During his recent interview with Excess Returns, Joel Tillinghast discussed three of Peter Lynch’s tenets for successful investing. Here’s an excerpt from the interview:
Tillinghast: Three. One consider many possibilities. Cast a wide net. In other words look at a lot of stocks because Peter’s formula was you study 10 stocks, two will be immediate buys, two will be immediate sells, and the rest will be blah.
And so if you study more stocks you’ll find more opportunities. But also when you’re thinking about the future trajectory of those he said all the possibilities.
Second thing is constantly look for new information, especially contradictory information.
Peter was exceptional at changing his mind. I’m not sure that I’m so good at it but he’s exceptional.
Third, mental white-out. Putting bits of information out of mind that are holding you back from making the right decision.
So he said if you white-out this stock chart and see that the stock has already risen by 100%, it’s already doubled, a value investor is likely to say oh I’ve missed it.
It’s too late!
Rather than looking forward and saying it still has exceptional value. Or a momentum investor… and since I’m terrible at momentum I maybe misspeaking, they’ll look at that double and say well and means I’m prone to thinking it’s a buy.
But is the business getting better at a rate that could justify…
You can watch the entire discussion here:
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