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Is an Idiot Running the Business?
Posted by: David Chulak (IP Logged)
Date: March 12, 2012 09:10AM
“Go for a business that any idiot can run — because sooner or later, any idiot is probably going to run it.”
— Peter Lynch
I recently started to peruse some of my investment books that have not been opened for awhile and began to realize the gems that I had sitting in my office. Sitting side by side were two books by Fidelity guru manager Peter Lynch. One was “One Up on Wall Street” and the other was “Beating the Street.” He also authored “Learn to Earn.”
Lynch served for 13 years as manager of the famous Fidelity Magellan Fund. The assets from that particular fund went from $20 million to in excess of $14 billion during his tenure. According to Investopedia, Lynch beat the S&P 500 index in 11 of the 13 years with an annual average return of 29%.
While most associate Lynch with his famous PEG ratio, or P/E divided by growth, he is characterized as a growth/value investor by many. Reading through his books again, he’s too often ignored by value investors and we have much to learn from him. A further reading of his books will make you realize that Lynch’s investment lessons or rules remind you and often mirror those of Warren Buffett.
Peter Lynch categorized his investment techniques into six main categories: Slow Growers, Stalwarts,
Fast Growers, Cyclicals, Turnarounds and Asset Plays.
Lynch was quite specific with his investment techniques, which I intend to share in future articles that will come out this week; however, I would like to begin this series with some of Lynch’s most incredible words of wisdom that I suggest you print and keep nearby as a reminder of good investing.
“Investing without research is like playing stud poker and never looking at the cards.”
“Absent a lot of surprises, stocks are relatively predictable over 20 years. As to whether they’re going to be higher or lower in two or three years, you might as well flip a coin to decide.”
“Investing is fun, exciting and dangerous if you don’t do any work.”
“Owning stocks is like having children – don’t get involved with more than you can handle…”
“If you can’t find any companies that you think are attractive, put your money in the bank until you discover some.”
“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.”
“Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and stock mutual funds
“There is always something to worry about. Avoid weekend thinking and ignore the latest dire predictions of the newscasters. Sell a stock because the company’s fundamentals deteriorate, not because the sky is falling.”
“Time is on your side when you own shares of superior companies. You can afford to be patient – even if you missed WalMart in the first five years,it was a great stock to own in the next five years.”
“If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes.”
“In the long run, a portfolio of well-chosen stocks and/or equity mutual funds will always outperform a
portfolio of bonds or a money-market account. In the long run, a portfolio of poorly chosen stocks won’t outperform the money left under the mattress.”
“If you’re thinking about investing in a troubled industry, buy the companies with staying power. Also, wait for the industry to show signs of revival. Buggy whips and radio tubes were troubled industries that never came back.”
“Never invest in a company without understanding its finances….”
“You have to know what you own, and why you own it. ‘This baby is a cinch to go up!’ doesn’t count.”
“Often, there is no correlation between the success of a company’s operations and the success of its stock over a few months or even a few years. In the long term, there is a 100 percent correlation between the success of the company and the success of its stock. This disparity is the key to making money; it pays to be patient and to own successful companies.”
Intrigued? As a teaser let me give you some of stocks that come up on my Lynch screener that you can do more research on:
Sanofi SA (ADR) (SNY)
Northrop Grumman Corp. (NOC)
Bridgepoint Education Inc. (BPI)
Disclosure: No positions on any stocks mentioned in this article
Stocks Discussed: NOC, SNY, BPI,
Re Is an Idiot Running the Business
Posted by: Adib Motiwala (IP Logged)
Date: March 13, 2012 09:42PM