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rePOrT PuBliShed decemBer 2005

Masterclass:Peter Lynch

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DISCLAIMER This publication is general in nature and does not take your personal situation into consideration. You should seek financial advice specific to your situation before making any financial decision.

Past performance is not a reliable indicator of future performance. We encourage you to think of investing as a long-term pursuit.

COPYRIGHT© The Intelligent Investor Publishing Pty Ltd 2011. Intelligent Investor and associated websites and publications are published by The Intelligent Investor Publishing Pty Ltd ABN 12 108 915 233 (AFSL No. 282288). PO Box 1158 Bondi Junction NSW 1355. Ph: (02) 8305 6000 Fax: (02) 9387 8674.DATE OF PUBLICATION 20 December 2005, layout updated Sep 2014

CONTENTS

The investment philosophy of Peter lynch 3The bloodhound who checks the horses’ teeth 4lynch’s core business: discover and confirm ‘stories’ 5categorising stories 7Ten numbers that lynch analyses 9What lynch seeks 10What lynch avoids 11Portfolio management and the ‘weekend worriers’ 12The Peter lynch way: a summary 13Additional reading 14

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The investment philosophy of Peter Lynchhad you invested $1,000 in the magellan Fund on 31 may 1977, the day Peter lynch became its manager it would have grown to over $25,000 by the time he left, 13 years later. The next 14 pages explain how he did it.

Peter Lynch was born in Boston, Massachusetts, in 1944. During his final year at Boston College, he applied for—and, to his amazement, was offered—a summer internship at Fidelity, a local funds manager. (‘I was a summer student at Fidelity in 1966. There were 75 applicants for three jobs … but I caddied for the president for eight years. So that was the only job interview I ever took. It was sort of a rigged deal, I think.’)

He then began postgraduate studies at the Wharton School of Business at the University of Pennsylvania, but after his second year his studies were interrupted by two years of military service. In 1969, with a Wharton MBA in hand, he returned to Fidelity as a full-time research analyst. He became Fidelity’s head of research in 1974, and was selected to manage its Magellan Fund three years later.

OUTSTANDING ANNUAL RETURNS

On his first day as its manager, Magellan had assets of $18 million and a tax-loss credit of $50 million (a consequence of the 1973-74 bear market). Lynch also had to face ‘a terrible stock market, a small and rapidly-declining number of skittish customers and no way of attracting new ones because Fidelity had closed Magellan to new buyers.’ In very sharp contrast, when he retired in 1990 the fund had assets of $14 billion and was by far the largest stock fund in the world. Formerly a vice chairman of Fidelity Management & Research Co. and member of Fidelity’s Board of Trustees, Lynch has kept a low profile and pursued philanthropic endeavours since retiring in 2007.

Lynch is one of the world’s most successful and celebrated fund managers. As well as coining the term ‘ten-bagger’, which refers to a stock whose price increases more than ten-fold, he also invested in many (though, owning more than 1,000 stocks at a time probably helped). Among his ten-baggers were such diamonds in the rough as Dunkin’ Donuts, La Quinta Motor Inns, Pier 1 Imports, The Limited and Taco Bell.

During the early 1980s recession, when others either denigrated them or were too timid to buy them, he also saw considerable value in Chrysler Corp. and Ford Motor Co. He bought large numbers of their shares and, by the middle of the decade when America had emerged from recession, profited very handsomely. He admits that he took plenty of risks and committed a variety of mistakes; yet, during his tenure as Magellan’s manager, the fund never suffered a losing year.

Whilst Lynch was at its helm, Magellan returned 2,510%—five times the roughly 500% return of the Standard & Poor’s 500 index and an average annual return of 29% a year. If an investor placed $1,000 in Magellan on Lynch’s first day as its manager (31 May 1977), by the day he retired (31 May 1990) it would have grown to over $25,000. Not surprisingly, during most of Lynch’s time Magellan was among the highest-ranking of the ever-growing number of stock funds.

BEATING THE PROFESSIONALS

Peter Lynch is renowned not just for his stellar results and distinctive approach to investment: he is also famous for his frankness and (in the positive sense of the word) populism. He has stated forcefully and repeatedly that individual investors, if they recognise and choose to wield it, have a powerful advantage over Wall Street and its institutional money managers. Hence ‘rule number one, in my book, is: stop listening to professionals! Twenty years in this business convinces me that any normal person using the customary three per cent of the brain can pick stocks just as well, if not better, than the average Wall Street expert.’ Individual investors, Lynch is convinced, can acquire relevant information much more quickly than professionals. They can also free themselves from distractions and useless and irrelevant information much more easily than can Wall Streeters; and they are far less encumbered by bureaucratic rules and concerns about short-term ‘performance.’

lynch is arguably the world’s most successful and celebrated fund manager.

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My distrust of theorisers and prognosticators continues to the present day.’ Further, ‘as I look back on it now, it’s obvious that studying history and philosophy was much better preparation for the stock market than, say, studying statistics. Investing in stocks is an art, not a science, and people who’ve been trained to rigidly quantify everything have a big disadvantage … All the maths you need in the stock market … you get in the fourth grade.’

He also has no time for economic forecasters, chartists and the like. In his words, they ‘can’t predict markets with any useful consistency, any more than gizzard squeezers could tell the Roman Emperors when the Huns would attack’. At the beginning of each year he devotes no more than a few minutes to economic analysis and another handful to market analysis. He told Canada’s The Financial Post ‘if you spend 13 minutes a year on economics, you have wasted 10 minutes. What is important to know about the stock market is it goes up and it goes down.’ But surely somebody who is so successful must know better than most what lies ahead? Lynch has stated repeatedly that he does not—and neither do any of the legion of self-appointed ‘experts.’ Hence one of his rules of investing is that it is futile to make predictions about the economy, interest rates and markets.

A final point puts into context the foundations of Lynch’s approach. ‘Logic is the subject that’s helped me the most in picking stocks, if only because it taught me to identify the peculiar illogic of Wall Street. Actually, Wall Street thinks just as the Greeks did. The early Greeks used to sit around for days and debate how many teeth a horse has. They thought they could figure it out by just sitting there, instead of checking the horse. A lot of investors sit around and debate whether a stock is going up, as if the financial muse will give them an answer, instead of checking the company.’

