Quotes by Peter Lynch

Peter Lynch

• Never invest in any idea you can't illustrate with a crayon.

• Investing without research is like playing stud poker and never looking at the cards.

• Warren Buffett, the greatest investor of them all, looks for the same opportunities I do, except that when he finds them, he buys the whole company.

• Investing in stocks is an art, not a science, and people who've been trained to rigidly quantify everything have a big disadvantage.

• To me, an investment is simply a gamble in which you've managed to tilt the odds in your favour.

• It only takes a handful of big winners to make a lifetime of investing worthwhile.

• I like buying companies that can be run by monkeys - because one day they will be.

• Twenty years in this business convinces me that any normal person using the customary three per cent of the brain can pick stocks as well as, if not better, than the average Wall Street expert.

• There seems to be an unwritten rule on Wall Street: If you don't understand it, put your life savings into it. Shun the enterprise round the corner, which can at least be observed, and seek out one that manufactures an incomprehensible product.

• Whoever imagines that the average Wall Street professional is looking for reasons to buy exciting stocks hasn't spent much time on Wall Street. The fund manager most likely is looking for reasons not to buy exciting stocks, so that he can offer the proper excuses if those exciting stocks go up.

• Between the chance of making an unusually large profit on an unknown company and the assurance of losing only a small amount on an established company, the normal mutual-fund manager, pension-fund manager, or corporate-portfolio manager would jump at the latter. Success is one thing, but it's more important not to look bad if you fail.

• You don't have to invest like an institution. If you invest like an institution, you're doomed to perform like one, which in many cases isn't very well.

• In stocks you've got the company's growth on your side. You're a partner in a prosperous and expanding business. In bonds, you're nothing more than the nearest source of spare change. When you lend money to somebody, the best you can hope for is to get it back, plus interest.

• The list of qualities [an investor ought to have] include patience, self-reliance, common sense, a tolerance for pain, open-mindedness, detachment, persistence, humility, flexibility, a willingness to do independent research, an equal willingness to admit mistakes, and the ability to ignore general panic.

• When it comes to predicting the market, the important skill is not listening, but snoring. The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as long as the fundamental story of the company hasn't changed.

• When ten people would rather talk to a dentist about plaque than to the manager of an equity mutual fund about stocks, it's likely that the market is about to turn up. When the neighbours tell me what to buy and then I wish I had taken their advice, it's a sure sign that the market has reached a top and is due for a tumble.

• If you're considering a stock on the strength of some specific product that a company makes, the first thing to find out is: what effect will the success of the product have on the company's bottom line?

• If I could avoid a single stock, it would be the hottest stock in the hottest industry, the one that gets the most favourable publicity, the one that every investor hears about in the car pool or on the commuter train - and succumbing to the social pressure, often buys.

• Although it's easy to forget sometimes, a share of a stock is not a lottery ticket. It's part ownership of a business.

• If you remember nothing else about p/e ratios, remember to avoid stocks with excessively high ones. A company with a high p/e must have incredible earnings growth to justify its high price.

• I got positive feelings when I saw that Taco Bell's headquarters was stuck behind a bowling alley. When I saw those executives operating out of that grim little bunker, I was thrilled. Obviously they weren't wasting money on landscaping the office.

• When you buy a stock for its book value, you have to have a detailed understanding of what those values really are. At Penn Central, tunnels through mountains and useless rail cars counted as assets.

• If you can find a company that can get away with raising prices year after year without losing customers (an addictive product such as cigarettes fills the bill), you've got a terrific investment.

• Some people automatically sell the 'winners' - stocks that go up - and hold on to their 'losers' - stocks that go down - which is about as sensible as pulling out the flowers and watering the weeds. Others automatically sell their losers and hold on to their winners, which doesn't work out much better. Both strategies fail because they're tied to the current movement of the stock price as an indicator of the company's fundamental value.

• If you know why you bought a stock in the first place, you'll automatically have a better idea of when to say goodbye to it.

• Warren Buffett thinks that stock futures and options ought to be outlawed, and I agree with him.

• Just because the price goes up doesn't mean you're right. Just because it goes down doesn't mean you're wrong. Stock prices often move in opposite directions from the fundamentals but long term the direction and sustainability of profits will prevail.