The core stock-picking principle that Peter Lynch emphasizes repeatedly in his several books is: pay close attention to life.
Great stocks are hidden in life, on the streets, in supermarkets. This is the most convenient and efficient way for ordinary people to discover early-stage great stocks, even more forward-looking than the research done by professional institutions. Lynch also discovered one after another of the over tenfold great stocks using this principle.
If you like to buy luxury goods, you buy LVMH stock;
If you think Tesla's products are disruptive, you buy Tesla stock;
If you find yourself unable to live without your iPhone after using it, you buy Apple stock;
If you can't stop eating Domino's after trying it, you buy Domino's stock;
If you see Wang Yuan influencing millions of young people to smoke, you buy a few tobacco stocks to ensure you become the most dazzling glutinous rice ball;
Many people will ask, what if I pick the wrong company or the good company I bought doesn't rise? After all, even a strong company like Microsoft faced negative returns for over a decade after its stock price peaked during the internet bubble.
Lynch continues to provide the simplest yet most useful method: extend the time frame + position management. Many people overlook Lynch's insights and do not understand where these two principles shine. Let me explain:
The rise of excellent companies will be accompanied by rapid increases in valuation and performance; time is a catalyst. During the company's growth phase, the longer the time, the higher the price; thus, the performance of asset prices is extremely convex.
Lynch's holding periods for stocks are generally quite long, checked every six months. If the fundamentals have not reversed, he won't adjust his positions for several years. This ensures that as long as you pick right, you can enjoy the benefits of convex returns that time brings to good assets.
However, even someone as strong as Lynch has less than a 70% probability of picking the right stock, and the probability of selecting a great stock is less than 25%, so how can we ensure that a wrong selection can still yield good performance? Position management.
For example, if you buy 10 stocks and allocate 10% of your money to each, extending the time frame. Even if 2 go to zero and 6 perform mediocrely, as long as you pick 2 great stocks, the performance will be bright enough. Because the returns from convexity can far outweigh the losses and enhance the overall performance of the portfolio. In essence, Lynch relies on good targets + central bank printing money + time + probability to achieve convex returns under controllable losses.
Indeed impressive! #BTC重返10万
