Buffet, Lynch and other legends - Investing Strategies: Peter Lynch's 25 Golden Rules from "B t S"

Print Page | Close Window

Peter Lynch's 25 Golden Rules from "B t S"

Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Buffet, Lynch and other legends - Investing Strategies
Forum Discription: DIscuss about the strategies followed by the great investors. Share an idea which would have impressed the masters. Try and bring their International experience into the Indian Markets.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=1651
Printed Date: 07/May/2025 at 4:38am

Topic: Peter Lynch's 25 Golden Rules from "B t S"

Posted By: rider.royal
Subject: Peter Lynch's 25 Golden Rules from "B t S"
Date Posted: 07/Mar/2008 at 3:49pm

http://in.groups.yahoo.com/group/stockwinner/message/18568;_ylc=X3oDMTJzaWZ1YnZ1BF9TAzk3NDkwNDgwBGdycElkAzExNjk5MTY5BGdycHNwSWQDMTcyMDAwMTc3OQRtc2dJZAMxODU2OARzZWMDZG1zZwRzbGsDdm1zZwRzdGltZQMxMjA0NDUwMTM2 -

Found it on net: (Have a hunch that I am repeating whats already present at TED.. cudnt find it though)

http://in.groups.yahoo.com/group/stockwinner/message/18568;_ylc=X3oDMTJzaWZ1YnZ1BF9TAzk3NDkwNDgwBGdycElkAzExNjk5MTY5BGdycHNwSWQDMTcyMDAwMTc3OQRtc2dJZAMxODU2OARzZWMDZG1zZwRzbGsDdm1zZwRzdGltZQMxMjA0NDUwMTM2 -

http://in.groups.yahoo.com/group/stockwinner/message/18568;_ylc=X3oDMTJzaWZ1YnZ1BF9TAzk3NDkwNDgwBGdycElkAzExNjk5MTY5BGdycHNwSWQDMTcyMDAwMTc3OQRtc2dJZAMxODU2OARzZWMDZG1zZwRzbGsDdm1zZwRzdGltZQMxMjA0NDUwMTM2 - Peter Lynch's 25 Golden Rules from "Beating the street"

1. Investing is fun, exciting, and dangerous if you don't do
any work.

2. 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.

3. Over the past 3 decades, the stock market has come to be dominated
by a herd of professional investors. Contrary to popular belief, this
makes it easier for the amateur investor. You can beat the market by
ignoring the herd.

4. Behind every stock is a company. Find out what its doing.

5. Often, there is no correlation between the success of a company's
operations and the success of its stock over a few months or even a
few years. In the long term, there is a 100 percent correlation
between the success of the company and the success of its stock.
This disparity is the key to making money; its pays to be patient, and
to own successful companies.

6. You have to know what you own, and why you own it. "This baby is a
cinch to go up!" doesn't count.

7. Long shots almost always miss the mark.

8. Owning stocks is like having children - don't get involved with
more than you can handle. The part-time stock picker probably has time
to follow 8 to 12 companies, and to buy and sell shares as conditions
warrant. There don't have to be more than 5 companies in the portfolio
at any one time.

9. If you can't find any companies that you think are attractive, put
your money in the bank until you discover some.

10. Never invest in a company without understanding its finances. The
biggest losses in stocks come from companies with poor balance sheets.
Always look at the balance sheet to see if a
company is solvent before you risk your money on it.

11. Avoid hot stocks in hot industries. Great companies in cold, non-
growth industries are consistent big winners.

12. With small companies, you're better off to wait until they turn a
profit before you invest.

13. If you're thinking about investing in a troubled industry, buy the
companies with staying power. Also, wait for the industry to show
signs of revival. Buggy whips and radio tubes were troubled industries
that never came back.

14. If you invest $1000 in a stock, all you can lose is $1000, but you
stand to gain $10000 or- even $50000 over time if you're patient.
The average person can concentrate on a few good companies, while the
fund manager is forced to diversify. By owning too many stocks, you
lose this advantage of concentration. It only takes a handful of big
winners to make a lifetime of investing worthwhile.

15. In every industry and every region of the country, the observant
amateur can find great growth companies long before the professionals
have discovered them.

16. A stock-market decline is as routine as a January blizzard in
Colorado. If you're prepared, it can't hurt you. A decline is a great
opportunity to pick up the bargains left behind by investors who are
fleeing the storm in panic.

17. Everyone has the brainpower to make money in stocks. Not everyone
has the stomach. If you are susceptible to selling everything in a
panic, you ought to avoid stocks and stock mutual funds altogether.

18. There is always something to worry about. Avoid weekend thinking
and ignore the latest dire predictions of the newscasters. Sell a
stock because the company's fundamentals deteriorate. Not because the
sky is falling.

19. Nobody can predict interest rates, the future direction of the
economy, or the stock market. Dismiss all such forecasts and
concentrate on what's actually happening to the companies in which
you've invested.

20. If you study 10 companies, you'll find 1 for which the story is
better than expected. If you study 50, you'll find 5. There are always
pleasant surprises to be found in the stock market -
companies whose achievements are being over looked by Wall Street.

