Conference nyoss1::market_investing

	He also wrote a best seller in 1989 called "One Up On Wall Street"
	I'm in the process of reading it now. It also tells his basic
	investment strategies and he defines a process that any person can
	follow for picking stocks, if she/he is willing to spend the time 
	keeping their eyes open and doing some research.

	I'd recommend the book. It's gopod reading.

	Patrick

   Everywhere I turn these days, all I hear is "Peter Lynch. Peter Lynch.
Peter Lynch."  While I must admit I'm sick of hearing his name so often
as he runs around promoting his book, he certainly does deserve his 
excellent reputation.  I've listened to him for years, and in fact I 
remember seeing him at the Newton Marriott once in the early 1980s and 
his favorite stock selections which he listed at that time turned out to 
be huge winners.

I'm not a believer that the markets are truly efficient.  I think Peter
Lynch is an example of someone who understands stock-picking well enough
to be able to do it exceedingly well consistently.  (I'm working at
being another example :) )

The last issue of Money magazine had a long article on Peter Lynch which
listed many of his "market truisms".  My favorite, which I use a lot and
which was not in Money magazine is:

When it comes to your portfolio: "Don't water the weeds and pick the flowers"
Others have stated the same thing this way:  "Cut your losses short and
let your profits run"

    Not to open up another can of worms....but I think it's really funny
    that Peter Lynch and Ken Heebner (CGM Capital Development, my personal
    hero) have a couple of common philosophies....invest in companies that
    have real products (they both stay away from biotech stuff), and STAY
    in the market, don't try to time it!  I don't believe in market timing
    either, if it truely worked the way they say, Martin Zweig would have
    the top fund over the last 1, 3, 5, and 10 year periods.  He doesn't,
    but Peter Lynch and Ken Heebner have and do!  The noted difference
    between the two is that Peter Lynch does better at guiding large funds,
    and Ken prefers a smaller fund (which is why he closed it at a very
    small asset base...by today's standards).
    
    Any comments from the timers out there?
    
    Michael

Peter Lynch is an amazing guy, and I tend to hang on every
word he says...if Pete called me up and told me to run naked
down the hallways of Wall Street to make bigger gains, I'd
take it under serious advisement.

I have a problem with his notion of "buy regularly, pay no
attention to the market."  I've technical models on my PC
at home that enable me to buy in/cash out with fairly good
precision.  They also let me know when the market is overbought,
or when the current rally has little support.  I find this
information essential in making an informed decision.

While I believe in Peter as far as doing my research and knowing
what I'm buying, I always "ask the computer" and try to buy when
the market is oversold, not overbought.

Of course, then there's the time I went racing out and bought AST
Research and *didn't* check the charts...and boy am I sorry now.

./chris

.3>    Any comments from the timers out there?
    
    For the past few years I have been following market timer Sy Harding,
    who manages some money but is basically a newsletter/hotline advisor.
    He gives clear, unhedged BUY and SELL signals using a proprietary
    index of his own.  One of his portfolios is "mutual fund switching"
    wherein he signals, e.g. "Tomorrow we're going to take a 25% position
    in Financial Strategic's Banking/Insurance fund".
    
    As far as performance goes I'll say this:  Sy gives 2-3 BUY and SELL
    signals every year.  If you just count DJIA points you'll find that
    following his signals has resulted in nearly double the nominal gains 
    on the DJIA index.  Something like 1600 points "timing" vs. 841 "actual".
    
    Now that won't correspond 1-1 to $$ made switching funds but there
    should be a reasonably close approximation, mas or menos, depending on
    entry/exit dates of record, dividends, etc.
    
    It's taken me this long to feel comfortable following his signals.
    I remember well his December 1991 BUY signal which I thought was a
    really stupid move, only to watch from the sidelines as the market
    soared on FED easing actions.
    
    For those with $50K or more, he offers to do your fund-switching for
    you, thus getting you in and out a bit faster (i.e., on the signal day
    as opposed to the next day.  May or may not help.).
    
    This is not an endorsement, just a response to .3s question.  I expect
    market timing to become very popular, akin to today's index funds, in
    the next bear market.  ("Any time now, maybe 6 weeks").
    
