Peter Lynch The Fidelity Wizard

October 16, 2009 | scorpion

Peter Lynch is the mind behind the well known companies Fidelity Investments Inc and Fidelity Management & Research Company. Both firms are well known across the world and even after his retirement from the investing industry Lynch is making waves with his philanthropic efforts. Lynch believed that ‘Investing without research is like playing stud poker and never looking at the cards.’ Some of his publications have been considered by industry pundits as must reads if investing and trading is a career choice.

Biography

Born in Newton, Massachusetts in 1944, Lynch graduated from Boston College with a finance degree in 1965. He spent 2 years in a branch of the armed services and then attended the Wharton Business School, which is part of the Pennsylvania University. He graduated in 1968 with an MBA. It was from here that he went on to gain employment with Fidelity Investments, starting out in investment analysis and working his way up to Research Director where he stayed until 1977.

In 1977, he was awarded the position of manager of the Magellan Fund. At the time the fund was still relatively unknown. By 1990, with Lynch’s careful investments, the fund achieved a historic portfolio. Lynch retired from the company in 1990 but has served as the vice-chairman for the Fidelity Management & Research Company.

Claim to Fame

Lynch’s true claim to fame is the way he took the little known Magellan Fund and built it up over a 13 year period. From 1977 to 1990 the funds assets went from $20 million to $14 billion. He beat the S&P 500 index benchmark with an annual average return of 29% eleven times during the thirteen years he was in charge of the Magellan Fund.

Why was he successful?

Considered and portrayed as a ‘chameleon’ by his peers, Lynch did not follow any one particular style of investing. He adapted his style to what was working at that point in time and he was always at work, contacting investors, company heads, industry experts, analysts and managers twenty-four hours a day. He developed eight fundamental strategies of investing and on how to select stocks, sharing it with the attendees of a conference on investment in 2005. The eight points included: knowing what you owned; knowing that it is futile to try and predict what interest rates and the economy are going to do; recognizing that you have time to recognize outstanding companies; that you should avoid long shot investment; it is important to invest in good companies with good management; flexibility and humbleness is important and to learn from your mistakes; knowing how to explain what you are purchasing; and that there is always something you should worry about.

As an investor and trader, Lynch made it a point to understand what he was investing in. If he did not understand it, he researched it and let the investment go if he still didn’t get it. He researched thing to the point that he knew everything he possibly could about the subject and he used what he called his bottom-up style in his choices, basing them on a company’s fundamentals and not what the market was doing. He was a long run investor and did not care about any short term stock market movement.

Books

Peter Lynch is the author of the following investment books:

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