21. If you don't study any companies, you have the same success buying
stocks as you do in a poker game if you bet without looking at your
cards.

22. Time is on your side when you own shares of superior companies.
You can afford to be patient - even if you missed Wal-Mart in the
first five years, it was a great stock to own in the next five years.
Time is against you when you own options.

23. If you have the stomach for stocks, but neither the time nor the
inclination to do the homework, invest in equity mutual funds.

24. Among the major stock markets of the world, the US market ranks
eight in total return in the past decade. You can take advantage of
the faster growing economies by investing some portion of your assets
in an overseas fund with a good record.

25. In the long run, a portfolio of well chosen stocks and/or equity
mutual funds will always outperform a portfolio of bonds or a money-
market account.
In the long run, a portfolio of poorly chosen stocks won't outperform
the money left under the mattress.

Replies:

Posted By: atulbull
Date Posted: 08/Mar/2008 at 11:36pm

Wisdom from Peter Lynch
From the second chapter of Beating the Street:
“A decline in a stock is not a surprising event, it’s a recurring event - as normal as frigid air in Minnesota. If you live in a cold climate, you expect freezing temperatures, so when your outdoor thermometer drops below zero, you don’t think of this as the beginning of the next Ice Age. You put on your parka, throw salt on the walk, and remind yourself that by summertime it will be warm outside.
A successful stock picker has the same relationship with a drop in the market as a Minnesotan has with freezing weather. You know it’s coming, and you’re ready to ride it out, and when your favorite stocks go down with the rest, you jump at the chance to by more.”

-------------
Price is what you pay.Value is what you get.

Posted By: basant
Date Posted: 08/Mar/2008 at 12:16pm

Always a great feeling to read Lynch. I find it particularly interesting to go through the section in One up on Wall street where he describes oct 87 and the emotions flying there. Keep these posts coming in.

-------------
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

Posted By: Mohan
Date Posted: 08/Mar/2008 at 3:00am

Basantji,

I just completed that chapter last nite. The one about the blarney stone.

I agree that this is a great opportunity for long term investors to load up on their choice of stocks.

-------------
Be fearful when others are greedy and be greedy when others are fearful.

Posted By: investor
Date Posted: 10/Mar/2008 at 12:52pm

Not the right thread i know, but check this out.... Shocked

from bloomberg: http://www.bloomberg.com/apps/news?pid=20601103&sid=aOHwqQ_AmZAY&refer=news

Fidelity Fined in SEC Probe of Private Jets, Escorts, Ecstasy

March 6 (Bloomberg) -- Fidelity Investments Vice Chairman http://search.bloomberg.com/search?q=Peter+Lynch&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1 - Peter Lynch , former head trader http://search.bloomberg.com/search?q=Scott+DeSano&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1 - Scott DeSano and 11 employees accepted more than $1.6 million worth of gifts from brokers jockeying to trade for the world's largest mutual-fund company, U.S. regulators said.

Fidelity will pay $8 million to settle the U.S. Securities and Exchange Commission's claims, the agency said yesterday in a statement. The brokers' inducements included a $160,000 junket to Miami, where bachelor party attendees were entertained by female escorts and supplied with ecstasy pills, the SEC said.

The settlement concludes a three-year probe that tainted the Boston-based money manager, known for policies aimed at protecting fund investors. The company failed to seek the best terms when trading for the funds because employees routed the transactions to brokers who doled out Super Bowl tickets and private-jet trips to Mexico, the SEC said.

``It was a highly embarrassing episode for Fidelity,'' http://search.bloomberg.com/search?q=Burton+Greenwald&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1 - Burton Greenwald , a mutual-fund consultant in Philadelphia, said in an interview. ``It created a real blemish on a reputation that it took them years to build.''

Fidelity and Lynch didn't admit or deny wrongdoing in the case, which doesn't name the brokers involved or their firms.

``We do recognize the seriousness of the misconduct,'' even though the SEC didn't assert that Fidelity harmed shareholders or its funds, the company said in a statement. ``The behavior that led to these settlements is not at all indicative of the ethical standards of our company.''

Fidelity disciplined staff involved and took steps to prevent future misconduct, it said. Most of the employees cited by the SEC have left the company, and none remain on the trading desk, the firm said.

Ryder Cup Passes

Lynch, the former manager of the flagship http://www.bloomberg.com/apps/quote?ticker=FMAGX%3AUS - Fidelity Magellan fund, received ``numerous'' free tickets to concerts, theater and sporting events from Fidelity's traders, according to the SEC. He agreed to forfeit more than $20,000, representing the value of the gifts, plus interest.

Lynch, 64, said in a statement yesterday that he had asked the trading desk for ``occasional help locating tickets.'' Events included performances of ``The Nutcracker'' and the ``The Lion King.'' He also got 14 three-day passes to the Ryder Cup golf tournament at the http://www.golfclubatlas.com/thecountryclub1.html - Brookline Country Club in suburban Boston, where he had once been a caddy.

``I never intended to do anything inappropriate, and I regret having made those requests,'' Lynch said. He never worked on the trading desk and hasn't placed trades on behalf of Fidelity for 17 years, he said.

