Peter Lynch (born January 19, 1944)
is an American
investor
An investor is a person who allocates financial capital with the expectation of a future Return on capital, return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some specie ...
,
mutual fund
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV i ...
manager, and
philanthropist
Philanthropy is a form of altruism that consists of "private initiatives, for the Public good (economics), public good, focusing on quality of life". Philanthropy contrasts with business initiatives, which are private initiatives for private goo ...
. As the manager of the
Magellan Fund
The Fidelity Magellan Fund () is a U.S.-domiciled mutual fund from the Fidelity family of funds. It is perhaps the world's best-known actively managed mutual fund, known particularly for its record-setting growth under the management of Peter Lyn ...
at
Fidelity Investments
Fidelity Investments, commonly referred to as Fidelity, earlier as Fidelity Management & Research or FMR, is an American multinational financial services corporation based in Boston, Massachusetts. The company was established in 1946 and is on ...
between 1977 and 1990, Lynch averaged a 29.2% annual return, consistently more than double the
S&P 500
The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. As of D ...
stock market index and making it the best-performing mutual fund in the world.
[The Intelligent Investor, 2003, Commentary on the Introduction] During his 13-year tenure,
assets under management increased from US$18 million to $14 billion.
A proponent of
value investing
Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. The various forms of value investing derive from the investment philosophy first taught by Benjamin Graham ...
, Lynch wrote and co-authored a number of books and papers on investing strategies, including ''One Up on Wall Street'', published by
Simon & Schuster
Simon & Schuster () is an American publishing company and a subsidiary of Paramount Global. It was founded in New York City on January 2, 1924 by Richard L. Simon and M. Lincoln Schuster. As of 2016, Simon & Schuster was the third largest publ ...
in 1989, which sold over one million copies. He coined a number of well-known mantras of modern individual investing, such as ''invest in what you know'' and ''ten bagger''. Lynch has been described as a "legend" by the financial media for his performance record.
Early life and education
Peter Lynch was born on January 19, 1944, in
Newton, Massachusetts
Newton is a city in Middlesex County, Massachusetts, United States. It is approximately west of downtown Boston. Newton resembles a patchwork of thirteen villages, without a city center. According to the 2020 U.S. Census, the population of Ne ...
.
In 1951, when Lynch was seven, his father was diagnosed with cancer. He died three years later, and Lynch's mother had to work to support the family. Lynch reports that from his early teens he worked as a
caddie
In golf, a caddie (or caddy) is the person who carries a player's bag and clubs, and gives the player advice and moral support.
Description
A good caddie is aware of the challenges and obstacles of the golf course being played, along with the ...
to help support the family. During Lynch's time as a sophomore at Boston College, he used his savings to buy 100 shares of
Flying Tiger Airlines at $8 per share. The stock would later rise to $80 per share, profits from which helped pay for his education.
In 1965, Lynch graduated from
Boston College
Boston College (BC) is a private Jesuit research university in Chestnut Hill, Massachusetts. Founded in 1863, the university has more than 9,300 full-time undergraduates and nearly 5,000 graduate students. Although Boston College is classifie ...
(BC) where he had studied history, psychology, and philosophy. He later earned a
Master of Business Administration
A Master of Business Administration (MBA; also Master's in Business Administration) is a postgraduate degree focused on business administration. The core courses in an MBA program cover various areas of business administration such as accounti ...
from the
Wharton School of the University of Pennsylvania
The Wharton School of the University of Pennsylvania ( ; also known as Wharton Business School, the Wharton School, Penn Wharton, and Wharton) is the business school of the University of Pennsylvania, a Private university, private Ivy League rese ...
in 1968.
Investment career
Fidelity
In 1966, Lynch was hired as an
intern
An internship is a period of work experience offered by an organization for a limited period of time. Once confined to medical graduates, internship is used practice for a wide range of placements in businesses, non-profit organizations and gover ...
with
Fidelity Investments
Fidelity Investments, commonly referred to as Fidelity, earlier as Fidelity Management & Research or FMR, is an American multinational financial services corporation based in Boston, Massachusetts. The company was established in 1946 and is on ...
partly because he had been caddying for Fidelity's
president
President most commonly refers to:
*President (corporate title)
*President (education), a leader of a college or university
*President (government title)
President may also refer to:
Automobiles
* Nissan President, a 1966–2010 Japanese ful ...