Lynch regards the obscurity in which he operated during his first several years (Magellan was not opened to new investors until 1981) as a blessing rather than a curse. ‘It enabled me to learn the trade and make mistakes without being in the spotlight. Fund managers and athletes have this in common: they may do better in the long run if they’re brought along slowly.’ During his first months at Magellan’s helm, he dumped his predecessor’s selections, replaced them with his own and was constantly selling shares in order to meet redemptions.

In an interview with the Public Broadcasting Service in the U.S., Lynch recounted the origins of his interest in the stock market. ‘I grew up in the 1950s. I started caddying when I was 11. So that would have been 1955 and … the ‘50s was a great decade for the stock market. I caddied at a very nice club out in West Newton [Massachusetts], had a lot of people, corporate executives, and some of these were buying stocks and I remember them talking about stocks and they mentioned the names and I’d look in the paper and look at it a month later, a year later, and I noticed they were going up. And I said, ‘gee, this makes a lot of sense.’ And so I watched it. I didn’t have any money to invest, but I remember the stock market being very strong in the 1950s and some people, not everybody, but a lot of people on the golf course talking about it.’

It seems much of Lynch’s early success could be traced back to the golf course. He purchased his first stock after he ‘got a caddie scholarship to college. It was actually a partial scholarship, a … financial aid scholarship, but it [cost] a thousand dollars a year to go to Boston College and they gave me a $300 scholarship and I got to earn over $700 a year caddying. So I was able to build up a little bit of money and I worked also during the winters. So while I was in college I did a little study on the [air] freight industry. And I looked at this company called Flying Tiger. And I actually put a thousand dollars in it and I remember I thought this air cargo was going to be a thing of the future. And I bought it and got really lucky because it went up for another reason. The Vietnam War started and they basically hauled a lot of troops to Vietnam in airplanes and the stock went up, I think, nine- or ten-fold and I had my first ten-bagger. I started selling it, I think, at 20 and 30 and 40, sold all the way up to 80 and helped pay for graduate school. So I almost had a Flying Tiger graduate school fellowship.’

PRACTICE BEATS THEORY

Lynch’s approach to investment has always been relentlessly practical. During his postgraduate studies ‘it was obvious that Wharton professors who believed in quantitative analysis and ‘random walk’ weren’t doing nearly as well as my new colleagues at Fidelity, so between theory and practice, I cast my lot with the practitioners. It’s very hard to support the academic theory … when you know somebody who just made a twenty-fold profit in Kentucky Fried Chicken, and furthermore, who explained in advance why the stock was going to rise.

The bloodhound who checks the horses’ teethPredictions about economies, interest rates and stock markets are futile, which is why lynch travelled 300,000km a year simply visiting companies.

Actually, Wall Street thinks just as the Greeks did. the early Greeks used to sit around for days and debate how many teeth a horse has. they thought they could figure it out by just sitting there, instead of checking the horse.

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another ‘Peter’s Principle’ states that ‘when yields on long-term government bonds exceed the dividend yield of the S&P 500 by six percent or more, sell your stocks and buy bonds.’

As an investor, Lynch relies heavily upon company ‘stories’ that are likely to generate higher earnings; greater profits, in turn, sooner or later produce higher stock prices. Each stock in Magellan’s portfolio (during the 1980s his fund contained up to 1,400 stocks, 200 or so of which comprised more than half of its assets) was purchased on the basis of a well-grounded expectation or set of expectations concerning that firm’s prospects.

These expectations were derived from the company’s story—what the company was presently doing or going to do, or what was going to happen, in order to increase its profits and thus the price of its shares. Lynch notes that a company can adopt one or more of only five ways to increase its earnings. It can reduce its costs; it can raise its prices; it can expand into new markets; it can sell more in existing markets; and it can revitalise, close or sell a money-losing product line or operation. The company’s plan to increase its earnings and the credibility of that plan comprise its story.

The more an investor knows about a given company, the more accurately its story can be assessed; and the greater the investor’s familiarity with a variety of companies and industries, the better the ability to locate promising stories.

It is a credit to Lynch’s methods that they are so simple that a non-professional can use them with little or no alteration. Appearing at the end of Lynch’s Beating The Street, many of his principles are also quite humorous; you’ll find them on page 6.

Lynch did not use computer programs to pick stocks or to ‘optimise’ the portfolio; indeed, he did not use computers, mathematical models or academic the`ry for any purpose. Each company selected by Magellan was considered on its own merits, and Lynch and his colleagues tended to avoid anything that the ‘consensus opinion’ of Wall Street analysts deemed to be a good thing.

Lynch invested Magellan’s assets almost exclusively in stocks—Peter’s Principle #2 is ‘gentlemen who prefer bonds don’t know what they’re missing’. Apart from the cash necessary to meet redemptions he also remained ‘fully invested’ at all times—that is to say, virtually 100% of Magellan’s assets were always allocated to stocks. Lynch noted that during only one of the twentieth century’s ten decades (the 1930s) did stocks’ returns as measured by the S&P 500 fail to surpass bonds’ returns. Moreover, during the 1940s the return from stocks was more than three times the return from corporate bonds—more than enough, in other words, to redeem stocks’ losses of the 1930s.

According to Lynch, then, since no one can predict when bonds might once again have the upper hand, ‘it’s virtually a given that long-term investors should be in stocks.’ Yet Lynch was not implacably opposed to bonds. Yet

He traded at an astonishingly frenzied pace: in his first year the fund’s turnover was 343% (that is to say, during those twelve months each dollar of Magellan’s assets was bought and sold an average of 3.43 times) and remained at approximately 300% for the next three years. During these years of hyperactive trading, Lynch’s method developed very rapidly. ‘The fact is that I never had an overall strategy. My stock picking was entirely empirical, and I went sniffing from one case to another like a bloodhound that’s trained to follow a scent.’

Lynch’s approach can be adapted by many different types of investors—from those who seek Philip Fisher-style growth to those who prefer Benjamin Graham-style value. But brace yourself: to replicate it fully demands phenomenal amounts of energy and stamina. His typical working day began at 6am and seldom ended before 8pm. Like Avis, the car hire firm, he also tried harder:

he routinely flew 300,000 kilometres a year, visited or spoke to representatives of about 40 to 50 companies per month, read hundreds of annual reports every year, employed three dedicated traders (one bought, one sold and the third understudied the others) and spoke to brokers 2 to 3 dozen times a day.

