Victory over Wall Street

--- Read Peter Lynch's victory over Wall Street

According to statistics, the average time for a fund manager to manage in the United States is five years, while the average "life" of fund managers in China is only 18 months, and some may have changed their names, this article describes the current situation of fund managers in China by describing "fund generation talented people, each leading the show for hundreds of days. In contrast, Peter Lynch of "Early Life China Fa" has been managing the United States's largest mutual fund, magelun, for 13 years, and is the "Life Star" of fund managers. What's even worse is that the annual average compound interest rate of the Fund, led by Peter Lynch, called the "First Financial Manager" by times weekly, has reached 29%. What is the secret of his "Longevity" and the way to win? Let's review his fund journey-victory over Wall Street.

Experience

Victory over Wall Street is an experience of Peter Lynch, without empty preaching and profound theories. As a fund manager, he did not talk about the depth and mysteries of investment. Instead, he did not advise everyone to buy funds. Instead, he said, "Everyone should buy stocks ", it also lists how the Middle School Students' portfolio can surpass 99% of the Fund's performance and create the "St. Angelis Miracle", and how the investment performance of 10 thousand private investment clubs can defeat 3/4 of the Common Fund on Wall Street.

Lynch's fund journey, from 1977 to 1990, can be divided into three stages: early, middle and late.

In the early four years when magelun was converted into a closed fund, there were no new customers and high-proportion redemption, forcing Lynch to keep looking for new shares for old shares and maintain a high turnover rate, he is therefore familiar with a large number of companies and industries and is ready to manage tens of billions of funds in the future. His most important achievement is to understand the value of his own research. The main lesson is: "giving up stocks early is in line with the motto", which makes him deeply aware of the importance of focusing on more and more attractive companies. For domestic fund managers who are keen on "band operations" and attractive companies, is it a wake-up agent!

In the middle of the term, as the Fund was reopened, Lynch became a patient investor, and the annual turnover rate of the Fund dropped by 2/3. Here, we need to put forward two practices that are useful for domestic funds: first, the unique research mechanism of loyal companies, which should be used by fund managers to select the stocks recommended by analysts, the traditional practice of handing over the research work to analysts, so that all fund managers can take responsibility for it, study it independently, and take responsibility for its results. The second is the freedom that mageline gives Lynch to make decisions on buying and selling. No one is always staring at Lynch's every move, and there is no weekly harassment. He only needs to face an annual score assessment, and the rest of the time is used for independent decision-making.

In the late period, magelun's scale soared to tens of billions. At this time, Lynch suffered a 1987 share crash. For the Fund, the main lesson is the risk of warehouse filling: in the case of a stock disaster, the Fund should be able to cope with the tide of panic redemption, but it was forced to sell it when it was supposed to be bought. Lynch summed up the basic principle of keeping 10% in cash forever.

Some funds in China once made a lot of money in cyclical stocks such as automobiles, and then put on a big heel. If they read the victory over Wall Street, they may pay less tuition fees. "The feature of a round-robin stock is that it takes too long in this game to eat up all your profits," Lynch said ." "When the price-to-earnings ratio is very low, it is an effective way to reduce your money by half in the short term because the buying income has increased for several years ." "The essence of speculative round-robin stocks is the expected game, but it makes it more difficult to make money on these stocks. The biggest danger lies in buying too early and then being too lazy to sell it ."

How to win

Someone calls lynch a "man who touches Wall Street". He's way of defeating Wall Street. I think of it as "eight words ":

1. diligence. Lynch's stock selection method is "art, science, and errands". He has been working for more than 13 hours a day, traveling more than 0.1 million kilometers a year, and even arranged to negotiate with the company for lunch. In an interview with television, he said his secret to success is "access more than 200 companies and read 700 annual reports each year ".

