Thursday, August 18, 2022

Peter Lynch – America’s NO. 1 Money Manager | A Biography

when peter lynch turns 10 his father dies from cancer it was a real tragedy because at the time lynch's father made a lot of money as accountant that provided a very good lifestyle lynch's mother didn't have to work but now she has to go back to the.

Workforce taken on two jobs at once and in order to support his mother the young peter lynch has to grow up quickly and to start working as well peter lynch is near the top of anyone's list of great investors he consistently tramps the market for over a decade by observing great ideas.

In the world around him then researching them and then buying them if they could stand the test of time in the 13 years he ran the fidelity magellan fund he racked up annual average returns of 29.2 percent with his father gone peter lynch's mother is determined to.

Make enough money in order for lynch to stay in a private school she knows that is the best way to guarantee her son's future but to make it easier for her the 11 year old lynch is desperate to find a job of his own he never expected to work at 11 years old he wanted to have a normal childhood.

But lynch was a very understanding boy seeing how hard his mother worked to provide for him he made out his mind from an early age that he was going to make so much money when he grew up that his mother would never have to work again but the type of jobs for 11 year old is limited he ends up becoming a caddy at a.

Local golf club his first job as a caddy allows lynch to appreciate the hard work and learn social skills but more importantly it is there he meets his mentor that will completely change his life forever.

To help support her mother peter lynch becomes a hardest working caddy on the golf course there he meets the executive vice president of fidelity george peter lynch stood up from the crowd because of his work ethic but what really left an impression on george sullivan was that one time.

Sullivan misplaced his umbrella and lynch used his own money as little as it was to buy a new umbrella to give it to sullivan and that act of kindness by peter lynch really left an impression on sullivan peter lynch's excellent work on the golf course pays off and with sullivan's.

Recommendation lynch gets accepted to boston college and receives full scholarship from a caddy scholarship fund the courier as a caddy has another benefit to lynch he develops a passion for finance especially for stock picking the golf course was the next best thing.

To being on the floor of a major exchange after my clients sliced the drive they enthusiastically described their latest investment the happy stories i heard on the fairways made me rethink the family position the stock market was a place to lose money many of my clients seem to be making money in the stock market.

He realizes to become as wealthy as those people he met on the golf course he should get into stocks at boston university lynch decides to become a finance major but he soon comes to realize that academic finance is not the same subject as he learned about on the golf course.

Investing in stocks is an art not a science people train to rigidly quantify everything are at a disadvantage in college peter lynch finds out that the most helpful subject to learn about stocks is not economics or mathematics but philosophy especially logic i was on the liberal arts side of boston.

College avoiding all the required math and accounting courses the normal preparations for business instead i studied metaphysics logic philosophy along with history psychology and political science they're called humanities because they're all about people and finance to peter lynch is all about people at.

Boston college lynch scores perfectly in tests but he knows the true way to examine his knowledge is not by passing his exams but by investing in the real world founded in 1945 flying tigers was the first cargo airline in the united states in 1961 it became one of the first carriers in the world to offer aerial.

Pallet shipping service before then aerial commercial shipping was expensive and nearly non-existent for larger goods flying tigers would be considered a growth stocks because it was a new and small company but lynch saw that the whole aerial shipping industry was going to explode.

And flying tigers was going to be the leader of it with strong conviction peter lynch put majority of savings in flying tiger's stock but for the next three years the stock becomes stagnated it never goes beyond the original price of seven dollars lynch bought it at if peter lynch learns.

Anything from his career on the golf course it is that it takes patience to win but lynch has no idea what is about to happen the united states is therefore prepared to take all necessary steps including the use of.

Armed forces to assist any member of the southeast asia collective treaty in defense of freedom the vienna war unexpectedly becomes the best thing that's ever happened to flying tigers initially lynch thought that flying tiger's business would grow as a result of typing into the commercial.

Shipping business but the vietnam war happened so unexpectedly and it sent the stock price to the sky by 1965 peter lynch original one thousand two hundred fifty dollars investment becomes more than six thousand dollars more than enough to pay for his grad school at wharton.