Tyco Trade

The closely held company's independent trustees fined Fidelity $42 million in December 2006 after probing what Chairman http://search.bloomberg.com/search?q=Edward+%60%60Ned%26%2339%3B%26%2339%3B+Johnson+III&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1 - Edward ``Ned'' Johnson III called ``improper behavior.'' Fidelity was founded in 1946 by Johnson's father with $3 million in mutual-fund assets. The company now oversees $1.6 trillion and serves 24 million customers.

A report on the trustees' 2006 investigation, released by the SEC yesterday, shows the amounts of money at stake when a Fidelity trader handed out an order to buy or sell.

In one case, a trader at the firm used a broker to buy 8 million shares in http://www.bloomberg.com/apps/quote?ticker=TYC%3AUS - Tyco International Ltd. , days before the broker flew him on a private jet to the Super Bowl in Houston in 2002, the report says. The trades cost the Fidelity funds as much as $18 million, though that may have been partly due to unexpected market events, according to the report.

``While no one can say that Fidelity could have obtained better execution from some other broker, the Tyco trade demonstrates the magnitude of the costs that the funds could incur'' from one transaction that may have been influenced by a gift, the report said.

Marijuana, Concorde

Former Fidelity trader http://search.bloomberg.com/search?q=Thomas+Bruderman&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1 - Thomas Bruderman , 39, allegedly received ecstasy pills and marijuana from brokers ``on a number of occasions,'' the SEC said in its complaint yesterday. It was his three-day bachelor party in Miami in 2003 that cost brokers $160,000, the agency said.

Another former Fidelity trader, http://search.bloomberg.com/search?q=David+Donovan&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1 - David Donovan , 45, took 24 trips in which brokers covered most expenses, according to the complaint. Travel included at least two first-class flights on the supersonic Concorde airliner, it said.

DeSano, the 47-year-old former head trader, knew some orders were steered to brokers who provided entertainment, travel and gifts, or with whom Fidelity traders had family or ``romantic relationships,'' the SEC said.

The agency's claims are still pending against DeSano, Bruderman, Donovan and seven other past and current employees.

DeSano's attorney, http://search.bloomberg.com/search?q=Jeffrey+Rudman&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1 - Jeffrey Rudman in Washington, and Bruderman's attorney, http://search.bloomberg.com/search?q=Thomas+Kiley&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1 - Thomas Kiley in Boston, didn't return phone calls seeking comment. Donovan's lawyer, Raipher Pellegrino, declined to comment.

Jefferies Settlement

The SEC and the NASD, now renamed Finra, fined brokerage http://www.bloomberg.com/apps/quote?ticker=JEF%3AUS - Jefferies Group Inc. almost $10 million in December 2006 for plying Fidelity staff with gifts, including a party hosted by Playboy magazine, to win trading business.

Jefferies and its equity trading chief settled the case without admitting or denying wrongdoing. The regulators said Jefferies gave Fidelity traders chartered flights, bottles of Chateau Petrus wine, golf clubs, and tickets to events including the Wimbledon tennis tournament.

Jefferies spokesman http://search.bloomberg.com/search?q=Thomas+Tarrant&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1 - Thomas Tarrant said at the time that the New York-based firm had ``enhanced safeguards and supervisory practices.''

-------------
The market is a place where people with money meet people with experience.
The people with experience get the money while people with money get experience!

Posted By: kulman
Date Posted: 10/Mar/2008 at 4:39pm

Originally posted by investor

The brokers' inducements included a $160,000 junket to Miami, where bachelor party attendees were entertained by female escorts and supplied with ecstasy pills, the SEC said.

Ooops. So for Rave parties, Goa is not the only destination.

-------------
Life can only be understood backwards—but it must be lived forwards

Posted By: basant
Date Posted: 10/Mar/2008 at 4:49pm

I have read One up on Wall street 10 times. Lynch has elaborately discussed his holidays but never talked about this one.

-------------
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

Posted By: Mohan
Date Posted: 10/Mar/2008 at 6:09pm

The Bachelor party story was in 2003, long after Lynch left Fidelity as fund manager. Lynch has only admitted to asking trading desk for locating concert tickets and show tickets.
These stories do not take away anything from his investing style.

-------------
Be fearful when others are greedy and be greedy when others are fearful.

Posted By: atulbull
Date Posted: 12/Mar/2008 at 6:16pm

Lynch's two-minute drill
Famed fund manager Peter Lynch stated that we should all be able to explain our reasons for owning a stock in a two-minute pitch. Lynch is counseling us to "Keep it simple, stupid." If you can't explain to a friend in two minutes why you own any given stock in your portfolio, the implication is clear: Sell that stock.

-------------
Price is what you pay.Value is what you get.

Posted By: akshayapandey
Date Posted: 05/Apr/2008 at 12:17pm

I do not wish to offend anyone and am a great believer in stock specific investment rather than index investing..but has anyone read "Random walk down the wall street"..it does refute all these guys even the legendry warren buffet..

Print Page | Close Window