. Lynch focused on individual companies rather than any overarching strategy, starting with large US companies and gradually shifting emphasis to smaller and international stocks.
From 1977 until 1990, it is understood that the Magellan fund averaged an amazing 29.2% annual return and as of 2003 had the best 20-year return of any mutual fund ever.
Peter Lynch – What is he doing now?
Lynch continues to work part time as vice chairman of Fidelity Management & Research Co, with a significant amount of his time spent on mentoring young analysts. However, as time goes on, like many other successful US investors, Lynch focuses a great deal of time and energy on philanthropy. He said he views philanthropy as a form of investment.
Peter Lynch – Investment Philosophy
The essence of Peter’s philosophy on investing can be best summed up as follows:
- Only Buy What You Understand – is simply, invest in what you know. For example, if certain companies in your city have a monopoly say on groceries and the like, that company might be a good place to start
- Always Do Your Homework – once you have chosen a company that has aroused your interest, now is the time to do some more detailed research. Peter highlights certain fundamental aspects to keep an eye on, including:
- Percentage of Sales
- Peg ratio – which is a stock’s price-to-earnings (P/E) ratio divided by the growth rate of its earnings for a specified time period – a lower PEG may indicate that a stock is undervalued
- Favor companies with strong cash positions and below-average debt-to-equity ratios.
- Invest for the Long Run – ignore short term market fluctuations. Great companies will outperform over time.
Peter Lynch – Inspirational quotes
A few inspiring quotes from Peter follows:
- Never invest in any idea you can’t illustrate with a crayon
- Time is on your side when you own shares of superior companies
- Know what you own, and know why you own it
- Average investors can become experts in their own field and can pick winning stocks as effectively as Wall Street professionals by doing just a little research.
Your PROFITABLE ACTION STEPS this time around:
- Continue to expand your knowledge regarding some of the world’s great investors. If you want to dig deeper on Peter Lynch there is some great reading available including: “One Up On Wall Street: How To Use What You Already Know To Make Money In The Market” and “Beating the Street”.
- Check out my recent article on the ‘The Intelligent Investor’
- If you haven’t already, go to my home page and download my Passive Income Guide. It describes a number of ways to earn income with minimal ongoing effort (in most cases) and it’s ABSOLUTELY FREE.
Stay safe, healthy and wise and most importantly of all, take ACTION.