The Compound and Friends - How Peter Lynch Became The Greatest Fund Manager Of All Time

Episode Date: October 3, 2025

On episode 211 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ is joined by Peter Lynch, Vice Chairman of Fidelity Management and Research to discuss: Peter's legendary career, how individual investors can succeed in the market, the biggest investing mistakes, and much more! This episode is presented by Fidelity Investments and the all-new Fidelity Trader+, Fidelity’s most powerful trading platform yet. Learn more at: https://Fidelity.com/TraderPlus Sign up for The Compound Newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

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Fidelity investments and the compound are not affiliated. Views, opinions, products, services, and strategies discussed are not endorsed or promoted by Fidelity Investments. Fidelity Brokwich Services LLC, member NYS-E-S-I-P-C. All right. This is such an incredible treat. I was told, I don't know if you heard this, last people sit in these chairs was Oprah Winfrey. So if anyone finds a set of keys to a new car under your seat, that's not from us. That's from a prior event. Ladies and gentlemen, this is one of the honors of my career. I've been excited about this for weeks. Peter needs no introduction, of course, in this room, but I'm going to give him one anyway. He asked me not to do a long

introduction so that we don't embarrass him, but I have a couple, I got a couple of things I got to say. Is that okay? Sure, please. All right. Peter is Vice Chairman of Fidelity Management and Research, the Investment Advisory firm of Fidelity Investments, where he has worked since 1969. He is also president and chairman of the Lynch Foundation, which supports programs that focus on education, cultural and historic preservation, healthcare, and medical research. From 1974 to 1977, Peter was Director of Research at Fidelity, and from 1977 until his retirement in 1990, he was manager of the Magellan Fund at Fidelity. During his tenure at the Magellan Fund, Peter averaged a 29.2% annual return consistently

That's right. That's right. Consistently more than doubling the S&P 500 market index, making it one of the best performing mutual fund in the world and the best 20-year return of any mutual fund ever. During that time, Magellan's assets under management increased from $18 million to $14 billion. Ladies and gentlemen, Peter Lynch. All right.

Anything you want to get off your chest before I start? Roll, let's roll. All right. There are a lot of reasons why you're on the Mount Rushmore of the greatest investors of all time. One of them is obviously your track record. Another is how much wisdom you are willing to share with everyone else via books and interviews,

which back then was very rare. But among your greatest achievements, is the fact that you went out on top, literally at the height of your popularity and your performance in 1990. That was 35 years ago. You were 46 years old at the time, and I wanted to start by asking you about that decision.

Well, I love the firm. I still love the firm. It's the best ever put together. And my father died at 46, and I was 46. I remember that number. And I was in the office every Saturday, 7 o'clock. We said that Fidelity,

we get up a basketball game on Saturday. And in Wellington, they couldn't play double solitaire. I'm sorry. Every day I enjoyed it, people are fantastic. We had three daughters, and we just wanted to spend more time with my wife and the third hour.

And I was lucky enough to Fidelity. I said, just stay on. We'll give us a role here working with young analysts and fund managers, so it's been a great company. the best. Did you ever think about getting back into the game? Was there ever a moment or a temptation where you said, you know what? I think I want to, I think I could do this better than everyone

else out there still, and I want to go for it. I had all these offers to do a close-end fund. Okay. One billion, two billion, two percent fees. It marks up 30-fold. Yeah. 30-fold since I left. Okay. So if I just did average, it would be a $60 billion fund. Yeah. The temptation was never great enough, though. No, no. I'd still be working those same hours.

Yeah. Because one out of every 100 Americans was a Magellan. Is that right? One of every hundred Americans was a Magellivan. Okay. These are people that $5,000, $10,000 was very meaningful. Did the weight of that get to you at all while you were running the fund, the level of responsibility? Yeah.

I had a perfect record. I think America went down 10 times, those 13 years. I went down more every time in the market, every time. Okay. But you somehow managed to get through those moments when you were down. How did you do that? In 87, I got letters from people saying, hang in there, it'll be great. Don't worry about it.

Amazing. I wanted to ask you, if there were ever moments where you looked at something that was happening in the market, whether it was a bull market or a bear market, and said to yourself, if I were at Magellan, I know exactly what I was. I would be doing right now with this opportunity. Had you had those moments? Yeah, I did have that moment when Pets.com came public. Pets.com?