      John

    Beating the Dow by that margin wasn't easy (this is the same dow that
    contained IBM, Sears, and some of the biggest white elephants I've ever
    seen).  But what about the bottom line?  Total return on the individual
    who tries to follow it?  Does it comp against the SP500?  How about the
    Russell2000, or the Wilshire5000?  Or even the average of the top 10%
    of the growth mutual funds out there?  For stock traders, you have to
    remember to remove all commissions and fees from your return, and don't
    forget to annualize the cost of the timing service.
    
    I saw a guy on CNBC yesterday who charts planetary activity to
    determine market trends.  Wonder what his bottom line is?
    
    /mtb

re: Note 405.2  -- More Peter Lync

>   "Cut your losses short and let your profits run"
      
      Properly understood, this IS good advice, but, do you realize that
      if you carried to the extreme exactly what  this  says  you  would
      never realize a profit because you would only sell losses�?  ;-)
      
      Clearly you've got to know when to take profits as well as when to
      cut losses.  And, clearly, Peter Lync makes both decisions  better
      than most investors.
      
      ------------------------------------------------------------------
      � Yes, I realize that it does work if you  define  loss  as  "loss
      from  the  latest high point", rather than "loss from the purchase
      price".  (The definition of "latest high  point"  is  left  as  an
      exercise for the reader.)

    re timing giving good returns
    
    What's the rate of return after taxes and expenses?  More transactions
    means more realized capital gains means more taxation, no?
    
    		-John Bishop

    
    I'm both a timer and a Peter Lynch fan.  Interestingly, if you read his
    "One Up on Wall Street" book, I think you'll find evidence that Peter
    is more a stock-timer than he admits even to himself, e.g. he looks at
    (among other things) the ratio of free cash flow to price to determine
    value, he talks about psychology as a major determinant of market
    direction, he talks about he "wish he had been told"/convinced about
    high P/E ratios (though he held through '87 as I understand it), and
    finally, he shows (gasp!) charts throughout his book and recommends
    their use.
    
    So, as I say, I'm a Peter Lynch fan.  But despite his disavowal of
    "technical" methods...  just look at what he DOES! (or says he does)..
    Obviously he's more concerned with the 'story' of a company than its
    relative strength rating, but just look at the way he buys and sells
    his 'stalwarts'  ... that's timing on a company scale.
    
    Peter is an exceptionally gifted analyst with more guts than most of us
    to sit through the bad times, and the good fortune to have been manager
    of a growth fund during the entire 80's bull market.  You can't get a
    much better combination than that to build a reputation on.
    
       /Jim
    

    He's the guest on special from 7-8pm EST tonight (friday 3/5) on CNBC.
    Also on CNBC sometime between 5-6 on BUY-SELL-HOLD segment. 
    
    Re: his charts. If I remember correctly from One up ... he uses the
    charts instead of pouring over numbers all day. He said it was much
    easier to look at some charts and in 30 seconds be able to identify
    trends: price advances,earnings gains,etc. Once identified, then he
    would look closer into the numbers and other particulars of company.
    

    Re. .0 
    
    If it makes you feel any better, that was $10000 in EACH of the 4
    companies, not $10000 total. Still not bad :-)
    
    /Ashok

   As I see it, the stock price of any company has two essential components -
   underlying value and the speculative component. Underlying values can only
   be determined only with a very good understanding of what's happening in
   the overall industry that the company is in. Wall streeters even with
   all their industry specialists cannot get a good handle on the underlying
   value of all the stocks that they hold. Even if they do, they have a vested
   interest in  changing their recommendations at least once every quarter.
   Guess why? They're paid by commissions for the most part. THEY DO NOT
   WANT YOU TO HOLD ON TO A STOCK FOR TOO LONG. Their livelihood is at stake.

   People like Peter Lynch go for the "guts", a hunch about underlying
   trends in the industry in which the company is in. So they buy and hold
   stock for terms longer than usual. But reality dictates that when they
   sell they want to get the maximum out of their "sell" decisions. So it
   doesn't surprise me that he uses charts as well. If he uses charts alone
   or use "value" investing alone, logic dictates that he might do only
   as well as the market average, not outperform it.

   Nari

    
    I want to qualify an earlier remark.  One of the things I learned from
    Peter Lynch's first book was that the methods you use for stock
    selection depend on the nature of the company.  He advocates using a
    different method for selecting slow growers than for vigorous growth
    stocks.  He primarily advocated the user of charts for the slow,
    predictable growers; this makes sense to me, since (a) earnings and
    cash flow are by definition more predictable, and (b) the price paid
    for the stock is still a function of human emotion and is therefore
    prone to excesses.  If you believe (a, b) then it follows that a simple
    value-investing formula might, over a long enough period, be
    consistently profitable.  Looked at with this perspective, technical
    analysis and value investing are nearly indistinguishable.
    