While pursuing his mba lynch continues to disregard economics and finance classes that are out of touch with the reality he devotes all of his free time researching the next stock to buy and after graduation from wharton he's eager to get into the real world but fate intervenes.

By the time peter lynch graduates from wharton the vietnam war has reached the critical stage it turns from a special military operation to a full-blown invasion the u.s now needs to recruit more soldiers to send to the battlefield peter lynch is one of them.

But fortunately for lynch he's stationed far from the battleground all the way in south korea and he spends a large part of his time researching his next investment idea it wouldn't be easy as he is far away from any companies in the u.s but he believes he could replicate his success with flying tigers he just needs.

To find another small growth company that no one on wall street knows about a 10 backer a 10 bagger is a stock which you've made 10 times your money i suspect this technical term has been barred from baseball which goes up to a four bagger or a home run in my business a four bagger is nice but a 10 bagger is a.

Whole lot better and with persistent effort peter lynch finds a perfect stock to buy sugar beets and sugar kings are the mink plants used to produce sugar but unlike sugar kings sugar beets can grow better in a cooler environment such as the state of maine the main sugar industries is a refiner.

Of sugar beets in 1965 the company finds a genius solution for increasing production it realizes that since there's a very little overlap between the harvest time of potatoes and sugar beets it will be profitable to convince the potato farmers to grow sugar bees as well.

Lynch understands clearly that this is a 10 bagger situation mostly because no wall street firms have yet taken notice he immediately buys as many shears as he can by calling his brokers from south korea expecting to have a windfall once he goes back to america.

Farmers in general tend to be very risk-averse and the main sugar company couldn't convince the farmers to plant sugar beets in full capacity instead most of them only use less than one quarter of their farms after coming home from korea lynch vows to never make the same mistake in the.

Future he will never buy stock again without research and more importantly on-site investigation if you're working hard you're always checking with competitors you're checking with customers suppliers you're trying to do work to find out is this company still early i might just they.

Have years and years of growth ahead of them then you stay with it you know the stock goes down but in the meantime he needs to make a living in 1969 through his connection with george sullivan he becomes a research analyst at fidelity then the largest asset management company in america.

by the 1930s the mutual funds are mostly small family operations consisting of firms made up of wealthy people the only way to grow is through performance and word of mouth but one boston businessman edward johnson thinks there's a better way.

Ed johnson was a great salesman so he thought to himself why not treat mutual fund like a product so he was one of the first to hire professional salespeople who barely knew anything about finance to distribute their mutual fund to the public on top of that.

Ed johnson shifts the focus of the mutual funds from speculative gambles to a safe place for people to earn stable returns by using the new concept at the time called diversification by 1962 fidelity becomes the biggest mutual fund company in america but with success comes competition.

So what happened from the 40s to the 60s was that a lot of mutual funds became overly obsessed with raising money rather than focusing on making returns for their investors so a lot of these funds spend so much money on salespeople on brokers rather than on.

Investment research to beat the competition ed johnson starts deploying a diverse set of strategies including a fund focused on technical analysis run by pioneer jerry thai with his unique way of analyzing charts and patterns jeritai's fund outperforms.

The competition by a wide margin he becomes a star in the mutual fund industry his success takes fidelity to a new height at the time technical analysis was relatively new tai was using mathematics to spot short-term patterns that other people haven't quite caught up yet and that's.

Why it worked for him by the late 1960s the boat market is slowing but with the jerry ty's performance fidelity is thriving as ed johnson gets close to his retirement age jerry thai becomes an apparent successor but surprisingly ed johnson decides that fidelity is always going to be a family.

Business and his son ned johnson becomes a new boss at fidelity after tight left fidelity loses a great number of clients in the investing world clients loyalty always lies where the profit is in this case they follow with jerry tygo's worse yet by 1969 fidelity is found.

Guilty for its involvement in an insider trading scandal when their broker conspired with a client to commit a fraud with profits down and with a lot of clients ned johnson struggles to find a solution he understands that to turn fidelity around he needs to find someone just as talented as tai.

And it turns out the solution has been standing right in front of him this entire time america is at a turning point after the great depression and world war ii it became the most powerful nation on the planet as a testimony to the efficacy and the resilience of the capitalist economic system.

