Peter Lynch makes it simple: the more stocks you research and learn, the more stocks to buy you will find.
Charlie Munger: Invert And Use “Disconfirming Evidence”
Peter Lynch: Stock Market Research Is Key
Good day fellow investors. One of my favorite quotes from Peter Lynch is I've always said that if you look at 10 companies you'll find one that's interesting. If you look at 20 you'll find two if you look at one hundred you'll find them the person that turns over the most rocks wins the game. PETER LYNCH So I recently discussed Daimler and said that I would think about it at 30 and this was the government with this kind of analysis you will never buy a stock you're way too conservative. And I said that if you look at the thousand stocks per year you'll find the few with my kind of conservative analysis and that's enough. And that's exactly what Peter Lynch was doing and that's exactly what investors are doing they're researching researching researching researching in order to find the best investments to watch. Peter Lynch ok he looked at 10 companies he found the one because he was invested in 100 200 300 companies. Some are invested in a much smaller number of companies. So depends how much time you have to do research how much time you have to analyze stocks and how much time you have to follow what's going on. And when a stock certain stock hits a buying price. Now you must think it takes a lot of time but it takes a long time. Not a lot of time. If you focus you find you look OK I'm going to look at 10 good companies good businesses and I'm going to follow those 10 stocks and nothing else.
Even better if you're a little bit diversified and then you say OK I'm going to spend an hour a week learning what's going on seeing about the business. And then you say OK this is the intrinsic value this is the price I would like to buy those stocks. And if you look at it that 10 year perspective I bet you that each one of those 10 stocks will fall somewhere in those 10 years below your buying range when you will load up on it and if you just do that your patients fall of 10 stocks you wait for one of those here and there to drop below your radar. Then you will have a great advantage over whatever your investing strategy is now. The key is to do that over a long time because you'll start following a company you need time to learn a company you need time to understand something and then you say okay this is a company that goes onto my long term watch list. Remember that your investment horizon is probably 50 years if not longer. If you're younger so there is plenty of time to invest. People usually crash and we have to set our portfolio set up our portfolio. Now that's wrong. You will set up your portfolio over the next 10 years for the next 50 years and that's how should be approached. Let me share another comment. So Pasquale's says let's assume you have found the stock you never heard about your sector know fairly well how much time of research analysis would you need to buy the stock. And then I wonder replied Pasqualini proximately three hours.
Then Pasquale's said Okay 10 20 hours and then I came and I said well in order to really know a stock it takes about two years because you need to get to know a business you need to know the management how they react to what's going on what's their situation how they solve issues that each business will have you listen to a conference call you go to a report to learn about the sector. So for a big position like I had the Nevsun this winter I would say at least a year of time and then Pasquarelli finishes with however it's not realistic to start a stock for two years before buying it especially for those who need to build the portfolio from zero. It means that if someone wants to start investing today Shelby he should buy the first stock in two years from now. And the stock may be undervalued now and probably won't be anymore in two years from now. My message here is being patient do the research learn enjoyed the research process and wait for perfect buying opportunities when you are sure of what you're doing anything else. Buying after an hour to hour of analysis is betting. And unfortunately all those that bet don't have long term sustainable returns follow the market research a few stocks and you'll do well over time. The more you research the better you'll do. That's the message from me and from Peter Lynch thank you for watching. Looking forward to your comments. Stay tuned for more advantages that we can have as individual investors see the next.