    Growth stocks are in an entirely different category, and the methods
    that Peter Lynch advocates for slow growers would probably not yield
    excellent results.  Lynch (says he) relies on picking simple businesses
    that he can understand which have some protection from competition, and
    which he has some reason for believing that he has a knowledge "edge"
    on other analysts....  and which also have a proven formula for
    expansion.  In this case his analysis bears little resemblance to
    technical analysis.  This is where he made his reputation, too.
    
    So I said that he uses and advocates the use of charts, and that's
    true, but not on all kinds of stocks.  As a matter of fact, I'd be hard
    pressed to categorize Lynch's methods into any single category...
    except maybe "successful".  :)
    
       /Jim
    

    I would like to buy One Up On Wall Street   by Peter Lynch but I have
    been unable to find it in any of the book sotores in my areas
    (Springfield, West Springfield) any suggestions where I could look.
    
    Thanks
    Frank

    
    Barnes & Noble has it, if there's one near you.  They've also got his
    new book.
    
       /Jim
    

About 3 months ago I found it one of those 'books for a buck' stores.  I picked
it up but still have yet to read it.

The 'book for a buck' place I found it (don't recall it's real name) was across
the street from Spag's (in Mass)...  Sort of a long ride from the Springfield
area - and you never know what these places will have.

Dan

    To obtain Lynch's newest book for $14.50 (or .95):
    
    FIDELITY account holders should look at the Fidelity insert with their
    March account statement. It included an offer to buy Lynch's latest
    book through Fido via charge card.
    

I bought his latest book at CostCo in Nashua, NH for around $13.

- Jim

I have been doing a lot of reading lately (Charles Givens & Peter Lynch).
Now it is time for questions.

Peter Lynch refers to some sources of info for investigating a company
before you buy stock in it, such as S&P stock sheets and Value Line
Investment Survey.   Where can I get them?  Will a discount broker such
as Schwab provide them if I ask?  For a fee?

Peter Lynch refers to a service from Schwab called "the Equalizer".
Does anyone know what that is, how it works, what it costs?
(I know I could call Schwab & ask the same naive questions, but
I felt more comfortable asking here.)

Peter Lynch says that a company's stock is a good buy if the p/e ratio
is less than its growth rate.  What growth rate is that (growth of
gross/net income?  profit?  stock price?)?

What exactly does the S&P year end Stock Guide (referred to elsewhere
in this conference) provide?  Is it info like the Value Line Investment
Survey?

If you join the NAIC & receive its monthly magazine, Better Investing,
does it just recommend stocks to buy, with no explanation.  Or does
it explain the fundamentals that make it a good recommendation?

Thanks for any help,
 - Al

re:  .19

A couple answers:

S&P:
I get copies of the Standard NYSE (or OTC or AmEx) Stock Reports
published by S&P at my local public library.   This is a good jumping
off point for getting good fundamental data.  They're two pages
in length, and contain paragraphs entitled "Current Outlook," 
"Important Developments," "Revenues," "Common Share Earnings,"
etc.  There are lots of numbers - essentially recaps of the Income
and Balance sheets for up to the past 10 years.

These reports are good, but unfortunately don't cover a large
number of small-cap companies.  

I think that S&P also offers research reports (multi-page write ups)
on companies by request for a small fee (less than $20), but I might
have them confused with somebody else.  There are services like this
and if you feel very strongly about a stock, you might want to checkl
these out.

Your broker might provide you with data regarding some companies, 
but it's been my experience (with a full-service broker) that there
is more interest in pushing their own favorite stocks.  Note, though,
that I'm not a fan of full service brokers preferring the basic
no-frills service of a discounter.

P/E ratios and such:

Earnings mean everything, and you'll here this expressed many
different ways.  Personally, I like to see a steady (or near 
steady) growth rate in earnings per share over several recent
quarters, and a strong 3-5 year track record in EPS (the CANSLIM
folks amongst us will realize this as a take off on the C and A
in CANSLIM).

