Peter Lynch delivered an average annual return of 29% managing the Fidelity Magellan Fund from 1977 to 1990 making him one of the most successful investors of all time. He is known for his simple and effective investment philosophy which he wrote about in his book, One Up on Wall Street. His ideas inspired generations of investors and have became a guiding principle for many. In this article, we’ll explore some of our favorite Peter Lynch quotes and how they can help you become a better investor. There is much to learn from his timeless wisdom for beginners and experienced investors alike.
Analyzing a stock is simple…
“Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”
“The secret of his success is that he never went to business school. Imagine all the lessons he never had to unlearn.”
“Investing in stocks is an art, not a science, and people who’ve been trained to rigidly quantify everything have a big disadvantage.”
For Peter Lynch, qualitative analysis and common sense go much further than any textbook financial theory. The business fundamentals drive the numbers, not the other way around.
…but understanding the business is critical
“Behind every stock is a company. Find out what it’s doing.”
“Never invest in any idea you can’t illustrate with a crayon.”
“Know what you own, and know why you own it.”
Touching on the same theme, Lynch constantly thinks about the businesses behind his stocks, rather than the numbers. How is that business growing? What is their story?
Holding during rough markets
“The key to making money in stocks is not to get scared out of them.”
“Remember, things are never clear until it’s too late.”
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.”
It’s impossible to time the market, let alone individual stocks. Peter Lynch express humility and understands that perfection isn’t necessary to be a great investor. To the contrary, aiming for total perfection leads to worse results.
Finding overlooked opportunities
“Big companies have small moves, small companies have big moves.”
“Spinoffs have a terrific, terrific record in my lifetime. When companies get spun off, something seems to happen to them. They get better run, even though they were well run before.”
“All else being equal, invest in the company with the fewest color photographs in the annual report.”
Lynch has written much about finding great opportunities in overlooked industries. Rather than trying to figure out which trendy software technology company will win over the corporate executives, he’d rather look to a simple business like garbage disposal. The stocks that appear most in the media aren’t necessarily the best investments. Often the reverse is true.
Peter Lynch believes that common sense is the most important skill for investing. Therefore, individual investors should avoid passive investing with index funds. He believes performance comes from stock selection and not from timing the market. These ideas are foundational for our investing approach and how we identify quality stocks for our managed portfolio.