The Magellan Fund has never been as strong and consistent a performer after Peter Lynch left the helm. There are many postulates as to why this is the case. I am going to introduce a new one. Few believe Berkshire will be the same after Buffett. In fact those trying to imitate Buffett’s style now have paled in comparison. I believe that just like the two investors shared some things in common, one thing they shared that the market has failed to appreciate is that both investors constantly changed, they evolved and their styles of investing encompassed many and broad asset classes. Buffett has bought everything from blue chip consumer stocks to junk bonds to even writing massive amounts of index puts. Peter Lynch bought it all: slow growers, fast growers, stalwarts, cyclical, asset plays and turnarounds. Even though he owned hundreds of stocks in the Magellan fund, he maintained a plan. Lynch synthesized his years of experience with a set of characteristics of his favorite stock in a chapter called The Perfect Stock, What a Deal!
His checklist sounds as good to me today as when I read it twenty years ago.
- It Sounds Dull- or Even Better, Ridiculous
- It Does Something Dull
- It Does Something Disagreeable
- It’s a Spinoff
- The Institutions Don’t Own it, and the Analysts Don’t Follow it.
- The Rumors Abound: It’s involved with Toxic waste and the Mafia
- There’s Something Depressing about It
- Its Got a Niche
- People Have to Keep Buying It
- It’s a Use of Technology
- The Insiders are Buyers
- The Company is Buying Back Shares
It’s really incredible the run Peter Lynch had. His giant fund was more profitable than even Buffet for a number of years.
Peter Lynch left Magellan in 1990 and Fidelity has been looking for his replacement ever since. That was almost 22 years ago. Buffet is still around. You forgot Bill Miller who beat the S&P 500 for 15 years in a row but for the last 2 years has been in the bottom percentile vs his peers. Knowing about Lynch, Buffet & Miller suggest that there is a probablilty that someone will beat the index for an extended period. How does one determine who will be that winner for the next 10 years? Shouldn’t be too difficult to determine. After all, how many ffund managers are there?