Overview

Peter Lynch is an American fund manager and philanthropist. From 1977 to 1990, he managed the Magellan Fund under Fidelity Investments, achieving an astonishing average annual return of 29%. Under Lynch’s leadership, the fund’s assets grew from $18 million to $14 billion. While he employed value investing, Lynch’s fluid portfolio management set him apart from other value investors like Warren Buffett and Benjamin Graham. His approach involved holding thousands of stocks, buying and selling them flexibly, earning him the title of an investment master.

Early Life

Peter Lynch was born on January 19, 1944, in Newton, Massachusetts. His father, a math professor at Boston College, passed away from cancer when Lynch was ten. To help his mother, Lynch worked as a golf caddy, where he met George Sullivan, president of Fidelity Investments. This connection later helped him secure a job at Fidelity.

During his college years at Boston College, Lynch invested $1,000 in Flying Tiger Airlines, which surged from $8 to $80 due to the Vietnam War, earning him enough to cover his MBA tuition at the University of Pennsylvania’s Wharton School.

Career Beginnings

Lynch started as an intern at Fidelity in 1966 and served as a ROTC artillery lieutenant from 1967-69. After returning, he became a full-time analyst at Fidelity, covering textiles and chemicals before becoming Director of Research in 1974. In 1977, at the young age of 33, he took over the Magellan Fund.

Magellan Fund

In the late 1970s, mutual funds were unpopular, and the Magellan Fund managed only $6 million. Fidelity merged it with another underperforming fund and handed it to the young analyst, Peter Lynch.

From 1977 to 1990, Lynch’s Magellan Fund recorded an incredible annual return of 29.2%. Under his management, the fund’s assets grew from $18 million to $14 billion, making it the world’s largest mutual fund. Notable investments included Fannie Mae, Ford Motor Company, Chrysler, Dunkin’ Donuts, Philip Morris, Taco Bell, Hanes, La Quinta, and Stop & Shop. He also invested heavily in small regional banks, yielding significant returns.

Investment Flexibility

Lynch’s investment strategy was characterized by flexibility. He invested in undervalued sectors like finance, automotive, chemicals, steel, retail, convenience stores, food and beverages, and textiles. His independence from Fidelity’s management allowed him to trade freely. Lynch sought undervalued companies aggressively, often preferring those in mundane industries or with unattractive names, as they were often overlooked by other investors. During the early 1980s, he even invested in government bonds when interest rates soared.