Discover more from Kingswell
Peter Lynch: The Wisdom of Walking Away
“I remember standing in the rain [at my daughter’s soccer game], cheering her on, and thinking, ‘I want to see more of these.’”
Happy Tuesday and welcome to our new subscribers!
Special thanks, too, to those who recently became paid supporters! ❤️
Peter Lynch is an investing legend for two big reasons.
(1) At the tender age of 33, Lynch took the helm of Fidelity’s Magellan Fund — with just $20 million of assets under management — and transformed the mutual fund from a small afterthought into one of the most successful wealth-creating vehicles in the history of the money game.
He earned a mind-boggling 29.2% annual return between 1977 and 1990, ballooning Magellan’s value to $14 billion by the time of his retirement. And Lynch did it by combining dogged (some might call it workaholic) research with a common sense appreciation for opportunities right under his nose.
Lynch unearthed profitable investment ideas by simply paying attention to which brands and stores his family gravitated to at the mall — or which restaurants they frequented most often.
In this way, he cashed in on the rise of Dunkin’ Donuts (Lynch loved their coffee), Hanes (his wife alerted him to the L’eggs craze), La Quinta Motor Inns, Stop & Shop, and many more. Lynch fully leveraged his consumer’s edge to make gobs and gobs of money for his clients.
(Now, as always, a word of warning: Lynch never said to run out and blindly buy stock in your favorite companies. But, rather, to use your own preferences and observations as a jumping-off point for further research. No shortcuts here.)
Another secret to Lynch’s success: paying close attention to insider buying. “In the early- to mid-1980s, when I worked for Peter Lynch, [insider buying] was the #1 factor that he deferred to when looking for the right time to buy a stock,” remembers Jerry Sullivan of Putnam Investments.
All in all, Lynch well deserves his spot on the investing version of Mount Rushmore.
Kingswell is a reader-supported newsletter. To better support my work, please consider upgrading to a paid subscription. 🙏❤️
(2) But it’s for an entirely different reason that Peter Lynch remains an exemplar of the money game.
Unlike so many others, he knew when it was time to walk away — and then did so in 1990, at the height of his fame, with no muss, fuss, or lingering looks back.
Those thirteen-plus years running the Magellan Fund had not been easy on either Lynch or his family. “I have a very small transmission,” he once admitted. “My gear box has two speeds — off and overdrive.”
And, looking at Lynch’s prodigious workload, “overdrive” might be an understatement. He visited hundreds of companies each year, conducting on-the-spot research of management and operating performance, all across the country. When not traveling, he was holed up in his office poring over annual reports and other filings — leaving no stone unturned in his quest to grow Magellan’s money.
80+ hour work weeks don’t leave much time for anything else and, eventually, something had to give. “You know you’re in trouble when you need a Cray computer (a super-computer of that era) to arrange your free time,” he joked.
And, to Lynch’s eternal credit, he ultimately chose his family over the allure of more and more money. “I remember standing in the rain [at my daughter’s soccer game],” he said, “and thinking, ‘I want to see more of these.’”
So Lynch shifted his gear box to “off” and left Magellan behind. He traveled the world with his wife, devoted more time to his growing daughters, and used his remaining energy to mentor new Fidelity analysts and raise money for charitable causes. In particular, Lynch worked closely with the Catholic Schools Foundation to provide faith-based education to inner city youth.
Even though he kept an office at Fidelity headquarters in Boston, there would be no instantly-regrettable “Michael Jordan on the Wizards” comeback attempts. Lynch walked off into the sunset and never marred his unbeatable record with a second (or third) bite at the apple.
If he had any regrets, he didn’t show it. “For me, it was all like hot fudge sundaes,” he said. “I liked my job, I loved my family, and I liked working with outside charities. It became a matter of, ‘How much can you handle without getting a stomachache?’”
And Lynch seems even less bothered by the prospect of someone else topping his Magellan record. “I don’t keep score,” he said in 2021. “I’ve got ten grandchildren … That’s what I keep score on.”
Interestingly, Lynch may have retired even earlier if not for the naysayers in the mid-1980s who claimed that Magellan had grown too big and could not replicate its past success. “The critics probably kept me on the job an extra four to five years,” he said. “They got my Irish up.”
(In typical Lynch fashion, he proved the doubters wrong with a 34.5% gain in 1989, his last full year before retirement. The man knew how to go out on top.)
When Lynch did finally head for the exit in 1990, his all-too-rare decision attracted a lot of attention from both the financial press and the wider world. Over 1,000 letters of support poured in from admirers of his choice to prioritize family time over his bank account.
“I loved what I was doing,” Lynch said, “but I came to a conclusion … What the hell are we doing this for? I don’t know anyone who wished on his deathbed that he had spent more time at the office.”