Serious Money: Peter Lynch, a simple view

Posted Oct 24th 2008 3:47PM by Sheldon Liber
Filed under: Rants and Raves, Berkshire Hathaway (BRK.A), Market Matters, Anadarko Petroleum (APC), Serious Money, Anglo American (AAUKY), Aluminum Corp of China ADS (ACH), Recession, Comic Relief

During these times of crushing financial news, collapsing stock markets combined with tremendous volatility, government ineptitude (what else is new), doubt, pessimism, and yes -- fear --- we all need to hear the reassuring words of one of our most successful investment sages.

'My pal Warren' has been filling the media with market supporting bits of wisdom and backing it up by making strategic investments through Berkshire Hathaway (NYSE: BRK.A) and more investments utilizing his personal fortune.

Yesterday I received the following in an email quoting Peter Lynch, who managed to gain an average of 29.7% per year for 13 straight years while he was running Fidelity Magellan fund. Once someone asked him how he knows what stage the market is at, he replied:

"If I go to a party, and introduce myself as a mutual fund manager to strangers, and they walk away from me and talk to other people instead, I know the market is near the bottom. If they sit down and ask me what stocks they should buy, the market is at normal levels. If they sit down and TELL ME what stocks to buy, the market is near the top."

Clearly this is a case of the former, not the latter being the case. However this reminded me of the old Wall Street stock market titan that returns to his investment company after lunch and tells his staff to clear the books and sell everything. When his senior manager asks him why, he replies that he was getting his hair cut and his barber started giving him stocks tips.

I have been buying lately. (see: Chasing Value: Intuitive Surgical Earnings -- what now?) If I said I knew anything for sure I would be lying, but my general sense of things is that there are stocks that have been "thrown out with the bath water". Three others that are old favorites I have yet to write up recently but hope to soon are Aluminum Corp of China ADS (NYSE: ACH) Anadarko Petroleum (NYSE: APC) Anglo American ADR (NASDAQ: AAUK) -- all with downtrodden commodities falling prey to the bearest of markets -- stay tuned.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of BRK.B., ACH, APC, & AAUK.

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