I said, this makes no sense at all, and then went up. So, yeah, I can't short. But there was so many companies of no value. And fortunately, Fidelity didn't own those damn things. So that was a period of you say, wow, what's wrong here? I wanted to ask you, who are the professional investors or the corporate leaders or other people on Wall Street that you either admire most today or that you looked at and learned from during your tenure, managing the, who are your heroes or who are your mentors? Let's say Lee Ayacocca would be really up there at Chrysler, Ford and Chrysler, and then Bob Walter. at the...

Well, let's pause. Wiley Iacocca. What was it about him that you admired? Well, imagine him invented the Thunderbird at the Mustang at Ford.

And he brings in the minivan in Jeep at Chrysler. Yeah. Incredible. It's just a wonderful person. And then, you know, this Bob Walter

when it was Cardinal was supplying supermarkets had a 37 million value when I came over. It's now 37 billion. This guy, Bob Walter. I mean, he's so good. And I'm trying to think of another fellow.

There's so many great entrepreneurs that aren't that well known. I think it's Al Named. He said, it's an amazing company in Florida. That's up a hundredfold. Ben Comerata, T.J. Max. I mean, T.J. Max is up a hundredfold. Yeah. That's Ben Comerada.

I mean, those are great people. One of the things that you've talked about is your... Watsko, is the incumbent. watts go one of the things you've talked about is your early introduction to wall street there was a lot of disbelief about stock market in the house you grew up in but then you got your first job caddying on the golf course and all you heard was how much money people were making tell us a little bit about that time in your life well actually you know people you know if you grew up in the 40s you heard about the big one the

depression. Yeah. There's one coming. What'd you think? Risk averse, it was risk averse, the barrow of four. And when I was a caddy, and people would talk about what stocks they buy. I'd look it up. A few months later, they were higher. Yeah. This is a pretty good deal, you know. So I didn't have money, but I, in addition to talking about their shots, but it was a great role of a caddy to be sure like an advisor to somebody. You're telling them, you know, you miss the screen, don't miss it to the right, or don't be short, or the line of puts, it's incredible. My friends were delivering newspapers. You know, at 5 a.m., I was making more on Saturdays than make it a whole week. So, and the president was, Mr. Johnson was the CEO,

and DeJour Sullivan was the president. And I caddy for him, he said, gee, why don't you interview for Job and Fidelity? How old were you when that offer came? 21 or... Okay. So, summer of 66, I was a... Somehow I was the only one to caddy for the president, so I got the job. It was like...

I think there was 75 applicants for three spots, but I got the spot in 66. And so they had to do one year award and two as the Army, came back in 69. So I owe it all being a caddy. What did you have to do at Fidelity to pay your dues to the point where they were willing to give you money

to invest for other people? Yeah, I think they forgot all my mistakes because I had the, I had the Tesla, the worst groups, the Tesla stocks, the steel stocks, the metal stocks. I don't know how I ever survived that, but they were, there weren't many winners there. They gave you the stocks to cover that nobody else cared about? Well, everybody had a group. Somebody did retailers, some did electronics, somebody did oil, some of the truckers, somebody did railroads. I wound up with the dregs. I wanted to ask you, what were some of the traits in the investors that you were learning from or the people

that you admired in money management? What were some of the qualities in those people or their habits that probably still resonate for investors today? When I started with this person, Alan Gray, he went back to South Africa about 10 years later, but he would work hard, he'd research companies, he'd listen to my stories. He was probably the best role model. I remember Alan Gray. Okay. But my peers were all great. I mean, all people around me,

everyone in the research part was really talented. So we're loaded with skill. It's funny. I interviewed one of your colleagues yesterday. She's a quantitative analyst at Fidelity. And it's so funny to hear you say that because she said the exact same thing. She said, any question I have about markets or the economy,

this whole building is filled with talented people who know what's going on. and all I have to do is walk down the hall and get the answer to my question. You still feel that way about the organization today? Oh, I believe. Steve Weimer or John McDowell, Joel Tilly has, Will Danoff, I mean, you know,

it's like the Yankees were, you know, 1920s. I mean, we're playing the Yankees right now. I won't tell you who I'm rooting for. So I thought it would be funny to take some of your legendary quotes and witticisms. They've all been attributed to you. You'll tell me if they're not actually you.