, D. George Sullivan, (among others) at
Brae Burn Country Club
Brae Burn Country Club is a golf course located in West Newton, Massachusetts. Designed by Donald Ross, Brae Burn has hosted seven USGA Championships, including the 1919 U.S. Open, and 1928 U.S. Amateur. Brae Burn is most noted for its diabolica ...
in
Newton, Massachusetts
Newton is a city in Middlesex County, Massachusetts, United States. It is approximately west of downtown Boston. Newton resembles a patchwork of thirteen villages, without a city center. According to the 2020 U.S. Census, the population of Ne ...
. He initially covered the paper, chemical, and publishing industries, and when he returned after a two-year Army stint he was hired permanently in 1969. This time Lynch was charged with following the textiles, metals, mining, and chemicals industries, eventually becoming Fidelity's director of research from 1974 to 1977.
Fidelity Magellan Fund
In 1977, Lynch was named head of the then-obscure
Magellan Fund
The Fidelity Magellan Fund () is a U.S.-domiciled mutual fund from the Fidelity family of funds. It is perhaps the world's best-known actively managed mutual fund, known particularly for its record-setting growth under the management of Peter Lyn ...
which had $18 million in assets. By the time Lynch resigned as a fund manager in 1990, the fund had grown to more than $14 billion in assets with more than 1,000 individual stock positions. Taking over when Magellan was a small fund, Lynch had no restrictions on what assets he could buy (other than laws, such as an
SEC-enforced federal law that prohibits investment company funds that are registered as "diversified" from holding more than 5% of total portfolio assets in a single company at time of purchase ).
[ He focused on individual companies rather than any overarching strategy, starting with large US companies and gradually shifting emphasis to smaller and international stocks.][Peter Lynch and John Rothschild, Beating the Street Simon & Schuster; Revised edition (May 25, 1994) 0671891634]
From 1977 until 1990, the Magellan fund averaged a 29.2% annual return and as of 2003 had the best 20-year return of any mutual fund ever. Lynch found successes in a broad range of stocks from different industries; according to ''Beating the Street'' his most profitable picks were Fannie Mae
The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the N ...
, Ford
Ford commonly refers to:
* Ford Motor Company, an automobile manufacturer founded by Henry Ford
* Ford (crossing), a shallow crossing on a river
Ford may also refer to:
Ford Motor Company
* Henry Ford, founder of the Ford Motor Company
* Ford F ...
, Philip Morris, MCI, Volvo
The Volvo Group ( sv, Volvokoncernen; legally Aktiebolaget Volvo, shortened to AB Volvo, stylized as VOLVO) is a Swedish multinational manufacturing corporation headquartered in Gothenburg. While its core activity is the production, distributio ...
, General Electric
General Electric Company (GE) is an American multinational conglomerate founded in 1892, and incorporated in New York state and headquartered in Boston. The company operated in sectors including healthcare, aviation, power, renewable energ ...
, General Public Utilities, Student Loan Marketing, Kemper, and Lowe's
Lowe's Companies, Inc. (), often shortened to Lowe's, is an American retail company specializing in home improvement. Headquartered in Mooresville, North Carolina, the company operates a chain of retail stores in the United States and Canada. A ...
.
Investment philosophy
Lynch has written (with co-author John Rothchild
John Harmon Rothchild (May 13, 1945 – December 27, 2019) was a freelance writer specializing in financial matters. He authored or co-authored more than a dozen books on finance and investing, and served as an editor of ''Washington Monthly'' as ...
