Friday, October 1, 2010

Oracle-Peter Lynch

Peter Lynch (born January 19, 1944(1944-01-19)) is a Wall Street stock investor. He is currently a research consultant at Fidelity Investments. Lynch graduated from Boston College in 1965 and earned a Master of Business Administration from the Wharton School of the University of Pennsylvania in 1968.

Peter Lynch
Born January 19, 1944 (1944-01-19) (age 66)
United States
Occupation Investor
Employer Fidelity Investments
Salary A lot
Net worth US$352 million (2006)[1]
Title Research consultant
Spouse Carolyn Lynch

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.[2] 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 to 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. From 1977 until 1990, the Magellan fund averaged a 29.2% return.[3] 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 Lowes.

[edit] Books
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 last-named book was written for beginning investors of all ages, mainly teenagers. In essence, One Up served as theory while Beating the Street 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 the Street 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.

[edit] Investment philosophy
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".

[edit] Philanthropy
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 Lynches have made gifts as individuals, donating $10 Million to Peter Lynch's Alma Mater, Boston College, naming the School of Education after the family.[4]

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

Mr. Lynch was inducted into the Junior Achievement U.S. Business Hall of Fame in 1991.

[edit] Controversy
Peter Lynch has been implicated in the improper receipt of tickets from brokerage firms that sought and obtained orders to buy or sell securities on behalf of Fidelity’s advisory clients. Those brokerage firms each received millions of dollars in commission revenue for handling orders from Fidelity’s advisory clients’ accounts.[5]

During the period from at least January 2002 through October 2004, two Fidelity senior executives (DeSano and Grenier) and ten Fidelity equity traders (Beran, Bruderman, Burnieika, Burns, Donovan, Driscoll, Harris, Horan, Pascucci and Smith) in aggregate accepted approximately $1.6 million worth of travel, entertainment and gifts from brokerage firms that sought and obtained orders to buy or sell securities on behalf of Fidelity’s advisory clients. In addition, Lynch requested and received tickets to events from two equity traders, who obtained those tickets from brokers. Those brokerage firms each received millions of dollars in commission revenue for handling orders from Fidelity’s advisory clients’ accounts. DeSano and the traders in aggregate accepted from brokers dozens of expensive trips, frequently by private jet, including excursions to the Super Bowl, family vacations to Bermuda, Nantucket and the Caribbean, golf outings at exclusive clubs in Florida and South Carolina, weekends in Las Vegas, lodging at fine hotels, and even an extravagant, three-day bachelor party for Bruderman in Miami. Brokers also provided the Fidelity executives and traders with gifts including premium tickets to the World Series, the U.S. Open, Wimbledon, Rolling Stones concerts, and dozens of other sporting events and concerts. In addition, certain traders accepted illegal drugs from brokers and one trader’s illegal gambling was facilitated by a broker.[6]

Here is his statement: "In asking the Fidelity equity trading desk for occasional help locating tickets, I never intended to do anything inappropriate, and I regret having made those requests. I want the public to know that I have never worked on the trading desk, and, since retiring from investment management at Fidelity over 17 years ago, I have not placed any trades on behalf of Fidelity with any brokerage firm. As many people know, over the past 17 years, I have spent most of my time on community service."

Peter Lynch agreed to settle the charges with the Securities and Exchange Commission.[7]

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