Given this punishing regimen, it is hardly surprising that Lynch retired, utterly exhausted from a dozen years of frantic activity, at the age of 46. (It suddenly occurred to him that his father had died at that age and that nobody is either immortal or truly indispensable. He quickly negotiated his exit from Magellan and has not regretted it. Hence one of his ‘Peter’s Principles’: when the things you have to do for business drastically outnumber the things you want to do for pleasure, ‘you know there is something wrong with your life.’)

Lynch’s core business: discover and confirm ‘stories’Advanced methods of stock selection are not required to follow lynch’s principles. Quite the contrary, in fact.

everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.

peter’s principle #2: Gentlemen who prefer bonds don’t know what they are missing.

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their approach and its results vindicated his conviction that the investor—whether professional or amateur, adult or adolescent—should allocate capital only in what he understands. The youngsters’ portfolio contained Walt Disney, a manufacturer of baseball swap cards, PepsiCo and clothing manufacturers and outlets such as Nike, The Limited and L.A. Gear.

Overrepresented in the portfolio were solid companies with good profits; and virtually absent were hot stocks in glamorous sectors such as biotechnology. Over a two-year period, the students’ portfolio returned 70%—versus a gain of 26% in the S&P 500. Lynch summarises: ‘St Agnes outperformed 99% of all equity mutual funds, whose managers are paid considerable sums for their expert selections, whereas the youngsters are happy to settle for a free breakfast with the teacher and a movie.’

FINDING ‘STORIES’

As long as it is simple and has favourable prospects, Lynch’s story approach does not restrict one’s investments to any particular type of business. In practice, however, he has been partial to what by American standards are relatively small companies (less than $1 billion of market capitalisation), whose sales and earnings have been increasing and can be expected to grow quickly (20–30% per annum), and whose shares are available at a reasonable price relative to their earnings. In the pursuit of stories, Lynch also pursued what he has dubbed the ‘million dollar question’ strategy.

SIMPLE, FAMILIAR STOCkS

Lynch therefore favoured companies with which he was familiar and whose products or services were relatively simple. Most notably, he favoured companies whose products or services members of his family had used and enjoyed, and suggested that individuals do likewise. He therefore preferred to invest in ‘pantyhose rather than communications satellites’ and ‘motel chains rather than fibre optics’.

Unsurprisingly, another ‘Peter’s Principle’ is ‘never invest in any idea you can’t illustrate with a crayon.’ This usually, but does not necessarily, mean that one should focus exclusively upon easy-to-understand businesses. It also means that one should be able to paint a picture of both the importance of the business and why it will succeed that is readily comprehensible to an intelligent layperson. If the investor does not understand why the company is likely to thrive, then he is unlikely to recognise signs that it may begin to fail.

To illustrate—literally—this point, Lynch recounts ‘the Miracle of St Agnes.’ In 1990, a class of year-seven students who attended St Agnes School in Arlington, Massachusetts (a suburb of Boston), inspired by their teacher, undertook a social studies project about business and stock analysis. The kids conducted their own research and decided which stocks to select for their mock portfolio. They sent their picks to Lynch (who later invited them to a pizza dinner in the Fidelity executive dining room) and illustrated their portfolio with small drawings representing each stock. Lynch rejoiced because

LYNCH’S INvESTING PRINCIPLES

1. When the operas outnumber the football games three to zero, you know there is something wrong with your life.

2. Gentlemen who prefer bonds don’t know what they are missing.

3. Never invest in any idea you can’t illustrate with a crayon.

4. You can’t see the future through a rearview mirror.

5. There’s no point paying Yo-Yo ma to play a radio.

6. As long as you’re picking a fund, you might as wel pick a good one.

7. The extravagance of any corporate office is directly proportional to management’s reluctance to reward shareholders.

8. When yields on long-term government bonds exceed the dividend yield of the S&P 500 by 6 percent or more, sell your stocks and buy bonds.

9. Not all common stocks are equally common.

10. Never look back when you’re driving on the autobahn.

11. The best stock to buy may be the one you already own.

12. A sure cure for taking a stock for granted is a big drop in the price.

13. Never bet on a comeback while they’re playing “Taps”.

14. if you like the store, chances are you’ll love the stock.

15. When insiders are buying, it’s a good sign—unless they happen to be New england bankers.

16. in business, competition is never as healthy as total domination.

17. All else being equal, invest in the company with the fewest color photographs in the annual report.

18. When even the analysts are bored, it’s time to start buying.

19. unless you’re a short seller or a poet looking for a wealthy spouse, it never pays to be pessimistic.

20. corporations, like people, change their names for one of two reasons: either they’ve gotten married, or they’ve been involved in some fiasco that they hope the public will forget.

21. Whatever the Queen is selling, buy it.

I don’t know anyone who wished on his deathbed that he had spent more time in the office.

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Lynch’s bloodhound approach led him to the offices of many company executives (and as Magellan became the world’s largest fund, many executives beat a path to his door). During his thousands of interviews he would almost invariably ask ‘which company is your fiercest competitor?’ The answer to this question often uncovered an even better investment opportunity than the one he was researching. How to find stories? Not unlike Thomas Edison, the method was 1% inspiration and 99% perspiration. Lynch investigated many more companies than the average fund manager, did so personally and looked where others would not.

Lynch recounts from his first year on the job, ‘I think flexibility is one of the key things. I mean I would buy companies that had unions. I would buy companies that were in the steel industry. I’d buy textile companies. I always thought there was good opportunities everywhere and researched my stocks myself. I mean Taco Bell was one of the first stocks I bought. I mean [other] people wouldn’t look at a small restaurant company. So I think it was just looking at different companies and I always thought if you looked at ten companies, you’d find one that’s interesting, if you’d look at 20, you’d find two, or if you look at a hundred you’ll find ten. The person that turns over the most rocks wins the game. And that’s always been my philosophy.’

RESOLUTELY BOTTOM-UP

Lynch’s approach, then, is time-consuming, labour-intensive and resolutely bottom-up. Prospective stocks must be identified one-by-one and then thoroughly investigated. There is no formula, computer program or other short-cut that will produce a list of prospective good stories.

Clearly, however, there are many more interesting stories and prospective investments than even an army of analysts can possibly investigate. Lynch recognises this and suggests that individual investors turn it to their advantage. He suggests that they keep alert for opportunities based upon their own direct personal experiences. Most notably, within their own business, industry or trade, or as consumers of goods and services, there are numerous stories that become apparent much more quickly to real people than to market analysts. By Lynch’s way of thinking, a visit to a shopping mall, supermarket or car repairer is also—if an investor is alert to investment possibilities—a stock market research expedition.

