Barron’s recently profiled legendary investor Peter Lynch with a lengthy retrospective on his humble beginnings, his successful career at Fidelity and highlights from a December interview.
Here are some key takeaways from Lynch’s comments on today’s market and the state of active investing:
- Lynch maintains that the state of active management—with most trailing their benchmarks—isn’t a new phenomenon. He argues that most indexes weight stocks by market value, leaning toward those that have already done well.
- ETFs are for those “who don’t have time to do the research.” While not necessarily a bad way to invest, Lynch contends, “you ought to have a reason why the heck you’re doing this. If you flip it every month, I’d be shocked if you do very well.”
- The preponderance of data available in today’s high-tech world should be a “huge positive for active managers.”
- If you only invest in an index, says Lynch, you’ll never beat it. If you subscribe to the consensus view that stock market returns are heading lower, he argues it would be wise to “brush up on your stock-picking skills.”
- Lynch readily discusses the mistakes he has made over his career, citing the example of his reluctance to invest in tech companies due to what he perceived as their short life cycles: “My mistake was that some of these technology companies are not that complicated…I kick myself for my sloppy analysis of what [constitutes] technology.” Apple, he says, “is not a technology company; it’s like buying RCA 50 years ago.”
- Lynch says 2019 has been “the worst relative year I’ve ever had in 50 years,” adding that the market’s steep advance “reinforces that growth stocks are better than nongrowth stocks. The turnarounds, the cheap stocks, if you’re right, sometimes you make a double or triple. But you’re not right that often.”