) three texts on investing: ''One Up on Wall Street'' (), ''Beating the Street'' (), and ''Learn to Earn''. The last-named book was written for beginning investors of all ages, mainly teenagers. In essence, ''One Up'' served as theory while ''Beating the Street'' is application. ''One Up'' lays out Lynch's investment technique including chapters devoted to stock classifications, the two-minute drill, famous numbers, and designing a portfolio. Most of ''Beating the Street'' consists of an extensive stock by stock discussion of Lynch's 1992 ''Barron's Magazine
''Barron's'' is an American weekly magazine/newspaper published by Dow Jones & Company, a division of News Corp.
Founded in 1921 by Clarence W. Barron (1855–1928) as a sister publication to ''The Wall Street Journal'', ''Barron's'' covers U.S. ...
'' selections, essentially providing an illustration of the concepts previously discussed. As such, both books represent study material for investors of any knowledge level or ability.
Lynch also wrote a series of investment articles for '' Worth'' magazine that expand on many of the concepts and companies mentioned in the books.Lynch coined some of the best-known mantras of modern individual investing strategies.
His most famous investment principle is, "invest in what you know," popularizing the economic concept of "local knowledge
Traditional knowledge (TK), indigenous knowledge (IK) and local knowledge generally refer to knowledge systems embedded in the cultural traditions of regional, indigenous peoples, indigenous, or Local community, local communities. According to t ...
". Since most people tend to become expert in certain fields, applying this basic "invest in what you know" principle helps individual investors find good undervalued stocks. Lynch uses this principle as a starting point for investors. He has also often said that the individual investor is potentially more capable of making money from stocks than a fund manager, because they are able to spot good investments in their day-to-day lives before Wall Street. Throughout his two classic investment primers, he has outlined many of the investments he found when not in his office. For example, in ''One Up'' Lynch explains how he invested in Dunkin' Donuts
Dunkin' Donuts LLC, also known as Dunkin' and by the initials DD, is an American multinational coffee and doughnut company, as well as a quick service restaurant. It was founded by Bill Rosenberg (1916–2002) in Quincy, Massachusetts, in 195 ...
not after reading about the company in ''The Wall Street Journal'', but after being impressed by their coffee as a customer. Assuming others would be similarly impressed and noting the company's Boston locations were always busy, he then studied the company's financial status and decided to invest in Dunkin' Donuts, which proved one of the best-performing stocks he ever bought. Lynch believes the individual investor is able to make similar smart investing choices noticing particular opportunities like Dunkin' Donuts or paying attention to business trends in their careers and hobbies. Using examples from Magellan Fund, his books outline how a novice should read and interpret company paperwork for information on stock valuation, earnings, cash flow, and other data.
Lynch has stated in ''One Up on Wall Street'' that his undergraduate studies in philosophy
Philosophy (from , ) is the systematized study of general and fundamental questions, such as those about existence, reason, knowledge, values, mind, and language. Such questions are often posed as problems to be studied or resolved. Some ...
and logic
Logic is the study of correct reasoning. It includes both formal and informal logic. Formal logic is the science of deductively valid inferences or of logical truths. It is a formal science investigating how conclusions follow from premises ...
were more important to his career than the math or finance he studied for his MBA. At Wharton, he came to believe that the two prevailing investing theories in academia, the random walk hypothesis The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk (so price changes are random) and thus cannot be predicted.
History
The concept can be traced to French broker Jules Regnault who pu ...
and the efficient market hypothesis
The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted bas ...
, were contradictory. The concepts taught by professors at school were regularly disproved by professionals during his internship at Fidelity. He thus came to rely more on practitioners than theoreticians: "It seemed to me that what was supposed to help you succeed in the investment business, could only help you fail ... Quantitative analysis taught me that the things I saw happening at Fidelity couldn't really be happening."
Lynch has also argued against market timing
Market timing is the strategy of making buying or selling decisions of financial assets (often stocks) by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from ...
, stating: "Far more money has been lost by investors preparing for corrections
In criminal justice, particularly in North America, correction, corrections, and correctional, are umbrella terms describing a variety of functions typically carried out by government agencies, and involving the punishment, treatment, and su ...
or trying to anticipate corrections than has been lost in the corrections themselves."