Lynch likes to look at companies in lousy industries.  His
theory is that in industries with little or no growth, only
the strongest, most well-managed companies do well.  He's
got an amazing track record, but you need patience and faith
to live with his picks.  He's presently big on Abington Bancorp,
Armco (steel), British Steel, Chrysler, General Host, Service
Fracturing, etc.  A lot of these companies are not seen favorably
by Value Line or other rating services.

The bottom line is that you need to develop your own ideas and
philosophies about how the markets work, how the economy goes,
and what you think are elements of success.  Only then, I believe,
can you be truly comfortable with your picks.

Listen carefully to Peter though.  I consider him to be one of
the most astute minds in the field.

Going on too long...
./chris

    re: .19
    
    	The Better Investing magazine does not recommend stocks to buy but
    points out stocks that members may wish to investigate and analyze
    using the NAIC tools.  It does discuss why they have chosen these
    companies based on current market trends that make it look favorable as
    well as why the company may have long term potential.  In their Stock
    to Study section they provide sufficient information for the members to
    complete the Stock Selection Guide, the primary tool in analyzing a stock.
    They also look at the stock again 1 year later to see how it has done,
    and in some cases they look at it again in 5 years. 
    
    	The NAIC does have a stock advisory service available to members
    for an additional fee in which they will provide recommendations on
    buying, holding or selling stocks.
    
    
    Ken

    
    I saw a poster in Barnes and Noble in Auburn about an "Evening with
    Peter Lynch". The date was May 26th I think. Don't recall where or
    for who or how much. If you're interested though, I'm sure someone
    at B+N could give you more info.
    
    Bob

    He's also featured in this months WORKING WOMAN.

There's also a short interview with Peter in the latest Fidelity Focus (?)
magazine, which Fidelity sends to all it's customers...

John Piekos

    Is there such a thing as a "Lynch Effect?"
    
    What impact does a Peter Lynch have on a stock after his picks appear
    in a periodical like Barrons (in early January each year and a subject
    of his latest book)?  What about other picks or recommendations.....
    from Money and the other magazines?  Anybody seen an impact analysis?
    
    Of course, the impact of The WSJ's "Heard on the Street" column is well
    known.
    
    Would it be naive to investigate a company based on a Lynch/other
    recommendation and then make a buy decision?  Or would one be too
    late because we are such a "wired" culture and we get instanteous
    news?

    Note that Lynch's philosophy is NOT buy-and-hold.  He holds his winners
    but dumps his losers.  This is reflected in the turnover rate for
    Magellan when he ran it ... 160% a year.  Meaning the average stock
    in Magellan's portfolio was only there 8 months.
    
    That's a lot of planting and a lot of weeding.
    
      John

    
    re: 160% turnover
    
        when the new mgr. of Magellen was on W$W a couple of months ago,
        Lou was disappointed to learn that the new mgr. did more trading
    	than Lou seems to prefer.  When Lou attempted to contrast this
    	with Lynch's style, he was corrected; Lynch did pretty much the
    	same thing.
    
    	But the new mgr (I forget his name) explained that a 100% turnover
    	doesn't mean that you get a different set of names each year; for
    	them it means that they buy and sell part of their holding in each
    	stock as they think it gets over/undervalued.
    
    	So looking at the prospectus, it may appear that they use a buy and
    	hold strategy when in fact they do not.
    
    /jim
    

re           <<< Note 405.27 by NOVA::FINNERTY "Sell high, buy low" >>>
                              -< buy and trade? >-

>    	But the new mgr (I forget his name) explained that a 100% turnover

Vinik, I reckon.  Don't remember his first name.  He's done a damn good job
since taking the fund over last July (20+ %, I think).  Sunday Globe just ran
an article on Magellin and Vinik.

re:  Lynch effect on market

Howzabout the "Rag Effect" in general on the market.  I don't know how
many times I've seen Barron's or IBD profile some company either positively
or negatively and then watched it fly or skid the next day based on the
news.

If I had more time, I'd do a historical study of Barron's to see if
there is a profit-making potential in buying the stocks that the
Barron's roundtable "discusses" every January and June.

A most striking example of this occurred recently when Barron's 
panned Media Logic (AmEx: TST).  The following Monday they hit the
skids in a fairly major way against the strength of broad market
gains.  They recovered nicely in the following days.

If somebody big says "buy" or "sell,"  (like Peter Lynch) and you're
involved, be prepared for an interesting ride.

./chris