THE PETER LYNCH GUIDE TO PICKING STOCKS

Investor, fund manager and a best-selling author, all rolled into one - that's Peter Lynch. His books provide nuggets of practical approach to stock investing. We demystify his investing style to help you implement it when picking stocks. We also have some picks based on his strategy that you may consider

- Shoaib Zaman

A random search on Google on “Who is Peter Lynch” will throw up two pieces of information about him, among others: his outperformance as a fund manager at Fidelity Investments and his status as a best-selling author. His investment philosophy in picking stocks has been widely acclaimed. During his tenure, the Fidelity Magellan Fund clocked 29.09 per cent annual returns compared to 14.47 per cent of the S&P 500 index.

However, few talk about how he underperformed in 1984, 1987, and 1990 versus the S&P 500, albeit by a small margin. Also, no one points out that because he didn’t manage funds directly for about 25 years, it is difficult to ascertain how his funds would have done if factors, such as value and momentum, were in vogue.

Nevertheless, there are learnings from him that can benefit investors. Let’s explore.

Learning From Lynch

Gems In Writing: His books—One Up On Wall Street, Beating The Street and Learn To Earn—provide a practical approach to investing rather than delving into complex theories. This puts retail investors at ease. His strategy of observing the world around him to discover potential stocks is a method that anyone can apply, making his investment philosophy accessible and empowering for amateur investors. What stands out is his ability to give a perspective on investing by looking at the investor’s consumption pattern.

Learn To Earn gives investors a brief understanding of economics and investing. Highlighting the importance of patience, Lynch says in this book, “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”