The teachings of an ace stock picker

The Ticker

September 12, 1997|By Julius Westheimer

AFTER Fidelity Magellan fund recently announced that it will be closing its doors to new money -- the $60 billion fund had become unmanageable -- I re-read the teachings of Peter Lynch, ace stock picker who ran Magellan in its greatest years, 1977 to 1990. Samples:

Owning stocks is like having children -- don't get involved with more than you can handle.

Invest regularly. If you can't discipline yourself, have a mutual fund automatically deduct a set amount from your paycheck or bank account each month.

Carefully study a stock's price-earnings ratio. If a stock is grossly overpriced, even if everything else goes right, you won't make any money.

Invest in companies, not in the stock market.

Hold onto stocks as long as the companies are doing well.

Invest in companies that make things we use daily -- razor blades, soft drinks, food, pharmaceuticals. Avoid toys; a girl gets one doll and keeps it four or five years.

Just because a stock goes down doesn't mean it can't go lower,

It's better to miss the first move in a stock and then see if the company's plans work out.

A good company usually raises its dividend every year.

You can lose money in a short time but it takes a long time to make money.

The stock market isn't a gamble if you pick companies with rapidly rising earnings, not just because the stock price appears low.

Research the company before you put your money in it.

Invest in several stocks because one out of five will turn out great, one will be a dog and three will be just OK.

Never fall in love with a stock; it can break your heart.

Ignore short-term market fluctuations.

Much money can be made when a troubled company turns around.

Be patient. A watched stock never boils.

Invest as much time choosing a new stock as choosing a new refrigerator.

Stocks that do well in the long run belong to companies that do well in the long run.

Keep your eyes and ears open. You learn a lot from seeing what people buy. That's how I found Dunkin' Donuts and Johnson & Johnson.

When in doubt, tune in later.

READ MORE: Mr. Lynch has written three fine books: "One Up on Wall Street," "Beating the Street" and "Learn to Earn."

Pub Date: 9/12/97

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