Hence another Peter’s Principle: ‘if you like the store, chances are you’ll love the stock.’ One of Lynch’s favourite activities (which, given his punishing hours and consequent time away from the family, was also extremely efficient) was to take his wife and kids to a large shopping centre. There he could see with his own eyes—and well before they reported their results to the stock exchange—which businesses were doing well. Even if their shares are traded on the stock market, many retailers that commence as small franchises and subsequently grow rapidly take time to come to analysts’ attention.

As an exercise in experimental stock market research, Lynch often gave pocket money to his daughters and observed where they spent it. As often as not it was at a discount clothing store such as The Gap or The Limited that was packed with kids making big purchases. From Lynch’s point of view, what could be better than a profitable business that has just commenced its expansion all over the country but escaped others’ notice?

prospective stocks must be identified one-by-one and then thoroughly investigated. there is no formula, computer program or other short-cut that will produce a list of prospective good stories.

Categorising storiesGiven an interesting possibility, Lynch familiarises himself thoroughly with the company concerned. Only by studying and making sense of a company’s past and present can he form reasonable expectations about its prospects. Importantly, however, he recognises that investors (whether amateur or professional) cannot predict rates of growth of earnings with any useful degree of accuracy. Because he is sceptical of analysts’—and, for that matter, companies’—estimates of earnings, he focuses upon companies’ plans.

How, exactly, does X Ltd intend to increase its earnings? To what extent are its intentions being fulfilled? What stands in the way of the plan’s successful implementation?

Categorising a company, according to Lynch, helps to develop the story and thus derive reasonable expectations. He places each company into one of six categories, each of which is outlined over the page, illustrated with local examples of our own choosing.

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SLOW GROWERS

‘Slow Growers’ are long-established, and typically large, companies that can reasonably be expected to grow only slightly faster than the economy as a whole. For this reason, and although they often pay large and regularly increasing dividends, they seldom excite lynch. Secure and growing dividends are the main attraction of slow-growth companies. in order to buy their shares, he requires that their annual sales are more than $1 billion; that sales are growing as fast as or faster than inventories; that their yield-adjusted price-to-earnings and earnings-to-growth ratios are low (see page 9 for details); and that their debts are low and manageable.

in Australia, Spark Infrastructure is a good example. Spark’s electricity distribution network is regulated, ensuring a stable return for investors. At current prices, however, it’s suitable for growth and income investors as some capital gain is expected.

Foster’s Group is another on the slow grower list. its portfolio of beer brands produce impressive cash flow, but growth is harder to come by, especially with competition recently taking an increasing share in a market that isn’t growing rapidly.

STALWARTS

‘Stalwarts’ are also large companies, often amongst the largest on the market, but, unlike slow growers, are able to grow much faster than the economy as a whole. examples of ‘stalwarts’ in which magellan made major investments during lynch’s tenure include The coca-cola company, Procter & Gamble and Bristol-myers. These companies enjoyed annualized earnings growth of around 10 to 12%. if such companies can be purchased at a reasonable price, lynch says that the investor can expect good but not enormous returns—usually no more than 50% in two years and typically much less.

lynch also suggests that investors rotate among stalwarts, selling when moderate gains are reached and repeating the process with others whose prices have not yet appreciated. Stalwarts, lynch believes, also offer downside protection during recessions. investing in these types of stocks makes particular sense for those investors who are unwilling to pay high prices for risky high-growth companies but still want the chance to realise significant capital gains.

The big four banks (National Australia Bank, Commonwealth, ANZ Bank and Westpac) are perhaps the best local examples. All have managed to consistently increase earnings at an above- average rate, often in spite of management’s ability to waste money on expensive acquisitions.

MAp Group also fits the stalwart bill, with its stakes in airports including Sydney’s. With attractive economics and a wide competitive moat, map has ample opportunity to outpace economic growth. A 6.8% dividend is also available to investors at current prices that should tick up with earnings growth.

FAST GROWERS

‘Fast Growers’ are much smaller, newer and more aggressive firms whose revenues and earnings can be expected to grow by 20–25% a year over several years. They are not necessarily members of fast-growing industries; indeed, lynch prefers that they are not. Fast-growers are among lynch’s favourites, and he says that an investor’s biggest gains will typically come from this type of stock. Beware, however, for they can also carry considerable risk. To mitigate the risk, they should have little debt and a price-to-earnings ratio below the rate of growth of the company’s earnings.

Servcorp is one of the best local examples. The serviced office provider pioneered its innovative business model in 1980, and has since expanded across Asia, europe, the middle east and the united States. Servcorp holds huge capital gain potential, but there’s a chance its expansion will not succeed.

Four wheel drive accessories manufacturer and retailer ARB Corporation is another great example. its reputation for high-quality, durable products has allowed the company to export around the globe, growing its sales revenue by an average of 14% per annum over the past decade, though it’s likely to be lower in the future.

A type of ‘fast grower’ is one of the most important—but perhaps least appreciated—stories pursued by lynch. it might be called ‘the franchise expansion story.’ it is based upon an investment in a successful company that expands, often through franchise arrangements, from a local to a regional market to a national market, and perhaps from a national market into an international one. Geographic expansion is easiest when the demand for your good or service is homogenous, the method by which you produce or supply it does not change from one place to the next, it has no close substitutes and is not heavily regulated.

When lynch initially bought home depot, for example, it was a very successful regional company that planned to expand to other regions and eventually across the uSA. lynch knew that home depot offered a unique package of goods and services that had no close substitutes in their original market and for which there was no close substitute nationally. home depot, in other words, was an ideal franchise company in the many markets where it eventually expanded.

lynch’s discovery of this principle prompted him to find numerous ‘franchise companies’ before they expanded. Boston market, dairy Queen international, Noah’s Bagels, Starbucks coffee and Wendy’s are a few in a very long list of examples.

ASSET OPPORTUNITIES

‘Asset opportunities’ are companies that own assets whose value analysts and others have overlooked. lynch cites general areas (such as metals and oil, newspapers and TV stations and patented drugs) where asset plays can often be found. clearly, one must possess an intimate knowledge of a company and its industry in order to appreciate the real value of the assets hidden on its balance sheet. equally clearly, then, and as lynch emphasises, the ‘local’ edge—that is to say, your own knowledge and experience—can be used to great advantage when seeking these opportunities.

