Wednesday, December 3, 2008

Mr. 1 Up On Wall Street: Peter Lynch

Many are already familiar with Peter Lynch, but for those that are not Mr. Lynch managed Fidelity's Magellan Fund(FMAGX) from 1977 to 1990. At the time the Magellan Fund was one, if not the biggest fund with assets under management. The Fund was always ranked as one of the top performing funds through out his tenure. In fact Mr. Lynch beat the S & P 500 Index 11 out of 13 years while accumulating a annual average return of 29%. He is also known for a couple books "One Up On Wall Street" and "Beating The Street" which should be on any Value Investors bookshelves. While the Magellan Fund was always considered a growth fund, Lynch's style is certainly one that resembles many other widely known value investors. Lynch, like many other Super Investors seemed to invest in simple easy to understand businesses, ones that seem boring or mundane.

A Lynch Quote: " I'd rather invest in panty hose than in communications satellites, or in motel chains than in fiber optics. The simpler it is, the better I like it".

Who else have we heard say the simpler the better? If you answered Warren Buffet, you are correct.

Lynch was a big proponent in looking all around your own surroundings to find stocks to buy. Almost on every corner in America you see a MacDonald's(MCD) or a Starbucks(SBUX). Every strip mall is anchored by a Target(TGT), WalMart(WMT) or a Best Buy(BBY). What kid or adult does not own a pair of tennis shoes(sneakers) these days, with a high percentage being Nike(NKE). Probably most have drank a Coke(KO) or Pepsi(PEP) and the list goes on. Lynch also observed what his wife and children purchased, these were his in house analysts you might say. He also, oftened looked for companies that had similar and favorable attributes, companies that:

1. sound dull
2. do dull things
3. do something disagreeable
4. do spin off deals
5. are not well followed on Wall Street or have no big institutional investors
6. have negative rumors are all over it
7. are in a depressing business or industry
8. are in a no growth industry
9. the business that has a nitch
10. people keep buying it
11. it uses technology
12. when management and owners are buying the stock.
13. when a company is buying back shares.

Lynch retired at the top of his game but still plays an active roll within the Fidelity Family of mutual funds.

1 comment:

  1. I thoroughly enjoyed this book as well. Found it to be a fun read.