Peter Lynch | Charlie Rose | 1993

Transcript

we begin with peter lynch time magazine has called him america's number one money manager during the 13 years he headed the fidelity magellan fund it was a top-ranked general equity mutual fund his new book beating the street offers advice on picking stocks and maximizing profits and he's here to talk to us about a lot of things including his own d... Read More

Summary

In this interview, Peter Lynch discusses his decision to leave his job as the head of the Fidelity Magellan Fund and the reasons behind it. He also talks about his approach to investing and offers advice on picking stocks. Lynch emphasizes the importance of understanding the companies you invest in and explains how to identify potential winners. He also discusses his thoughts on the Clinton economic plan, the role of government in business, and offers his insights on various industries and stocks to watch.

Questions & Answers

Q: Why did Peter Lynch decide to leave his job at the Fidelity Magellan Fund?

Peter Lynch decided to leave his job because he wanted to spend more time with his family. Despite loving his job, the long hours and constant traveling became too much for him.

Q: What did Lynch do after leaving his job at Fidelity?

After leaving Fidelity, Lynch reduced his work hours to have more time for family and personal activities. He took on charity work and became involved in organizations such as inner city schools, libraries, and housing.

Q: Why did Lynch write another book after his first one, "One Up On Wall Street"?

Lynch wrote another book because he felt that many people didn't grasp the concepts he explained in his first book. He wanted to reiterate the advantages of investing in stocks and provide further guidance on how to do it successfully.

Q: Why has the percentage of people's assets invested in stocks decreased over time?

Lynch believes that people lost money in the stock market during the 1980s because their methods were flawed. This loss of confidence led to a decline in the percentage of assets invested in stocks. He emphasizes the need for individuals to understand certain principles and be committed to following them before investing in stocks.

Q: What is Lynch's philosophy when it comes to investing in stocks?

Lynch's philosophy is to invest in companies that you understand and can explain to a ten-year-old in two minutes or less. He stresses the importance of knowing what a company does and how it generates earnings. Lynch believes there is a 100% correlation between a company's earnings over time and the performance of its stock.

Q: How does Lynch advise people to identify good stocks to invest in?

Lynch advises people to focus on industries they know and understand. For example, if someone works in the restaurant industry, they should consider investing in companies related to that industry. He suggests looking for companies with solid fundamentals and growth potential.

Q: What does Lynch think about predicting the stock market, the economy, and interest rates?

Lynch believes that predicting the stock market, the economy, and interest rates is impossible. He recalls the recession of 1982 and the inability of anyone to predict it. Rather than trying to predict macroeconomic factors, he encourages investors to focus on understanding individual companies.

Q: Is Lynch in favor of eliminating the capital gains tax?

Lynch believes that the capital gains tax is too high and discourages investment. He mentions that the capital gains tax rate in Japan is only 10%, while in the United States, it is much higher. He argues that lowering or eliminating the capital gains tax would encourage people to save and invest.

Q: What are Lynch's thoughts on government regulations and their impact on businesses?

Lynch acknowledges the need for some government regulations, particularly those related to protecting workers and consumers. However, he criticizes excessive paperwork and unnecessary regulations that hinder business growth. He believes in encouraging entrepreneurship and reducing bureaucratic obstacles.

Q: Does Lynch have any recommendations for specific stocks to watch?

Lynch suggests keeping an eye on companies like Obapan, which specializes in croissants and breads, as well as Jay Baker, a retailer. He also mentions Super Cuts, a small company in the haircuts industry, as worth watching. Lynch believes that now is a good time to consider cyclical industries such as paper, aluminum, and steel, as they have cut costs and have the potential for increased profits.

Takeaways

Peter Lynch's insights in this interview highlight the importance of understanding the companies you invest in and the industries they belong to. Lynch advises investors to focus on their natural advantages and stick to what they know. He reminds investors that predicting macroeconomic factors is futile and instead advocates for investing in well-understood businesses with sound fundamentals. Lynch also emphasizes the need for government policies that encourage investment and entrepreneurship while reducing unnecessary bureaucratic obstacles. Overall, Lynch's advice encourages individual investors to approach the stock market with knowledge, diligence, and a long-term perspective.