In a recent Big Picture blog, Barry Ritholtz, CIO of Ritholz Wealth Management, named Peter Lynch the greatest stock-picker of all time (GOAT).
Ritholtz notes that the honor would go to Buffett for the “best and longest-tenured investor,” and that Renaissance’s Jim Simons would win for “highest overall returns by any possible means.” But in terms of pure stock-picking, Ritholtz argued, it would be Lynch—now Vice Chairman of Fidelity—who he interviewed last month at the MIT Sloan annual investment conference.
During his thirteen-year tenure, Lynch turned Fidelity’s Magellan fund into the world’s best-known fund, averaging returns of 29.7% annually and never having a down year. “Along the way,” Ritholtz writes, “he changed how we think about stock picking, invented GARP (Growth at a reasonable price), encouraged millions of individuals to manage their own portfolios, and changed what it meant to be a fund investor. He also helped turn Boston-based Fidelity from a successful fund family into a financial powerhouse.”
Ritholtz outlines a few pieces of investment advice from Lynch:
- Management. While important, Lynch argues that the underlying business is even more important: “If you took Lee Iacocca or Bill Gates or Elon Muck and put them in charge of Sears or JC Penney, it still would have a miserable outcome.” He quips, “A great business,” says Lynch, “is one that any fool can run, because eventually one will.”
- Research. “Look at 10 companies, 8 are probably fairly priced, 1 is way overpriced, and 1 is attractive. The goal is to look at as many companies as possible to find that 1 company. The person who turns over the most rocks wins.”
- Predictions, says Lynch, are useless: “I have no idea what’s going to happen to interest rates, inflation or whether the market’s going up or down. And basically, if you are tying your portfolio to predicting how the market is going to go or how the economy is going to go, how can anyone manage into that approach?”
- When to buy. According to Lynch, the best time is “when things go from crappy to semi-crappy.”
- Market Timing. Lynch advocates for “tapping out when you are at the top of your game,” Ritholz writes, “and not milking every last cent by overstaying your welcome.”
- On Gamestop and Robinhood: Trading in both, says Lynch, are “total gambling,” and “you need to see a psychiatrist if you do that.”