Peter Lynch

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Peter Lynch (born January 19, 1944) is a successful Wall Street stock investor whose record ranks him as one of the best stock-pickers in the world. He is a president at Fidelity Investments.

Education and military service

Before being hired as a stock analyst for Fidelity, Lynch served for two years in the United States Army and studied at Boston College and finance at the Wharton School of the University of Pennsylvania.

Fidelity

Peter Lynch was hired as an intern with Fidelity Investments in 1966 partly because he'd been caddying for Fidelity's president (among others) at a local country club. He initially covered the paper, chemical, and publishing industries, and when he returned after a two year Army stint Lynch was hired permanently in 1969. This time Lynch was charged with following the textiles, metals, mining, and chemicals industries, eventually becoming Fidelity's director of research from 1974-1977. In 1977, Lynch was named head of the obscure Magellan Fund which had $18 million in assets, though the fund was closed to new investment until 1981. By the time he resigned as a fund manager in 1990, Magellan averaged a staggering 29.2% annualized return since inception, and only underperformed the S&P 500 twice while growing to more than $14 billion in assets with more than 1,000 individual stock positions. Lynch's greatest dollar successes occurred in a vast array of stocks including (by order of profit achieved): Fannie Mae, Ford, Philip Morris, MCI, Volvo, General Electric, General Public Utilities, Student Loan Marketing, Kemper, and Loews.

Books

Peter Lynch has written (with co-author John Rothchild) three texts on investing, including One Up on Wall Street, Beating the Street, and Learn to Earn. The latter book was written for teenagers. In essence, One Up served as theory while Beating is application. One Up lays out Lynch’s entire investment technique including chapters devoted to stock classifications, the two-minute drill, famous numbers, and designing a portfolio. Most of Beating consists of an extensive stock by stock discussion of Lynch’s 1992 Barron's Magazine selections, essentially providing an illustration of the concepts previously discussed. As such, both books represent extensive study material for investors of any knowledge level or ability.

Lynch also wrote a series of investment articles for Worth magazine that expand on many of the concepts and companies mentioned in the books.

Investment terminology

Lynch coined some of the best known mantras of modern individual investing strategies.

His most famous investment principle is simply, "Invest in what you know," popularizing the economic concept of "local knowledge". This simple principle resonates well with average non-professional investors who don't have time to learn complicated quantitative stock measures or read lengthy financial reports. Since most people tend to become expert in certain fields, applying this basic "invest in what you know" principle helps individual investors find good undervalued stocks.

Lynch uses this principle as a starting point for investors. He has also often said that the individual investor is more capable of making money from stocks than a fund manager, because they are able to spot good investments in their day-to-day lives before Wall Street becomes aware of them. Lynch understands this concept well. Throughout his two classic investment primers, he has outlined many of the great investments he found when not in his office - he found them when he was out with his family, driving around or making a purchase at the mall. Lynch believes the individual investor is able to do this, too.

He also coined the phrase "ten bagger" in a financial context. This refers to an investment which is worth ten times its original purchase price and comes from baseball where "bags" or "bases" that a runner reaches are the measure of the success of a play. A "two bagger" would be a double, so by extension, two home runs and a double would be a "ten bagger".

Philanthropy

Currently Peter Lynch focuses a great deal of time on philanthropy. Lynch, who continues to work as vice chairman of Fidelity Management & Research Co., the investment adviser arm of Fidelity Investments, said he views philanthropy as a form of investment. He said he prefers to give money to support ideas that he thinks can spread, such as First Night, the New Year's Eve festival that began in Boston in 1976 and has inspired similar events in more than 200 other communities, and City Year, a community service program founded in Boston in 1988 that now operates in 14 locations.

The Lynches give money primarily in five ways: as individuals, through the Lynch Foundation, through a Fidelity Charitable Gift Fund, and through two charitable trusts.

The Lynch Foundation, which had $74 million in assets in 2003, supports education, religious organizations, cultural and historic organizations, and hospitals and medical research.

External links

• Book Reviews: Peter Lynch
• The Greatest Investors: Peter Lynch
• "The Wit and Wisdom of Peter Lynch"