But where there's a free market there's always a cycle of boom and bust by the early 1970s the economic recession has arrived peter lynch had a rough childhood but through hard work and ingenuity he graduated from the top business school in the u.s and by learning stock picking from.

Hands-on experience lynch excels at fidelity as a research analyst while the stock market collapses peter lynch stock recommendations thrive however after the exit of start trader jerry thai fidelity is struggling to grow it lost one third of his assets in one.

Year alone the new ceo net johnson aimed to find a brilliant trader just like jerry thai but little does he know the man who will eventually take fidelity to the moon is anything but like jerry thai the magellan fund was initially set up.

By ed johnson and george sullivan as a boot camp to train future fund managers for fidelity lynch started in 1969 as a steel and metals analyst lynch was a research analyst but on the side he was building his own little stock portfolio that consistently beat.

The market so all the employees at fidelity always came to him for stock tips by 1974 it becomes apparent to net johnson peter lynch is the kind of talent he's been searching for he promotes lynch as the new head of the magellan fund which at the time was a closed fund consisting mostly the wealth of johnson.

Family and their executives as the new boss of the magellan fund lynch knows to outperform the market he must do things the rest of the market doesn't do as the bear market reaches on most mutual funds shift away from stock investing but to lynch a bear market only means.

One thing bargains there were bargains everywhere in those days my portfolio continued to grow pretty soon i became known as the will rogers of equities a man who never saw a stock he didn't like as a savvy poker player lynch believes that with a portfolio full of potential.

10 backers the law of probability will inevitably be on his side if i find 10 good stories they're all equally attractive i buy all 10 and i wait to see them unfold it's like watching 10 poker games 10 games of stud poker you watch the cards turn over story 3 gets.

Better story 6 slips story 7 stays the same but it goes up 50 percent he sells seven by two and his first 10 bagger is a very unlikely company taco bell was founded by a white man called glenn bell who was addicted to the hard shell tacos.

At his local mexican restaurant belt learned the recipe and opened up his own stand in 1951 before long he made enough money to open a physical restaurant and then two years later a chain of taco bell restaurants start popping up in california on a trip to california i was impressed.

With the taco bell burrito they had no debt they never had a restaurant close and i started buying at seven and uh it was the largest position magellan in 1978 taco bell may have been a treasure but peter lynch is not the only one who's found it.

In just less than a year since peter lynch invested in taco bell the company is acquired by pepsico at 50 a year having an influx of reliable information was key for lynch to gain an edge with the magellan fund we used to wait for the mail to come to see what nike's inventories were like.

You know i mean you find out we get in our library in the first class mail so all this information so the investing for the average person now is much clearer they know the same thing as i do i want to thank the daily upside for sponsoring this video it's a free business and investing newsletter that.

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Click the link in the description and join me to rate the daily upside every morning and if you don't like it you can always unsubscribe the newsletter by 1978 the raging inflation has left federal reserve very little options the dow jones falls 18 by 1977. it's the same year peter lynch becomes.

One of the youngest money managers on wall street while the rest of the market is down sharply lynch's fund has generated a 20 profit to peter lynch stop picking is like an art form or a sport the way he practice this art form is by immersing himself in the business that he's going to buy.

My stock picking method which involves elements of art and science plus legwork hasn't changed in 20 years professional investors are missing the point a pile of software isn't worth a damn if you haven't done your basic homework on the companies they're scrambling to buy services like bridge shark bloomberg first call market watch.

And they ought to be spending more time at the mall and philosophy is called empiricism which prioritizes learning from direct experiences over anything else peter lynch forms his investment thesis by immersing himself in the business rather than by just reading the numbers on paper.

It's essentially a human-driven approach meaning that if lynch lacks the product and other people love the product and the management are good people these serve as a better evidence than just figures and papers lynch becomes unstoppable a year later while the market has bounced back to 18.

Lynch's magellan fund has done even better creating a 51 return in 1979. we are americans god bless you and thank you as ronald reagan becomes a president the age of prosperity has returned the bull market propels peter lynch magellan to start him as it consistently makes mind-boggling profits.