At The intelligent investor, we’re always on the lookout for asset plays. A fertile hunting ground is investment companies. Brickworks, for example, holds surplus land it once used as kilns or quarries. Property groups are similarly attractive targets, with Queensland developer Sunland Group and active manager Abacus Property Group at discounts to net tangible assets (NTA) of 49% and 27% respectively on 15 September 2010.

CYCLICALS

‘cyclicals’ are companies whose sales and profits tend to rise and fall in tandem with the economic cycle. Prominent examples include companies in the car, air transport, mining, steel and construction industries. lynch cautions that during the upward leg of the business cycle inexperienced investors can mistake these firms for stalwarts. But it is imperative that this confusion be avoided: unlike most stalwarts, the share prices of cyclicals can drop dramatically during hard times. hence timing is crucial when investing in these firms, and lynch says that investors must learn to detect the early signs that business is starting to turn down.

The airline industry is notoriously cyclical, which means that even Qantas, one of the better-managed airlines, rarely fails to escape the frequent outbreaks of price cutting and capacity expansion. The best known example however is the ‘Big Australian’, BHP Billiton, which is dependent upon world economic activity to support commodity prices. But cycles can also be industry-specific: manufacturer of construction materials and building products Boral, for example, is highly linked to the Australian and united States housing markets.

Macquarie Group is a newly-turned-cyclical, which—unable to rely upon its core business of managing listed investment funds—has fallen back to the transaction-dependent, economic sentiment-linked approach of its investment bank peers.

TURNAROUNDS

‘Turnarounds’ are companies that, either because their managers have committed major mistakes or because a recession has depressed their operations and prospects, are unpopular with most investors. lynch also calls these ‘no-growers’ and cites as examples chrysler (during its dalliance with bankruptcy and well before its merger with daimler-Benz), Penn central railway (after its entry into receivership) and General Public utilities (the owner of the Three mile island nuclear facility that was the site of an accident during the late 1970s and a lengthy shutdown well into the 1980s).

Why investigate companies like these? Because the stock of a successful turnaround, once its success is belatedly recognised by other market participants, can rise very quickly and substantially. Further, of all of these categories, turnarounds are the least related to the pace of economic activity or the level of the general market; through well-chosen and timed turnarounds, in other words, one can achieve excellent results in rotten markets.

Again, however, proceed with great caution: few investors truly possess the ability to consistently anticipate successful turnarounds, although every year throws up a number of potential opportunities.

Aristocrat Leisure is a classic example. Though gambling is an age-old human activity, poor management saw the video pokie supplier hit lows below $1.00 in 2003. it recovered but now faces new setbacks ranging from smoking bans in Australia and New Zealand to a loss of gambling spirit in las Vegas. Though it has fallen out of favour with many investors, it was one of The intelligent investor’s picks in Five stocks set to double.

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Thorough investigation and qualitative analysis, as we have seen, is central to Lynch’s approach to investing. In examining a company, he is seeking to understand the firm’s business and prospects, including any competitive advantages, and to evaluate any potential pitfalls that may prevent the favourable story from occurring. Further, and very importantly, an investor cannot profit if the story has a happy ending but the stock was purchased at an excessive price. For that reason, Lynch also strives to determine what price represents reasonable value. The key numbers Lynch examines include:

1. CONSISTENCY OF EARNINGS

The stability and consistency of a company’s historical record of earnings is critical. The longer the record the better, and for this reason Lynch avoids Initial Public Offerings (‘floats’). Because the price of a stock cannot deviate indefinitely from the underlying company’s profits, the pattern of earnings (increasing, stagnant or decreasing) will help to reveal—and in some instances to determine—the company’s overall stability and strength.

2. GROWTH OF EARNINGS

The growth rate of earnings should correspond to the firm’s story. The profits of fast growers, in other words, should grow much more quickly than those of stalwarts and slow growers. Lynch cautions that an extremely high level of earnings growth is not good news: among other things, it will attract attention from both investors (who will prematurely levitate the stock) and competitors (whose competition will provide a more difficult business environment).

3. THE PER (P/E OR PER)

A company’s earnings potential is a (and perhaps the) primary determinant of its value. Not infrequently, though, investors get ahead of themselves and overprice a stock, as they did with QBe insurance in 2008. Conversely, they may underestimate prospects and thereby undervalue a stock, as occurred with Flight centre in 2009. According to Lynch, a stock’s PER, which compares its current price to its most recently reported annualized earnings, helps investors to gauge others’ assessment of the company. Stocks whose prospects are good and quite certain usually sell at higher PERs than those with poor or uncertain outlooks.

4. THE PER RELATIvE TO ITS HISTORICAL AvERAGE

Studying a stock’s PER over a period of five to ten years (i.e. through good and not so good economic conditions) helps to reveal the level that is ‘normal’ for the company. A comparison of current and historical PERs, and the discovery that the former is significantly greater than the latter, helps the investor to avoid buying a stock whose price has vaulted ahead of its earnings; it may also provide a warning that it is time to take some profits.

5. THE PER RELATIvE TO THE INDUSTRY AvERAGE

A comparison of a company’s PER to the average PE of all or other major companies or the average company in that industry can, according to Lynch, help to determine if its stock is a bargain. At a minimum, it prompts the investor to ask why the company is priced differently from its competitors. If, for example, a company’s PE is significantly lower than the industry average, Lynch is prompted to ask whether it is a poor company. If so, why? And if it is not, why is it being neglected?

6. THE PER RELATIvE TO THE GROWTH OF THE COMPANY’S EARNINGS (PEG RATIO)

Companies with better prospects should sell at a higher PER; but the ratio between the two can reveal bargains or overvaluations. For example, if a company’s PER is 10 and its earnings during the past ten years have grown at 20% per year, then the ratio of these two figures is 10/20 = 0.50. According to Lynch, a PER that is half the rate of historical earnings growth is very attractive; conversely, a PER that is twice the rate of historical earnings growth (i.e. a relative ratio of 2.0 or more) is unattractive. For dividend-paying stocks, Lynch refines this measure by adding the dividend yield to the rate of earnings growth—in other words, the PEG ratio becomes the PER divided by the sum of the earnings growth rate and dividend yield. With this modified technique, PEG ratios above 1.0 are considered poor and ratios below 0.5 are considered attractive.

