Collection: Peter Lynch - #27 'How to Research Stocks'



[Transcript]

MONROE KARMIN 00:00

How useful is the financial reporting in the general daily press to you? And how useful should it be to investors in general?


PETER LYNCH 00:12

It has improved dramatically not just in the press but also company reporting.


Ten years ago, companies didn’t have interim balance sheets. It's hard to imagine they only gave their balance sheet to you once a year. Now they share it quarterly, what happens to inventories, what happens to receivables.


And now in the major newspapers, they even show types of funds. There are now – I think there's 2,500 companies in the New York Stock Exchange. There are over 5,000 different mutual funds, twice as many mutual funds as stocks. At least in the paper, they explain what kind of fund, this fund is. So I think reporting has improved, they report earnings.


But again, I think if you own auto stocks, you shouldn’t be reading the financial part of the newspaper. [Inaudible] that the local newspapers [Inaudible], they have a whole four pages on automobiles. They talk about new models and they said this one stinks, this one is outstanding, they really – If you own auto stocks, that's the part of newspaper you should deal.


You shouldn’t be calling your broker four times a day to get stock quotes. It doesn’t work. Getting up in the morning to see how your stock did yesterday is not useful. All this stuff is just a waste of time. If you’re adding up how much your stocks are worth, it’s an absolute waste of time. You should be looking at the company when you get the quarterly reports.


If you were at the mall, imagine if you were in the retail – If you were in the retailing industry or if you were in the restaurant industry, you would have seen companies like Taco Bell, you would seen McDonald’s, you would seen Toys “R” Us. You would have seen all these companies do terrifically well.


You would have seen Bombay, you would seen Tandy or Radio Shack. You would have seen Radio Shack roll across the country, pretty soon there were 25 Radio Shacks in every major city. You said there’s not much room for them to grow, but they had a 20-year great run.


That’s what you’re dealing with. You’re not dealing with the minutiae of today. You’re dealing with what this company is doing two years, three years, four years, five years from now.


If you’re dealing with a cyclical and business is turning around, you wait for signs that business is slowing down. When you see it, you move on to something else.


(Source: https://www.c-span.org/video/?60722-1/us-economic-investments)

 

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