Lynch popularized the stock investment strategy “GARP” (Growth At A Reasonable Price), which is a hybrid stock-picking approach that balances Growth investing
Growth investing is a style of investment strategy focused on capital appreciation. Those who follow this style, known as ''growth investors'', invest in companies that exhibit signs of above-average growth, even if the share price appears expens ...
potential for share-price increases with the discipline of Value investing
Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. The various forms of value investing derive from the investment philosophy first taught by Benjamin Graham ...
to avoid buying overpriced stocks. Many well-known funds now follow the GARP model, ranging from equity funds such as Fidelity Investments
Fidelity Investments, commonly referred to as Fidelity, earlier as Fidelity Management & Research or FMR, is an American multinational financial services corporation based in Boston, Massachusetts. The company was established in 1946 and is on ...
Fidelity Contrafund (FCNTX) and Lemma Senbet Fund
The Lemma Senbet Fund is the largest student managed investments fund by endowment in the U.S. It's offered as a limited-enrollment year-round experiential learning course to top tier undergraduate students from the Robert H. Smith School of Bu ...
,[ to index funds such as ]Russell Indexes Russell indexes are a family of global stock market indices from FTSE Russell that allow investors to track the performance of distinct market segments worldwide. Many investors use mutual funds or exchange-traded funds based on the FTSE Russell I ...
iShares Russell 1000 Growth Index.
He also coined the phrase "ten bagger" in a financial context. This refers to an investment which is worth ten times its original purchase price, and comes from baseball
Baseball is a bat-and-ball sport played between two teams of nine players each, taking turns batting and fielding. The game occurs over the course of several plays, with each play generally beginning when a player on the fielding tea ...
where the number of "bags" or "bases" that a batter can run to is a measure of the success of that runner's hit. A baseball player who hits a home run
In baseball, a home run (abbreviated HR) is scored when the ball is hit in such a way that the batter is able to circle the bases and reach home plate safely in one play without any errors being committed by the defensive team. A home run i ...
will pass all four bases, and so such a hit is sometimes called a four-bagger. Similarly, a baseball double
A double is a look-alike or doppelgänger; one person or being that resembles another.
Double, The Double or Dubble may also refer to:
Film and television
* Double (filmmaking), someone who substitutes for the credited actor of a character
* Th ...
hit is sometimes called a two bagger. As Lynch wrote in ''One Up on Wall Street'', “In my business a fourbagger is nice, but a tenbagger is the fiscal equivalent of two home runs and a double.” In ''Beating the Street'', Lynch expounded with many-bagger, "For the most part, the NAIC (National Association of Investors Corp) groups buy stocks in well-managed growth companies with a history of prosperity, and in which earnings are on the rise. This is the land of the many-bagger, where it’s not unusual to make 10, 20, or even 30 times your original investment in a decade.
Personal life
Lynch married Carolyn Ann Hoff and cofounded the Lynch Foundation. They had three daughters. His wife died in October 2015 due to complications of leukemia
Leukemia ( also spelled leukaemia and pronounced ) is a group of blood cancers that usually begin in the bone marrow and result in high numbers of abnormal blood cells. These blood cells are not fully developed and are called ''blasts'' or ' ...
at age 69.
Wealth and philanthropy
According to a 2006 ''Boston Magazine
''Boston'' is a monthly magazine concerning life in the Greater Boston area and has been in publication since 1805.
History and profile
''Boston'' magazine was started in 1805. Metrocorp, Inc. bought the magazine in 1970. The company also owns ...
'' article, Lynch has an overall net worth of $352 million USD
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
.
Though he continues to work part time as vice chairman of Fidelity Management & Research Co., the investment adviser arm of Fidelity Investments, spending most of his time mentoring young analysts, Peter Lynch focuses a great deal of time on philanthropy
Philanthropy is a form of altruism that consists of "private initiatives, for the Public good (economics), public good, focusing on quality of life". Philanthropy contrasts with business initiatives, which are private initiatives for private goo ...
. He said he views philanthropy as a form of investment. He said he prefers to give money to support ideas that he thinks can spread, such as First Night
First Night is a North American artistic and cultural celebration on New Year's Eve, taking place from afternoon until midnight. Some cities have all their events during the celebration outside, but some cities have events that are hosted indoors ...