7. THE RATIO OF DEBT TO EQUITY

How much debt appears on the company’s balance sheet? A strong balance sheet, characterised by modest amounts of the ‘right’ kind of debt, provides room to manoeuvre if the company expands or experiences trouble. Lynch is especially wary of bank debt, which can usually be called in by the bank on demand.

8. NET CASH PER SHARE

This is calculated by adding the level of cash and cash equivalents, subtracting long-term debt, and dividing the result by the number of shares outstanding. High levels provide a support for the stock price and indicate financial strength.

9. THE DIvIDEND AND PAYOUT RATIO

Dividends are usually paid by larger and more venerable companies. Lynch, as we have seen, tends to prefer smaller growth companies. He nonetheless suggests that investors who prefer dividend-paying firms seek those which have demonstrated their ability to maintain their dividends even during recessions. A low payout ratio (that is to say, a low percentage of earnings paid to shareholders as a dividend) is a good sign; and a record of raising dividends stretching over 10, 20 and even 30 years is an outstanding sign.

Ten numbers that Lynch analyses

In examining a company, he is seeking to understand the firm’s business and prospects, including any competitive advantages, and to evaluate any potential pitfalls that may prevent the favourable story from occurring.

LYNCH’S INvESTING PRINCIPLES

1. earnings consistency

2. earnings growth

3. Per

4. historical Per

5. industry average Per

6. PeG ratio

7. debt-to-equity

8. Net cash per share

9. dividend and payout ratio

10. inventories

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eliminated? Also according to Lynch, when inventories grow faster than sales a red flag is waving. He adds that if a company is depressed and is a potential recovery, then the depletion of inventory is often the first tangible evidence of a turnaround.

10. INvENTORIES

Lynch pays close attention to inventories—and particularly to an accumulation of inventory. Most notably, for manufacturers or retailers a build up of inventory is a bad sign: have too much of the wrong things been purchased? In order to sell the inventory, must prices be slashed, margins crunched and hence profits reduced or

IT HAS LITTLE COMPETITION

Lynch likes good companies in bad industries. A good industry offers its members very high profit margins; and high margins attract the attention of others who want a piece of the action. As a result, competition within the industry often becomes so fierce that previously profitable firms lose money.

Lynch refers to Lawrence ‘Yogi’ Berra, the American baseballer and originator of numerous quotable quotes (no other sporting figure has as many entries in Bartlett’s Familiar Quotations), who once said about a famous Miami Beach restaurant that ‘it’s so popular, nobody goes there any more.’ For this reason Lynch likes terrible and often out-of-favour industries such as transport, steel and textiles, and looks for the company whose operating costs and debt are lowest. When times become tough some of its competitors will fold and leave the survivor with greater market share and profits.

IT HAS A BORING OR SILLY NAME

‘The perfect stock,’ writes Lynch, ‘would be attached to the perfect company, and the perfect company has to be engaged in a perfectly simple business, and the perfectly simple business ought to have a perfectly boring name. Automatic Data Processing is a good start.’ Further, ‘Pep Boys—Manny, Moe and Jack is the most promising name I’ve ever heard. It’s better than dull: it’s ridiculous. Who wants to put money into a company that sounds like The Three Stooges?’ Few apart from Lynch did; and so few profited as handsomely as Lynch from this investment.

IT DOES SOMETHING DULL

Lynch also likes companies that do boring things. Crown, Cork & Seal makes bottle caps; and Seven Oaks International processes the coupons submitted to supermarkets by their customers. ‘A company that does boring things is almost as good as a company that has a boring name, and both together is terrific.’ Both of these companies were goldmines for Lynch.

IT DOES SOMETHING DISAGREEABLE

Better than boring alone is a stock that is both boring and disagreeable. Prominent examples recounted by Lynch

include Safety-Kleen (washes greasy auto parts); Service Corporation International (operates funeral homes) and Waste Management International (a toxic waste clean-up firm).

IT’S A SPIN-OFF

Lynch says that divisions or parts of big companies that are divested as stand-alone entities get scant attention from Wall Street. He suggests that investors investigate them several months after they are divested in order to see whether insiders are buying their shares.

IT’S GOT A NICHE

Lynch ‘would rather own a local rock pit than Twentieth Century-Fox, because a movie company competes with other movie companies [whereas] the rock pit has a niche. Further, ‘owning a rock pit is safer than owning a jewellery business. If you’re in the jewellery business, you’re competing with other jewellers from across town, across the state and even abroad…But if you’ve got the only gravel pit in Brooklyn, you’ve got a virtual monopoly, plus the added protection of the unpopularity of rock pits.’

PEOPLE HAvE TO kEEP BUYING IT

Lynch likes companies that produce non-discretionary products—ones that people must constantly buy whether times are good or bad. Examples include medications, soft drinks and razor blades (and supermarket items more generally). These companies’ sales and earnings tend to be more stable over time than those of companies whose products’ sales are more variable and subject to changes in economic conditions.

INSIDERS ARE USING THEIR OWN MONEY TO BUY IT

According to Lynch, it’s a good sign when executives and employees buy shares on market (as opposed to exercising options at strike prices well below the market price). Despite obligations to disclose all relevant information to the stock market, insiders typically know much more about a company than analysts and shareholders. Accordingly, if insiders are willing to put their own money on the line, it’s worth paying attention to.

What Lynch seeksSome companies have characteristics that lynch finds particularly attractive. But what are they?

there’s no point in studying the financial section until you’ve looked in the mirror.

MC • peter lynCh11

In fact, during his tenure at Magellan, Fidelity employed a team of analysts to track insider purchases and sales.

THE COMPANY IS USING ITS OWN MONEY TO BUY IT

Also a good sign is when a company is buying back shares. Once a good company becomes well established, it is

likely that its cash flow from operations will exceed the capital expenditure required to maintain those operations. What to do with the surplus cash? Lynch prefers that the company either pay a dividend or buy back its own shares. He is cautious about companies that aggressively purchase other companies, and avoids companies that expand into unrelated businesses.

Some companies also have characteristics that Lynch dislikes. He avoids hot stocks and hot industries because they seldom become as lucrative as their proponents predict; companies that change their names (‘corporations, like people, change their names for one of two reasons: either they’ve … married, or they’ve been involved in some fiasco that they hope the public will forget’); companies—particularly small companies—that have ambitious and unproven plans; firms that depend upon one customer for a disproportionate amount of their sales; and profitable companies that diversify their operations by buying poor and often unrelated businesses. Lynch disparagingly calls these acquisitions ‘diworseifications’.

