Investing legend Peter Lynch warned investors that “the sucker’s going up is not a good reason” to buy a stock, chastising traders who chase high-flyers without understanding the businesses behind them.
What Happened: Lynch’s caution, which came in a rare CNBC interview, carries weight. He steered Fidelity’s Magellan Fund to an average 29.2% annual return from 1977 to 1990, a run that more than doubled the S&P 500 and turned $20 million into $14 billion. The Boston native also popularized the motto “invest in what you know,” reminding savers that only a handful of “ten-baggers” can offset inevitable losers.
In the April 2023 interview, Lynch lamented that many shoppers “are careful when they buy a refrigerator,” yet will drop thousands on a tip heard “on the bus,” skipping even a cursory balance-sheet check. His fix requires a clear, fact-based thesis on why earnings, not momentum, should lift a stock.
He still hunts for companies “either in turnaround mode or poised to grow,” singling out off-price retailer TJX, chip titan Nvidia, and earlier success stories Panera and Family Dollar as examples of the kind of “something different” narratives worth researching, though he stopped short of recommending any outright.
Even the maestro has regrets. “Apple AAPL was not that hard to understand. I mean, how dumb was I?” he admitted, adding that Nvidia Corp. NVDA became a “huge stock” after he passed. Still, Lynch insists his 1989 playbook holds up: turn over more rocks than the crowd, stay patient, and never let a chart do the thinking.
Why It Matters: Lynch isn’t the only one who believes in truly understanding a business through and through before investing in it. Warren Buffett, for one, likes to pore over annual reports like most people scroll social media.
Peter Lynch, like Buffett, also believes in locking in on prospects for the long run. In his book ‘Learn to Earn’, Lynch advocates for a twenty-year investment horizon as the ideal timeframe for stock market success. This span, he says, provides sufficient time to bounce back from market slumps and amass profits.
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