, the New Year's Eve festival that began in Boston
Boston (), officially the City of Boston, is the state capital and most populous city of the Commonwealth of Massachusetts, as well as the cultural and financial center of the New England region of the United States. It is the 24th- mo ...
in 1976 and has inspired similar events in more than 200 other communities, and City Year
City Year is an American education nonprofit organization founded in 1988. The organization partners with public schools in 29 high-need communities across the US and through international affiliates in the UK and Johannesburg, South Africa. Ci ...
, a community service program founded in Boston in 1988 that now operates in 29 cities across the U.S.
The Lynches give money primarily in five ways: as individuals, through the Lynch Foundation, through a Fidelity Charitable Gift Fund, and through two charitable trusts.
The Lynches have made gifts as individuals, donating $10 million to Peter Lynch's alma mater, Boston College
Boston College (BC) is a private Jesuit research university in Chestnut Hill, Massachusetts. Founded in 1863, the university has more than 9,300 full-time undergraduates and nearly 5,000 graduate students. Although Boston College is classifie ...
. In turn, BC named the Lynch School of Education and Human Development
The Lynch School of Education and Human Development (Lynch School) is the professional school of education at Boston College.
Founded in 1952, the Lynch school offers graduate and undergraduate programs in education, psychology, and human develo ...
after the family.
The Lynch Foundation, valued at $125 million, gave away $8 million in 2013 and has made $80 million in grants since its inception. The Foundation supports education, religious organizations, cultural and historic organizations, and hospitals and medical research. For example, the Foundation donated $20 million to establish in 2010 the Lynch Leadership Academy (LLA), a research and training program for school principals at BC's Carroll School of Management
The Wallace E. Carroll School of Management (CSOM) is the business school of Boston College in Chestnut Hill, Massachusetts. The school is regularly ranked among the best business schools in the United States, particularly its undergraduate progr ...
business school. The Lynch Foundation was one of the first major supporters of Teach for America, AmeriCares
Americares is a global non-profit organization focused on health and development that respond to individuals affected by poverty, disaster, or crisis. The organization addresses poverty, disasters, or crises with medicine, medical supplies and h ...
, and Partners in Health
Partners In Health (PIH) is an international nonprofit public health organization founded in 1987 by Paul Farmer, Ophelia Dahl, Thomas J. White, Todd McCormack, and Jim Yong Kim.
Partners in Health provides healthcare in the poorest areas of ...
. Lynch was inducted into the Junior Achievement U.S. Business Hall of Fame in 1991.
Lynch is a member of the Harvard Medical School
Harvard Medical School (HMS) is the graduate medical school of Harvard University and is located in the Longwood Medical Area of Boston, Massachusetts. Founded in 1782, HMS is one of the oldest medical schools in the United States and is consi ...
Board of Fellows.
Honors
Lynch received the 1992 Seton Award from the National Catholic Education Association
The National Catholic Educational Association (NCEA) is a private, professional educational membership association of over 150,000 educators in Catholic schools, universities, and religious education programs. It is the largest such organization ...
.
See also
* Gerald Tsai
Gerald Tsai Jr. (; March 10, 1929 – July 9, 2008) was a billionaire investor and philanthropist who helped build Fidelity Investments into a mutual fund powerhouse.
After starting Fidelity Investments' first publicly sold aggressive growth fund ...
* Stock selection criterion
In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit f ...
References
External links
Book Reviews: Peter Lynch
The Greatest Investors: Peter Lynch
Sayings on markets by peter Lynch
Peter Lynch Quotes
"The Wit and Wisdom of Peter Lynch"
*
{{DEFAULTSORT:Lynch, Peter
1944 births
20th-century American businesspeople
Living people
American financial analysts
American financiers
American investors
American money managers
American philanthropists
Boston College alumni
Harvard Medical School people
People from Massachusetts
Stock and commodity market managers
Wharton School of the University of Pennsylvania alumni