Perhaps above all, Lynch dislikes corporate extravagance in any of its countless and constantly-evolving forms, believing that ‘the extravagance of any corporate office is directly proportional to management’s reluctance to reward shareholders.’ In sharp contrast, excellent companies are thrifty. They seek to maximise returns by running their operations efficiently and constantly striving to improve those operations. Companies that house themselves in gleaming skyscraper office towers and own corporate jets; pay executives fat salaries and perks that bear no relation to results or undertake massive advertising campaigns in order to enhance their corporate

image are all unlikely to attract Lynch. He believes that profligacy and self-indulgent behaviour indicate that executives are more interested in returns to themselves than their shareholders.

Finally, ‘all else being equal, invest in the company with the fewest color photographs in the annual report.’ Contrast the glossy brochures and extensive advertising of the schemes promoted by many advisors and funds managers with the companies that Lynch favours—dull organisations with boring names that do disagreeable things and, unnoticed by many investors, steadily increase their earnings. Lynch’s favourite companies have no photographs or glossy paper at all in their annual report: instead, they produce a simple black and white text document that sticks plainly to the facts. Lynch senses that good companies that produce plain reports possess a genuine sense of custodianship over their shareholders’ funds; and it is these companies whose unheralded stories he strives hardest to uncover.

What Lynch avoids

Companies that house themselves in gleaming skyscraper office towers and own corporate jets; pay executives fat salaries and perks that bear no relation to results or undertake massive advertising campaigns in order to enhance their corporate image are all unlikely to attract lynch.

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result has been reflected fully in the present market price. An investor should also sell if the story fails to unfold as expected or the story changes. If, for example, a cyclical company’s inventory starts to build at a far more rapid rate than its sales, and your enquiries uncover no reason to expect that sales will shortly increase, then it may be wise to sell.

FOCUS ON FUNDAMENTALS

For Lynch, a fall in a stock’s price can be an opportunity to buy more of a good prospect at cheaper prices. It is much harder, he says, to stick with a winning stock once the price goes up—particularly with fast-growers where the tendency is to sell too soon rather than too late. With these firms, he suggests holding on until it is clear that the firm is entering a more mature (and slower) stage of growth. Rather than simply selling a stock, Lynch suggests ‘rotation’—that is to say, selling the company and replacing it with another company with a similar story but better prospects. This approach both maintains the investor’s long-term commitment to the stock market and keeps the focus on fundamental value.

Lynch is adamant: investors must possess and maintain a long-term commitment to investing. He has cited various historical statistics to quell the short-term queasiness that they sometimes acquire from market turbulence.

Over the years and decades, the direction of financial markets as a whole is unambiguously upwards. Accordingly, ‘unless you’re a poet looking for a wealthy spouse, it never pays to be pessimistic.’ Lynch believes that a focus upon short-term turbulence distracts investors from what should worry them: whether they will be able to locate good companies at sensible prices.

Lynch has written extensively and insightfully about ‘weekend worriers’—the pundits (and those who read and watch them) who believe that economic conditions are terrible, that now is not a good time to invest and therefore that one should wait until uncertainty abates and the future becomes clearer. Lynch acknowledges that he has fallen into this trap. Indeed, during most of his tenure at Magellan he appeared on the prestigious panel assembled annually by Barron’s in order to pontificate about the state of companies, financial markets, economies and civilisations.

When Lynch managed the Magellan Fund, its portfolio held as many as 1,400 stocks at a time. Market wags often remarked as a result that he never saw a stock that he did not like. But a fund such as Magellan was allowed by regulators to invest no more than 5% of its assets in any one investment; nor could it own more than 5% of the shares of any given company. It was Magellan’s mammoth size and various legal restrictions—and not Lynch’s approach—that biased the fund towards diversification. Even so, half or more of Magellan’s assets were concentrated into 200 or fewer companies, and the bulk of the remainder was allocated into 500 more.

Although Lynch successfully juggled this very large number of stocks, he repeatedly emphasised that a portfolio containing so many companies is inherently difficult to manage. When he faced fewer restrictions—as he did as a trustee of various charitable and non-profit organisations’ investment funds, and with his personal holdings—he favoured a portfolio that contained a significantly smaller number of investments.

Accordingly, he cautions that individuals should not diversify their portfolios too much. There is no point in diversifying just for the sake of diversifying—particularly if it means (as it likely will) that the investor becomes less familiar with the companies of which he is a part-owner. Lynch says investors should own as many ‘exciting prospects’ as they are able to uncover through their own research. He also suggests—if possible and as a way of mitigating the risk inherent in investment operations—that individuals invest in several of his six categories of stocks; and he expressly warns against portfolios that contain only 2–3 stocks.

WHEN TO SELL?

Lynch also advocates that investors maintain a long-term commitment to the stock market. He is no market timer and denies that humans can be prescient enough to trade consistently profitably. But that does not mean that an individual investor should retain a single stock forever. Instead, Lynch says that investors should review their holdings every few months, rechecking each company’s ‘story’ in order to see whether anything (either the unfolding of the story or the share price) has changed.

So when does it make sense to sell a particular holding? The key, Lynch says, is to know ‘why you bought it in the first place.’ Lynch states that an investor should sell if the story has eventuated as expected and this favourable

Portfolio management and the ‘weekend worriers’markets are inherently risky, which is why a genuine long-term commitment to investing is imperative.

just because you buy a stock and it goes up does not mean you are right. Just because you buy a stock and it goes down does not mean you are wrong.

MC • peter lynCh13

Throughout the 1980s, by his own admission, he and the other panellists produced ever more ingenious reasons why a funk would descend upon the world. Yet all the while they continued to invest—and much of the time financial markets roared. Hence one of his principles is worth repeating. Look at companies and their stories one at a time; find value in one stock at a time; and disclaim the futile attempt to predict the state of the economy and its effect upon the prices of stocks. Lynch therefore emphasises the individual investor (and the individual’s ability to endure the financial turbulence that will inevitably occur) as much as the process of investment. Hence ‘the key to making money in stocks is not getting scared out of them…in dieting, as in stocks, it is the gut and not the head that determines the results.’

