📖Peter Lynch

Two-Minute Drill

🌿 Intermediate★★★★★

If you cannot articulate your investment thesis quickly and clearly, you are gambling, not investing.

💬

If you can't explain why you own a stock in two minutes or less, you shouldn't own it.

— *One Up On Wall Street*，1989

🏠 Everyday Analogy

Just as when being set up on a blind date, if you cannot even articulate the other person's strengths, how can you entrust your lifelong happiness to them? The same goes for investing: if you cannot explain why you bought a particular stock, you are essentially throwing your money away.

📖 Core Interpretation

If you cannot explain why you are buying a particular stock within two minutes, you should not buy it.
💎 Key Insight：Lynch's two-minute drill forces clarity. For every stock you own, you should be able to explain: what it does, why it will grow, and what could go wrong. If your explanation relies on "it's going up" or "everyone is buying it," you have no thesis. A clear story keeps you grounded during volatility and tells you exactly when the thesis is broken.

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❓ Why It Matters

A concise investment thesis demonstrates that you truly understand the opportunity.

🎯 How to Practice

Summarize in one or two sentences: what the company does, why it will grow, and whether its valuation is reasonable.

🎙️ Master's Voice

When the story changes, sell the stock.
Lynch sold when the fundamental story broke—not because of price drops. If the reason for buying was gone, so was the reason for holding.

⚔️ Practical Guide

✅ Decision Checklist

  • Has the story changed?
  • Is my original thesis still valid?
  • Why am I still holding?

📋 Action Steps

  1. Monitor the story, not the price
  2. Sell when thesis breaks
  3. Update thesis regularly

🚨 Warning Signs

  • Holding despite broken thesis
  • Ignoring fundamental changes
  • Hope-based holding

⚠️ Common Pitfalls

✕Simplicity does not equate to shallowness.
✕It requires solid research support behind it.

📚 Case Studies

1
Ford Turnaround (1982)
Auto sales rebounded after a brutal recession; Ford had cut costs and improved models, yet the stock traded at a low P/E as if bankruptcy was imminent.
✨ Outcome：Lynch bought, stock multiplied several times as profits recovered and investors re-rated the company.
2
Subaru of America (1981)
Tiny U.S. distributor of Subaru cars grew rapidly; Wall Street ignored it due to size and complexity of its capital structure.
✨ Outcome：Lynch bought early; as earnings and sales surged, the stock rose dramatically, contributing outsized gains to Magellan.

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