But these have been taken from interviews you've given over the years, from the books that you've written, from the things that you've written and published. I thought it would be fun to share some of these with the audience, and the audience probably can quote some of these by heart, and just have you react to them and tell us where it came from or what the lesson is behind the thing that you were trying to get across. I've got a couple of categories for these quotes.

I did a little taxonomy. So the first category involves the risk of investing in stocks. You said the real key to making money in stocks is not to get scared out of them. Why is that the key to making money in stocks? Well, more important to that is I have this expression, know what you own. I was going to do that one later.

I'll cross it off. But that's it. That's the most important lesson. Okay. Because you'll get shaken out. If the suck goes from 10 to 8, you don't know what they're doing. What are you going to do with it? And I was saying earlier, I got a call.

I did an ad fidelity with Lily Tomlin. She's very close with Barbara Streisand. So I'm on vacation, my wife and two other couples. And my secretary at Paul Self says, Barbara Streisand's called three times. She'd really like to talk to you. And she's very nice. I said, sure, I got some time to have it.

So I called me, she says, I own all these stocks. And I'm getting up at 5 a.m. and looking at this stuff. And he says, I never did drugs. I never did marijuana. I just can't sleep. What do I do? I says, tell me five things you own. She named five companies.

I said, OK, what did they do? She didn't have any idea. He's an incredibly talented person. She had no idea what those companies did. Right. So what are you going to do if they go down 50%. Yeah. If you don't understand what you own, you're toast.

It sounds so obvious to hear you say it, but it's amazing. You talk about people spend more time researching a refrigerator they're going to buy than they do a stock. They're going to invest part of their life savings. People are very careful. They spend hours, get $50 off on an airplane flight. They look at everything. Right.

And they'll put $10,000 in some crazy stock they heard on the bus. us. You know, and, you know, and they have no idea what they're doing. And some have been this awful term before I got the business called, play the market. Play the market. You don't like that term. That is a, sometimes a noun, there's a verb, it's a very dangerous verb. Play the market is not what you do.

Okay. You buy good companies and some work, and you have to know what they do. There was this fireman, West of Massachusetts, the two companies, Tampax out there, friendly ice cream. You put $1,000 in a month for 10 years. Brilliant idea says, if they stop hiring, I'm going to leave. OK.

You made a million dollars. Huh. I mean, people have all these edges. People in the steel industry know it's getting better before I do. There's people have an edge. And they must go to a casino and bet on red. So by knowing the companies that you're invested in,

there's a higher likelihood that you'll be to stick with them when other people are scared? The average range for a stock on the New York Stock Exchange. The average high, average law, every year is 100%. The stock might start at 20, sell at 28, finish at 14, finish at 20. There's 100% move every year. So it's 50% up, 50% down-ish, and that's how it's 100% swing in the price. That's the average stock.

Wow. And most stocks you're going to buy, they're probably going to go down. the odds sometimes they go up. If the story's powerful, like Watsko or Chrysler, you might buy it up. If you don't know what they do and it goes down, and I've had people say, this stock's gone from 50 to 1.

How much can I lose? And I say, well, wait a second. If somebody put $10,000 in at 50, and you put $50,000 at 1, it goes to zero, who loses the most? I mean, stocks go. to zero. I've had them. I wasn't buying them on the way to zero, but stocks go down. If you don't understand what they do, if you can't explain to an 11-year-old and a minute or less, why you own it, not the sucker's going up. I've heard that one before. Why, what's the story that's coming? They're good business, good balance sheet. They're fine. That's why I own it.

You've instructed investors to write a script for the stock they're going to buy. Write the story down. Why is the stock going to work? Or why is it undervalued? He said, I've told this to people in high school and call it saying, make a paper portfolio, pick 10 stocks, and watch them over a year or two, and say why you bought them. List the reasons.

And see what happens. That's what we're about. We do this. We have those, our fund managers, they don't wait for the analysts come in. They're out researching companies. They're on the phone talking to companies. Every fund manager is,

the highest role of failure, is an analyst. A funder's analyst. We have analysts under that. We have all this information coming in. It's staggering out of the information. I could go back in time. We own a lot of Nike. This story's amazing.