PREDICTIONS FUTILE

If not the economy or interest rates, what should concern investors? ‘Well, they should think about what’s actually happening. If you own auto stocks you ought to be very interested in used car prices. If you own aluminium companies you ought to be interested in what’s happened to inventories of aluminium. If your stocks are hotels, you ought to be interested in how many people are building hotels. These are facts. People talk about what’s going to happen in the future, that the average recession lasts 0.2 years or who knows?…[But] I deal in facts, not forecasting the future. [Prophesy] is crystal ball stuff. It doesn’t work. Futile.’

everybody has the brainpower to invest intelligently. But not everyone has the intestinal fortitude.

Investing can and should be rewarding and enjoyable. But if you do not prepare yourself properly then it is almost always hazardous. Lynch is amused by a contradiction of consumer behaviour: people research and shop assiduously when they buy furniture, white goods, a car or a house; but when it comes to their investments, which usually involve greater amounts of money and have a more direct bearing upon their long-term standard of living, people will buy on the spur of the moment—or, worse, on the basis of a ‘tip’ overheard in the queue at the supermarket.

Your edge or advantage is not something that you acquire from a broker, advisor, financial planner or other ‘expert.’ It is something that you already possess. In the course of your normal daily life you accumulate experiences—and therefore information—that you can put to gainful use as an investor. In every industry, area of the country and walk of life, the observant individual can encounter excellent goods and services—and companies that produce them—long before the professionals. So learn the foundations of investment, acquire your own information, keep your own counsel and trust your own judgement.

THE INSTITUTIONAL IMPERATIvE

Since the 1980s, the Australian stock market has become dominated by a herd of major institutional ‘investors.’ Contrary to popular belief, their very dominance makes life easier for the individual investor. If you ignore the institutional herd then you can chart a course that is more lucrative than the one that would be charted for you by the institutions.

The Peter Lynch way: a summaryYour ‘edge’ doesn’t come from an ‘expert’, it’s something that you already possess.

Everybody has the brainpower to invest intelligently. But not everyone has the intestinal fortitude. There has always been, always is and always will be something to worry about. A stock-market decline is as routine as a heavy downpour in North Queensland. If you realise this then short-term volatility cannot hurt you. Quite the contrary, it can help you: a decline is a great opportunity to acquire the bargains abandoned by ‘investors’ who flee the storm in panic.

So avoid ‘weekend worrying’ and ignore the pundits’ latest dire predictions. Realise that nobody can predict interest rates, the future direction of the economy or the stock market with any useful degree of accuracy. Discount these forecasts and focus your attention upon what is actually happening to the companies in which you have invested or want to invest. A stock is not a lottery ticket, and behind every stock is a company. Therefore learn what it is doing and recognise that over a few months or even a few years there is often no correlation between the success of a company’s operations and the success of its stock. Also recognise, however, that over many years and decades the correlation between these two things is virtually perfect; and the often-extended disparity that sometimes emerges between quality and price is the key to an investor’s success. It therefore pays to seek and acquire successful companies and then be patient. Also remember that you need not (and should not try to) hit a boundary off every ball: as long as you stay at the crease, a series of singles will accumulate into a very healthy score. ‘In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.’

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others have overlooked—can often be found in the stock market. But if you do not properly study companies then you will have as much success buying stocks as you would if you played poker without looking at your cards. Time is on your side when you own shares of superior companies; and a portfolio of well-chosen stocks will always, if given enough time, generate better results than a portfolio of bonds or a money-market account. Equally importantly, however, a portfolio of poorly-chosen stocks may generate less wealth than money stuffed under the mattress.

IN HIS OWN WORDS

In Lynch’s own words, ‘I think the secret is if you have a lot of stocks, some will do mediocre, some will do okay, and if one of two of ‘em go up big time, [then] you [will] produce a fabulous result … and that’s all you need. I mean stocks are out there. When I ran Magellan, I wrote a book. I think I listed over a hundred stocks that went up over ten-fold when I ran Magellan and I owned thousands of stocks. I owned none of these stocks. I missed every one of these stocks that went up over ten-fold. I didn’t own a share of them. And I still managed to do well with Magellan. So there’s lots of stocks out there and all you need is a few of ‘em. So that’s been my philosophy. You have to let the big ones make up for your mistakes.’

Finally, ‘frequent follies notwithstanding, I continue to be optimistic … When you invest in stocks, you have to have a basic faith in human nature, in capitalism, in the country at large and in future prosperity in general. So far, nothing’s been strong enough to shake me out of it.’

THE BASIC RULES

Know what you own and know why you own it. If, during a thirty-second ride in a lift with a perfect stranger, you can explain why you own a particular stock and how it fits into your game plan, then you clearly have an idea of what you are doing and why. If you can’t, then you don’t. Owning stocks is like bearing children—don’t accumulate more than you can properly manage. The individual investor probably has the time to follow 10–15 companies and to buy and sell their shares as conditions warrant. But there need not be more than eight or ten companies in the portfolio at any time; and if you cannot find a greater number of companies with a compelling story at a good price then it is not a crime to put your money in the bank until you do.

Never invest in a company without understanding its finances. The biggest losses usually come from companies with poor balance sheets. Before you put your money at risk, always look at a company’s accounts and confirm that it is comfortably solvent. Avoid ‘hot’ stocks in ‘hot’ industries: they are seldom as lucrative as their spruikers claim. In sharp contrast, good companies in mediocre or poor industries are often more rewarding than most realise.

Before investing in a small, new company, wait until it establishes itself and develops a track record of profitability. If you’re considering an investment in a troubled company or industry, wait for the industry to show signs of revival and then buy the company with demonstrated staying power. Recall that buggy whips and radio tubes were troubled industries that never revived. Pleasant surprises—companies whose achievements

the amateur investor has numerous built-in advantages that, if exploited, should result in his or her outperforming the experts and also the markets in general.

Additional readingPeter Lynch is a prolific author. He penned the million copy-selling One Up on Wall Street: How to Use What You Already Know to Make Money in the Market (1989), which sets out his philosophy in detail; Beating the Street (1993), which remained number one on The New York Times best-seller list for eight weeks, amplified the themes of his first book and applied them to the specific companies and industries in which he invested; and Learn to Earn: A Beginner’s Guide to the Basics of Investing and Business (1996).

John Train’s book The New Money Masters (1989) has a chapter that summarises Lynch’s approach to investing and its results. An interview with Lynch is also included in Investment Gurus: A Road Map to Wealth from the World’s Best Money Managers (1999) by Peter Tanous.

MC • peter lynCh15

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