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World’s Greatest Investors Part 12 – Peter Lynch
Peter Lynch is considered as one of the greatest stock pickers in the world. He was the fund manger of the highly successful Fidelity Magellan fund for 13 years. During his tenure, it was the top ranked general equity mutual fund in the US. His Magellan fund averaged 29.2% return over these years and elevated him to a globally acclaimed fund manger. Lynch is also a famous as the author of three investing books including international bestsellers “One Up on Wall Street” and “Beating the Street”. Lynch popularized the investment strategy “invest in what you know.” Because of his simple and common sense based approach to investing, Lynch is the most followed guru by small investors.
Lynch can be described as a value investor like Warren Buffett. But he ran a more diversified portfolio than Buffett. He used his local knowledge successfully in investing. He even used investment ideas occurred to him while he was shopping in the supermarkets with his family. Due this approach, he realized consumer market trends early and profited from them. Lynch always looked for undervalued companies in unglamorous industries. For example, he invested and profited in unpopular companies like barber shop chains and funeral management companies.
Peter Lynch was born in Newton, Massachusetts in the US in 1944. Lynch graduated from Boston College and received his MBA from University of Pennsylvania. He started his career in renowned investment management firm Fidelity Investments as an intern in 1966. But he quit the position and served in the US Army for two years. After his stint in the army, he rejoined Fidelity in a permanent position in 1969. His first job included tracking industries like metals, mining and chemicals. In 1974, he was appointed as the director of research at Fidelity. In 1977, he was assigned a new job as the manger of a small fund called Magellan Fund with $18 million in assets. Within some years, Lynch’s investing abilities transformed the fund into the most successful mutual fund in the US. By the time he retired from active investment management in 1990, the fund had grown into $14 billion in assets. 1000 dollars invested in the Magellan fund in 1977 was worth 28,000 dollars at the time of his retirement.
After his retirement from Fidelity, Lynch focused more on educating small individual investors on “how to beat the Wall Street experts”. His first book describing his investment philosophy was published in 1989, just before his retirement. His second book “Beating the Street” came out in 1994. Both books achieved global success as an essential reading for every investor. Though his books, Lynch said that individual investors are in an advantageous position than Wall Street professionals because they are free to make investment decisions without restrictions. He advised them to look around them and search for companies about which they already know and invest in them. Lynch suggested that individual investors can find good investment ideas even when they shop or taking a haircut by perceiving the upcoming trends. Lynch always insisted that investors should not consider stocks like lottery tickets. Instead, he said, they must understand that there is a company behind every stock and a reason for it to go up or down in the market. He advised every one to do their home work before investing.
About the Author
Shareskool.com is an India focused investor education website. It aims to empower investors in India to make independent investment decisions through education and information.
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