Sunday, July 19, 2009

Masters of Investing: Peter Lynch

Lets take a break from focusing on the markets and have a peek at the Masters who built fortunes in the markets.
As and when time permits, I would try and post about the greats of Investing.

Peter Lynch

Peter Lynch is one of the masters of the modern era of investing. He built up a career in Fidelity, the world's largest mutual funds.
He has written 2 Best-selling books, "One up on Wall Street"and "Beating the Street". These books are a must read for any investor in the markets.
He has a simple investment philosophy which can be imitated successfully by anyone. It is one of the greatest myths of investments that to be a successful investor you have to be a financial wiz kid.
Peter Lynch believes in keeping your eyes open and see what is selling in the markets. every Christmas he used to go to the malls with his daughters and see which item was selling like hot cakes. That would be his starting point for zeroing on to the scrip.
He talks about the "circle of competence" - or know what you own. Each one of us work in different professions. We may be knowing what sells in that industry.
To put it in Indian context. Around the period 2002-2003, Bharti Airtel mobile connections were selling the most. The share was at a throwaway price of Rs 50-60.
UTI Bank was setting up ATMs all over the place. It was growing aggressively.
1 more example is of Deccan Aviation. It was available for a long time at Rs 60 and almost whole of India was flying Deccan.
Even now, if you see every 1 out of 2 car in India is a Maruti. It comes out with new models which even in these days have a waiting list. It has been a Market leader for 25 years now.
Young India visits Malls. They spend a lot in the malls. Disposable incomes are rising. Pantaloon is a market leader in this segment.oung India wants to buy houses for living. The number of people taking home loans is rising. Check out the market leader in this segment.
Amul is the most visible brand we see. unfortunately, its not listed, else it would have been the bedrock of any portfolio.

The Peter Lynch model is just the starting point. Once you have that, you have to look at the EPS and Promoter capability.

Peter Lynch philosophy of investing makes it a simple, common sense approach to investment. I would reccomend one reads his 2 books. Simply facinating.

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