Sunday, 31 August 2008

Peter S. Lynch

Peter S. Lynch - Manager o/t Fidelity Magellan Fund; Fidelity Mutual Fund Whiz; Director of Morrison Knudsen and W. R. Grace & Company; Wall Street Stock Investor; Advisory Committee AmeriCares

Peter Lynch (born January 19, 1944) is a Wall Street stock investor. He is currently a research consultant at Fidelity Investments. Lynch graduated from Boston College and earned a Master of Business Administration from the Wharton School of the University of Pennsylvania.


Lynch was hired as an intern with Fidelity Investments in 1966 partly because he had been caddying for Fidelity's president (among others) at Brae Burn Country Club in Newton, Massachusetts. 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 1974-1977. In 1977, Lynch was named head of the then obscure Magellan Fund 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. Lynch's achieved dollar successes in a range of stocks including (by order of profit achieved - source is Beating the Street): Fannie Mae, Ford, Philip Morris, MCI, Volvo, General Electric, General Public Utilities, Student Loan Marketing, Kemper, and Loews.


Peter Lynch has written (with co-author John Rothchild) three texts on investing, including One Up on Wall Street (ISBN 0671661035), Beating the Street (ISBN 0671759159), and Learn to Earn. The latter book was written for teenagers. In essence, One Up served as theory while Beating 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 consists of an extensive stock by stock discussion of Lynch’s 1992 Barron's Magazine 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.

Investment terminology

Lynch coined some of the best known mantras of modern individual investing strategies.

His most famous investment principle is simply, "Invest in what you know," popularizing the economic concept of "local knowledge". This simple principle resonates well with average non-professional investors who don't have time to learn complicated quantitative stock measures or read lengthy financial reports. 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 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 - he found them when he was out with his family, driving around or making a purchase at the mall. Lynch believes the individual investor is able to do this, too.

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 where "bags" or "bases" that a runner reaches are the measure of the success of a play. A "two bagger" would be a double, so by extension, two home runs and a double would be a "ten bagger".


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. 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, the New Year's Eve festival that began in Boston in 1976 and has inspired similar events in more than 200 other communities, and City Year, a community service program founded in Boston in 1988 that now operates in 14 locations.

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 Lynch Foundation, which had $74 million in assets in 2003, supports education, religious organizations, cultural and historic organizations, and hospitals and medical research.

Peter S. Lynch's approach to stock investment is simple: know what you own.

"If you can't explain it to a 12-year-old in three minutes or less - if you don't understand it - you've got a problem," explained Lynch, vice chairman of Fidelity Management & Research Company and advisory board member of Fidelity Funds, who delivered the Charles F. Dolan Lecture on April 17.

Carolyn and Peter Lynch receive the Ad Majorem Dei Gloriam Award from Tom Regan.

The second was the Ad Majorem Dei Gloriam Award which
is given annually to an individual or a group for exemplifying
the Jesuit ideal of living a faith that does justice.
This year’s
recipients were Carolyn A. and Peter S. Lynch, for whom
the School of Education at Boston College is named. Father
Joseph M. O’Keefe, interim dean of that school, introduced
the award as honoring the Lynches not only for their many
philanthropic activities, but especially for their untiring and
effective promotion of the education of youth, particularly
those of poor, inner-city origins.

In recognition of an unprecedented gift of over $10 million and continued dedication to education by Boston College Trustee Peter Lynch, BC ?65, and his wife, Carolyn, the University held a dedication ceremony for the Carolyn A. and Peter S. Lynch School of Education (LSOE) last Thursday.


In a crop of corporate dramas, Knights of Malta are everywhere

When W.R. Grace & Co. Chief Executive J.P. Bolduc sensed a few months ago that his strained relations with Chairman J. Peter Grace were putting his job in jeopardy, he took his case to a rather unorthodox authority: John Cardinal O'Connor, Archbishop of the Archdiocese of New York. At Bolduc's request, the cardinal asked Grace to patch things up, hoping to avoid the scandals and the corporate upheaval that have since cost both men their jobs.

Grace rebuffed the advice, say sources close to the company; Grace, Bolduc, and the cardinal won't comment. But why did O'Connor even attempt to referee a boardroom blowup at W.R. Grace, a publicly held chemicals giant? Grace, Bolduc, and three other company directors--former Fidelity mutual fund whiz Peter Lynch, former Borden CEO Eugene Sullivan, and former University of Notre Dame administrator James Frick--all are Knights of Malta, an elite, secretive, Catholic lay order that counts O'Connor as its spiritual leader in the U.S. The knights trace their history back some 900 years, to a band of warrior-monks who tended to the injured during the Crusades.
A Wizard Caught in Two Storms

Published: March 10, 1995

Nothing can cloud the legend of Peter S. Lynch, the mutual fund wizard. As the manager of the giant Fidelity Magellan Fund from 1977 until his retirement in 1990, Mr. Lynch racked up one of the best long-term track records in the fund industry.

But it has not been a good year for Peter S. Lynch, the corporate director. Mr. Lynch is a director of only two public corporations, Morrison Knudsen and W. R. Grace & Company. And since January, the boards of both companies have been plunged into controversy centering on the charismatic chairmen who asked Mr. Lynch to serve as a director.

At Morrison Knudsen, the invitation came in 1988 from his friend William J. Agee, who had just taken command. Last month, Mr. Agee was forced to resign in the wake of big corporate losses. Yesterday, the company named a new management team to try to regain its financial footing. [ Page D3. ]

At W. R. Grace, Mr. Lynch joined the board in 1989 at the request of its chairman, J. Peter Grace, another old friend and a fellow member of the Knights of Malta, a Roman Catholic charitable group.Last week, the company's popular president and chief executive, J. P. Bolduc, resigned abruptly, setting off protests among institutional investors who blamed Mr. Grace for his departure. And yesterday, the company was fielding questions about whether Mr. Grace's compensation package and his son's business transactions with the company had been fully disclosed to investors. [ Page D3. ]

Mr. Lynch was traveling yesterday and could not be reached for comment on how he was coping with the twin crises. "With respect to W. R. Grace, the board members have voted as a matter of policy not to comment," a spokeswoman for Mr. Lynch said. In the past, he has also declined to comment about his role in Mr. Agee's departure.

* Hawks,J. For a Good Cause? 1997 (141)
* New Federalist 1994-07-18 (4)
* Washington Times 1990-03-29 (C1, 9)
* Washington Times 1995-02-11 (D8)

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