The Greatest Investors: Peter Lynch

Born: 1944 (Newton, Massachusetts)

Key Positions: Fidelity Investments, Inc.

Fidelity Management & Research Company

Personal History:
Peter Lynch’s spot in the list of greatest investors stems in large part from his work with the Fidelity Magellan Fund between 1977 and 1990. During this 13-year period, the fund posted an annual average return of 29%, beating the S&P 500 index in 11 out of 13 years and building the fund’s assets from $20 million to $14 billion. The fund had the best 20-year return rate of any mutual fund in history.

Lynch graduated from Boston College in 1965 after studying history, psychology, and philosophy. After serving two years in the military, Lynch enrolled at University of Pennsylvania’s Wharton School of Business, from which he graduated with an MBA in 1968. Lynch’s earliest career move was as an investment analyst at Fidelity Investments. He eventually rose through the ranks to become the firm’s director of research (1974-77). In 1977, Lynch became manager of the low-profile Magellan Fund, where his career really took off. He retired in 1990 from his work with Magellan.

Lynch continues to work part-time as vice chairman of Fidelity Management & Research Company, though most of his efforts in the time since his retirement have focused on philanthropy.

Investment Philosophy:
Peter Lynch has frequently been described as a “chameleon” when it comes to investment, as he tends to switch his strategy and style depending upon the situation and what he feels will work best at any given time. He was also known for his frenetic work pace and for being willing to work at any and all times of day. More broadly, Lynch made use of a set of eight fundamental principles when selecting stocks to purchase. He has distributed that checklist to younger investors and the public at various conferences and talks:

• 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.

The first of these principles was especially important to Lynch. He always stuck with companies and industries that he knew about or could easily learn about. Along with that principle was a steadfast commitment to due diligence before making any investment decision. Lynch was famous for focusing 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.)

Noteworthy Publications:

• "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)

Quotes:

"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."