Although lynch doesn't always pick the right stocks he knows if he gets 3 out of 5 stocks right in the long run he will do just fine but even with that assurance one stock investment still catches him off guard founded in 1983 jade beltner was an instant success.

It became a popular specialty food store due to its understanding of the local consumers in boston bildner's is a specialty food store located across the street from my boston office it sells gourmet sandwiches and prepared hot foods bildner's is a cross between a convenience store and a three-star restaurant i had first-hand.

Information that they had the best bread and the best sandwiches in boston the store was perfect for middle class white collars who had a little bit of disposable income and who want something better than just microwave sandwiches for lunch when the company goes public in 1986 lynch is the first in line to buy stocks.

At 13 a share since he's become addicted to their sandwiches lynch is confident the soon the stores will pop up across america and millions of middle class americans will enjoy their sandwiches as he does what peter lynch didn't realize was that biltner was successful because it was.

Local it hasn't yet proven itself that they could succeed elsewhere and when biltner opens a new store in manhattan it fails to compete with the infamous new york dailies by the time the company tries to open new locations in atlanta it has already run out of cash.

I'm sure the company learned from these mistakes but there was no second chance once the money ran out i gradually unloaded my shares at losses ranging from 50 to 95 the lesson here is if the prototype is in texas hold off buying until the company shows it can make money in illinois does the idea work in some.

Other place that's the question i forgot to ask builders after learning his lesson lynch continues to hunt for 10 baggers companies whose products he enjoys who have the ability to scale and who somehow also have been neglected by wall street but lynch gradually finds out that as.

His fund grows bigger and he becomes more famous it gets more difficult to find 10 backers by 1989 the magellan has become the most popular mutual fund in america with 17 billion dollars under management peter lynch has been beating the market.

Every year making him the most celebrated investor on wall street tonight johnson hiring lynch has been a stroke of genius and to millions of americans fidelity is lynch and lynch is fidelity lynch is no question a ethical hardworking intelligent person and that was exactly the brand image.

Ned johnson want people to associate with fidelity but then at the peak of peter lynch's career he does the unthinkable in 1991 after 11 years of exceptional performance peter lynch.

Resigns for years he was driven by the desire to provide for his mother and his family he has pushed himself to work hard like no one else even at the expense of spending time with his children peter lynch knows what it's like to not.

Have his father around peter lynch manager of the nation's largest and most profitable mutual stock fund for 13 years left his job at fidelity's magellan fund in 1990. lynch's decision to retire young was influenced by his father's death at 46 when peter was only 10. at the age of 48 lynch decides that no.

Amount of money can bite back time with his family but there is one more reason why lynch quit fidelity what many people don't know was that magellan was a closed internal fund for the first five years of his history it had less than one billion dollars in 1980 which was considered small even at.

That time and when the fund is small you have a wider range of companies to pick from and if you look at magellan's historical performance the best years were in the early years by early 1990s as the size of the funk grows and as a celebrity it becomes.

Increasingly difficult to find 10 baggers lynch decides that while magellan is still performing well it is time to retire and cement his legendary status as the most profitable mutual fund manager in history but little does he know.

That even after retirement a ghost from the past will come back and haunt him by early 2000s mutual funds and other etfs have become the most powerful forces in corporate finance as a massive trillion dollar investment.

Company fidelity is often the biggest shareholder in many major corporations in america so they literally have enough votes in their hands to change the fate of many u.s companies what happens now is that whether if you're active as hedge funds or if you're an executive of a company.

You need to be on good terms with guys like larry fink and the johnson's family in 2008 the sec charges fidelity for receiving bribery from various companies amount to millions of dollars including vip tickets for super bowl concerts and even for strip clubs.

And peter lynch is charged with a twenty thousand dollars fine for receiving bribery tickets for broadway shows and for golf tournaments but that setback doesn't affect peter lynch's reputation as people trust that lynch didn't break the law on purpose in 2022 peter lynch is just as popular.

As ever they come to find out that lynch's way of investing is just as relevant today even though the success of magellan fund has made lynch a rich man he has made even more money for the johnson family unlike other financial institutions fidelity is still a private company with.

Almost eight trillion dollars of assets under management and it is still tightly controlled by the johnson family who now is arguably one of the most powerful families in america.

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