Updated: Dec 30, 2020
Video Link: https://youtu.be/IlZxnKE3QV0
In this episode, Peter Lynch was asked to explain on his investing philosophy which often summed up as buy what you know and what does he mean by that?
In this episode, you’ll learn:
Peter Lynch investing philosophy; buy what you know.
How would regular investors get inside advantage by sticking into industry that they know?
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So Peter, your investing philosophy is often summed up as buy what you know and there’s some truth to that and it’s also often way oversimplified.
PETER LYNCH 00:08
Can you explain what you did mean by that and what you didn’t mean.
PETER LYNCH 00:12
Well, it bothers me that people are very dangerous when they invest. This word play the market. That’s a dangerous term.
If you do some work, do some research, know what you own, look at the balance sheet, if you get an 8 and 8 get fairly close to 16, you find out this company has lots of debt, no cash – they’re in trouble. Should know it – So, a little bit of research.
People are careful when they buy a refrigerator, careful when they take a vacation. And they’ll put five, ten thousand dollars some stock they hear on the bus or at a party, that’s dangerous.
So when you say buy what you know you also thought that the regular investor might be able to get an inside advantage by sticking to an industry he’s familiar with or seeing something that she realizes as a great product.
PETER LYNCH 00:55
Imagine if you were in a mall the last 50 years, you would have seen Gap when it was hot, you were seeing Limited when it was hot. You would have seen when it was not hot.
You would have seen when certain people weren’t excited about Gap anymore or then you do some research say well gee, there’s a lot of Limited stores, but they are only 20 you know and they can go to 400.
So, you see a company, I did really well with Dunkin Donuts a local company. I did well with Stop and Shop. But people could see that there’s a reason people are showing up or gets to the sunglass hut and no one’s there anymore.
So I mean that’s research, that’s fundamentals – you don’t leave the mall though and by that day, you have to do some more work.
That's the important point.
PETER LYNCH 01:31