2. Common sense. Lynch does not believe in technical analysis and stock market prediction, but only in common sense. Lynch Principle 1: never invest in anything you cannot draw; Lynch Principle 8: If you fall in love with this store, most of them fall in love with its stock. Lynch's favorite source of investment inspiration is Burlington. He led his three daughters to buy Christmas gifts and found the story of investment opportunities in "beauty shops", a vivid portrayal of Lynch's stock selection using common sense.

3. Flexible. Lynch's style is no style, and his stock selection is flexible and changeable. He said: "I have never had a comprehensive strategy. It is completely empirical and sniffed like a trained police dog ", you can always find the undervalued stock. He selected five types of stocks in magelun: "Medium-and Small-scale growth companies, companies with improved prospects, and companies with undervalued round-robin companies, companies with high incomes and dividend growth and companies with real assets being underestimated by the market." In addition, foreign stocks also account for a considerable proportion in the Fund.

4. belief. Lynch said in the book: "No matter what method you use to select stocks or stock investment funds, the final success depends on one ability, that is, stick to the ability to succeed in investment by ignoring the pressure of the environment; it is not the mind but the endurance that decides the fate of the stock selector." He also said: "stick to the belief and stock selection should not be compared, but the success of the latter depends on the former ." The stock market crisis in 1987 led to a sharp drop in the Fund's market value, but Lynch relied on his firm belief.

Different from Buffett's

Lynch has many similarities with Buffett. For example, they are fans of Graham. Their methods are an important branch of value investment. They all focus on company analysis, discard technical analysis, and ignore macro analysis; they all pay attention to common sense, only invest in companies they are familiar with, and focus on the research of listed companies. They all prefer companies that are not highly competitive and continue to grow, avoiding hot industries. They all emphasize the principle of margin of safety, it requires that the purchase price be underestimated or reasonable. Both emphasize long-term investment, and patience is more important than mind. They all criticize financial derivatives.

However, their differences are also very prominent:

1. Lynch also focuses on company analysis, but because of the management of the mutual fund, the Role Positioning is not as thorough as Buffett, and the "stock" color is looming; buffett invests completely from the perspective of the enterprise owner (except for short-term arbitrage ).

2. Lynch is an outstanding representative of the fund's diversified investment. His scattered investment is related to the rules of the fund and his extraordinary diligence. Buffett is an outstanding representative of concentrated investment, research and investment companies are concentrated.

3. Lynch's stock selection is flexible, and various types of stocks can be considered. Buffett's stock selection is concentrated on outstanding enterprises with sustained competitive advantages, that is, excellent companies with the permission and moat.

4. Lynch prefers to make small decisions frequently. He thinks that making a small decision is irrelevant even if he makes a mistake. Buffett prefers to make only a few major decisions a year and thinks that he can make fewer decisions and make fewer mistakes.

5. Lynch also advocates long-term investment, but he is used to buying a batch of companies at a time, and then quickly removes companies with poor performance. The annual turnover rate exceeds 100%. Lynch's regret list, A long string of good companies sell too early; Buffett's shareholding remains stable for a long time, and a few core companies are even listed as permanent shareholders.

6. Lynch is a representative of modern investment. He is enterprising, complex, flexible, scattered, and changing, pursuing rapid value-added capital, and the original intention and essence of investment are alienated. Buffett is a representative of traditional investment, robust, simple, simple, centralized, and persistent. The pursuit of perfect integration of investment and lifestyle is in line with the original intention and essence of investment.

7. Lynch is the "Four Kings", Zhang Xueyou; Buffett is the "Three highs" and Pavarotti.

In 1990, Lynch retired immediately and announced his retirement. However, his investment philosophy has been widely spread around the world and has a profound impact on fund managers and investors. It is worth noting that after Lynch's retirement, his investment methods are increasingly moving closer to Buffett. While enjoying family ties, he also enjoys the joy of independent investment. Perhaps, only investors with internal impulse and no external pressure can rest and enjoy themselves overnight, reaching the highest level of investment. (Chen Li)