The title is a statement of a Legendary Investor, and The person, many newcomers like me, follow like a god. Nonother than Warren Buffet. It is a good start for today’s post. It is the subject where, no matter how much I write, it is less. But I want to dedicate this post to my favorite writer and one of the world’s best fund managers, Peter Lynch. Peter Lynch ran the Fidelity Magellan Fund for 13 years, during which time Magellan was the number one ranked general equity fund in America. His books One Up on Wall Street, my favorite book on investing, and Beating the Street are filled with his accumulated Wisdom, and in Beating the Street, he gives a fairly detailed account of how he did his analysis. In this post, I will discuss some wisdom of Peter Lynch, and I am sure that you will be confused about whether is it a quote by Warren Buffet or Peter Lynch. I was also confused, but I read it. Why am I saying it? Look at the quote, “Never invest in any idea you can’t illustrate with a crayon.” Possibly you will fight with me because it is similar to Warren Buffet’s Wisdom. I agree. But what I realize is Wisdom. No one is the owner of it. Peter Lynch is that person who made the record highest wealth-earning mutual fund house with some nonsense Idea. When whole US people are busy buying a share of high-tech solar companies or any idea they find hard to digest, like E-commerce, he made wealth with car washing companies, Dunkin donuts, banks, insurance companies, etc. When people are selling their shares because of one or two bad performances, he maintains it by saying that ‘best performer stock may take five years to perform, but it is the best performer beyond doubt.’ After Reading Aswath Damodaran’s ‘Little Book of Valuation,’ I believe that P/E is not a good way to evaluate any stock. How do you justify the price of Sun Pharma, ONGC, ACC, HUL, Max India, Infosys, IDFC, Tata Steel, Hindalco, NTPC, Idea, Coal India, and ZEE entertainment? I’m afraid I have to disagree with Peter Lynch, but after his statement that earnings will make or break any investment, I completely agree with him. And realize that price is not the best way to evaluate any stock. It is impossible if you are investing ₹ 4000 in penny stock with the hope of super-fast growth. But if you invest in TCS, I am sure it will give you some good returns. One another thing which I like about him is his simple language. He straightforwardly explains it all. No show of, nothing. But what I like about him is what he says. And it is shocking. In his words, “Don’t follow analysts. Use your investors’ edge.Your investor’s edge is not something you get from Wall Street experts. It’s something you already have. You can outperform the experts if you use your edge by investing in companies or industries you already understand.” I agreed with him. Say you like to go to Adlabs Imagica. It is coming with an IPO. You know what they are doing. How much is it crowded and when? So, as usual, you like the ride also. Now the question is, ‘are you waiting for a report from CRISIL that they give the rating to IPO, and then I will buy it? Why you? I told you my example. I have an account with the Central Bank of India. When I open an account, there is less crowded, and even after 100 years, the bank is not big. But whatever they are doing with their service and new products is fantastic. At that time, the share was trading at ₹ 60/share. Now it is near 100. and analysts are still not referring to it. ( I am not saying that buy the share in any of these companies, CHECK THE FUNDAMENTALS BEFORE INVESTING). Another big piece of advice by Peter Lynch to you. “If you don’t study companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” Hard to digest but true in the era of ‘intraday, derivatives, and BTST calls.’ In my opinion, Wisdom is something beyond Nations and time. Sometimes during reading, I remember Indian events related to his statements. Like, look at the next statement. “Time is on your side when you own shares of superior companies.” I remembered L&T, a company that survived three tries of acquisition. If you buy the share @ ₹ 60/share, then today, you may be happy with the result. The current price is nearly 1700. Please take a look at one another statement and argue with me that it is a statement of Warren Buffet. My answer to you always is Wisdom. “The worst thing you can do is invest in companies you know nothing about. Unfortunately, buying stocks in ignorance is still a popular American pastime.” Mr. Lynch Indians are the same, too. One another. Take a look at this one where you find that Peter Lynch and Warren Buffet both tell the same thing differently. “In stocks, as in romance, ease of divorce is not a sound basis for commitment. The basic story remains simple and never-ending. Stocks aren’t lottery tickets. There’s a company attached to every share” I still remember when TCS was at ₹ 2000/share, people were telling each other that there was no growth in it. After some days, the same stock was? 2700/share, and recently, I found the news that its new target is? 3100/ share. I remember another statement from my great guru.” That’s not to say there’s no such thing as an overvalued market, but there’s no point worrying about it.” Some days before, I wrote a post about Nifty. In which I mention the Indian mentality about stocks. I was thinking of writing at that time. But now I remember, so here it is Indian mentality and Lynch. “If you hope to have more money tomorrow than you have today, you’ve got to put a chunk of your assets into stocks. Sooner or later, a portfolio of stocks or mutual funds will turn out to be much more valuable than a portfolio of bonds, CDs, or money-market funds. Because gentlemen who prefer bonds don’t know what they’re missing. You will never find ‘Tenbagger’ with Bonds, CDs, Debenture Fixed Deposits, Postal Savings, and Gold. I was often confused that he was talking about US people or Indians. There seems to be an unwritten rule on Wall Street. If you don’t understand it put your life savings into it. Shun the enterprise around the corner, which can at least be observed, and seek out the one that manufactures an incomprehensible product” Mr. Lynch, the reality is the same everywhere. If you are not convinced that Investment is easy, I have something for you. A seventh-grader class at an American primary school did a social studies project on stocks. The kids had to do their research and dig up stocks for a paper portfolio. They sent their picks to Lynch, who later invited them to a pizza dinner at the Fidelity executive dining room, illustrating their portfolio with little drawings representing each stock. Lynch just loved this because it demonstrates that you should only invest in what you understand. The kid’s portfolio consisted of toy manufacturers, makers of baseball swap cards, clothing manufacturers and outlets, Playboy Enterprises (a couple of boys chose that one), Coke, and other stocks. With a portfolio lacking glamorous technology ventures and entrepreneurial risk-taking, they went for solid stocks with excellent profits. Their portfolio returned 69.6% against a 26.08% gain in the S&P500 in 1990/91. If it is simple, then it is better, and this is a statement by Warren Buffet, not peter lynch. Both of them are telling the same thing. And. Still, both of them are saying this in the long run. Not just how much money you make will determine your future prosperity. It’s how much of that money you put to work by saving it and investing it. One another statement, This time, I remember Reliance Power and Buffets’ comment about leverage. “Imagine if you borrowed your parents’ car without permission and ran it into a tree. How much better you’d feel if you were incorporated.”
The first thing that will strike new investors as strange is that Lynch’s methods are so simple that mostly an amateur could use them unchanged and with the same results. Lynch does not use gimmicky computer programs to pick stocks or optimize the portfolio for volatility. Every company invested in by Magellan was considered on its own merits, and the managers of Magellan generally did their best to avoid investing in anything that consensus opinion from the average Wall Street analyst declared was a good thing. Lynch sums up his points in Beating the Street with several humorous “Peter’s Principles,” most of which I mention here. It is hard for me to finish it as it is my favorite subject. So I want to say be invested, stay invested with a thought Of Peter Lynch. “Long-term investing has gotten so popular. It’s easier to admit you’re a crack addict than to admit you’re a short-term investor” Even six to nine-month is also ‘long-term for some.’
