A Wall Street legend explained the strategy that made him one of the best stock pickers of all time

Wednesday, May 3, 2017

A Wall Street legend explained the strategy that made him one of the best stock pickers of all time

Peter Lynch

Peter Lynch is a mutual fund legend.

For 13 years, from 1977 to 1990, he headed the Magellan Fund of Fidelity, the Boston-based multinational financial services corporation. He retired in 1990 at the top of his game.

According to Investopedia, Lynch beat the S&P benchmark in 11 out of the 13 year during which he managed the Magellan Fund, “achieving an annual average return of 29%.” When he was running the fund, 1 in every 100 Americans was invested in it, he told The Wall Street Journal.

That success helped grow the fund’s assets from $20 million to $14 billion during that time period.

In an interview with Kip McDaniels at Institutional Investor, Lynch explained the investment strategy that underpinned his success.

“I have no prejudice, no bias. I will buy companies with unions. I will buy companies that aren’t growing. I will buy companies that are airlines. I’ll buy insurance companies. I’ll buy banks,” he said.

Lynch told McDaniels that investing is basically a numbers game, inasmuch as the more firms you look at the better chance you have finding a good buy.

“I think if you look at ten companies, one is probably a bargain. One is mispriced. If you look at 20, it’s going to be two. If you look at 100, it’s going to be ten,” he said.

In other words, “the person who turns over the most rocks wins the game.”