📖Peter Lynch

Company Research

🌿 Intermediate★★★★★

Stick to businesses simple enough that anyone could understand how they make money.

💬

Never invest in any idea you can't illustrate with a crayon.

— *One Up On Wall Street*，1989

🏠 Everyday Analogy

Just as you wouldn't buy strange vegetables you don’t recognize when grocery shopping, the same applies to investing. If a company’s business model is so complex that it requires a PhD to understand, steer clear of it. Choose simple businesses that even an elementary school student could sketch with crayons.

📖 Core Interpretation

Conduct on-site company visits to understand the products, customers, and competitors.
💎 Key Insight：Lynch avoided complex financial instruments, conglomerates, and businesses he could not diagram on a napkin. Simplicity in a business model means fewer things can go wrong, management is easier to evaluate, and competitive advantages are clearer. If a company's annual report confuses you, skip it. There are thousands of simple, profitable businesses waiting to be discovered.

AI Deep Analysis

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❓ Why It Matters

Personal experience reveals truths more effectively than reading reports.

🎯 How to Practice

Visit stores to observe product sales, converse with employees, and gather customer feedback.

🎙️ Master's Voice

If you liked a stock at $14, you ought to love it at $6.
Lynch often added to positions that dropped if the thesis was intact. Lower prices meant better value for unchanged fundamentals.

⚔️ Practical Guide

✅ Decision Checklist

  • Is the thesis still valid?
  • Should I add at lower prices?
  • Is this a buying opportunity?

📋 Action Steps

  1. Add to winners when they drop
  2. Verify thesis before adding
  3. Take advantage of lower prices

🚨 Warning Signs

  • Selling on price drops alone
  • Not reviewing thesis
  • Panic at lower prices

⚠️ Common Pitfalls

✕Don't judge by appearances alone.
✕Individual stores do not represent the overall performance.
✕Integrate with financial data

📚 Case Studies

1
Taco Bell Turnaround (1982)
Lynch studied Taco Bell’s expansion, low-cost menu, and strong franchise model during a recession, noting rising same-store sales despite economic weakness.
✨ Outcome：Invested via Magellan Fund; position grew significantly as earnings compounded and the stock became a multi-bagger.
2
Ford vs. Chrysler Autos (1980)
Analyzed US automakers post-1970s crisis, focusing on balance sheets, model pipeline, and labor costs; found Ford financially stronger and better positioned than Chrysler.
✨ Outcome：Favored Ford in the fund; investment appreciated as car sales rebounded and Ford’s profitability improved through the early 1980s.

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