I own a lot of Nike. And their inventories were out of whack. Not a good sign. It's before the Internet. We had to go to a library and get their quarterly report. Our library, fell in. We got the came in, we opened up. Inventories went down.

We backed up the truck. I mean, the concept of, you know, They used to mail it out by mail to the shareholders. Now they have a website that's everybody on the planet knows what they do. Information today is unbelievable. You can't understand they have company presentations. It's a lot easier to understand what you own today. So I think you're saying in today's day and age you have no excuse not to know the companies you own.

It's too easy. It's too easy. You don't need a Bloomberg. They have websites. Here's another one on risk. You said far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves.

Talk about that. Well, I think people, you know, they're always worried the market's going around, and it does, as I mentioned. And, you know, two years ago they were saying 2004 was going to be a down year for the economy, and 25s be a down year. I mean, every year.

I think economists have predicted 33 of the last 11 recessions. Yes. With great certainty. Yeah. Yeah, yeah, yeah. And I think, you know, people are, they're basically, it's a, you look dumb in this business. You're terrific in this business.

You write six and a half times out of ten. That's a great score. Even if you write five times out of ten, if you own Costco or Walmart or, I can't pronounce in a video. getting close to me. I think you nailed it just there. That offsets your mistakes.

Yeah. You have to have these winners, offset mistakes, and that's what we've done for 70 years at Valley. So you've got two more on this topic. I'll read them both. You said you get recessions, you have stock market declines. If you don't understand that's going to happen,

then you're not ready, you won't do well in markets. You also said, people who succeed in the stock market also accept periodic losses setbacks and unexpected occurrences how important is it for the average I hate the term average investor for the typical investor

to go into this business understanding there's no way to dance around these things they're going to take place you're going to have to live through them would you say that's one of the paramount things because that's what I think well the point is when if somebody has three children

about to start college in two years. They shouldn't be in the stock market. That's right. They should be in the money market fund. It depends. If you get your house, paid down your mortgage, then you can invest.

And it's been a great place to be since, you know, you're 1900. Yeah. One of the more timeless things that you've said, and it comes off as sarcastic, but I think the last 15 years have really

proven the value of this idea. Coming out of the great financial crisis, the most in vogue style of investing was macroeconomic hedge funds, because there were a small handful of people who determined that the housing crisis would ultimately

bring about a recession. And those people were revered for a couple of years. You've never really been big on trying to outguess everyone else on the economy, and you said, if you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes. I still quote you to this day when clients call up and they want to talk about the latest labor report or what the Fed's going to do.

Tell us, how long did it take you to figure that out, and how much pushback did you get when you said it from people that were economists or focused on the macro? Well, I don't remember Fidelity ever have an economist, so we just buy stocks. She's here tonight. So I'd love to get next year's Wall Street Journal. Yeah.

I'd pay at least five dollars for next year's Wall Street Journal. And hands off to people did the big short. I had no idea how bad the housing market was, how bad people had second mortgages, they had improvement loans, they were underwater in their house. I had no idea. Hats off to them.

Yeah. But I look at facts, like what's happened to debt, credit card debt. You can get that now. What's happening to savings rate? What's happening to employment? I'd love to know what's happened in the future. I've been hoping I could get that in the last 81 years. It's not available.

So I just deal with what's now? What's happening to use car prices? What's happening, price of oil? And you look at the industries that have gone from, miserable to getting better. Like Chrysler. I mean, I remember people says, gee, you're really good on that show, but how can you possibly recommend Chrysler? You know, it's going bankrupt. You know, well, they had two billion in cash and they had enough money for the next three years. They weren't going bankrupt, but you know, so I think the best stocks I had, I think if a hundred people did work on it, 99 would say that's better than I expected. So I use this for one of our great fondment, Joel Tillinghast. I wrote it forward to his book, and I always said, the person that wins the most, in terms of the most rocks, wins the game.

And I said, Joel Tilihanes is a great geologist, because if you look at 10 stocks, you probably if I won, that's mispriced. Yeah. Look at 20, you'll find two. Look at 40, you'll find four. And that's what we've been doing in Fidelity. we just don't look we look at everything

yeah so you're not discounting the value of economic data you're saying if it's not from the future the market already understands this yeah I mean I want to know facts right now yeah that's important you said behind every stock as a company find out what it's doing

some of the great stories about your big investment success involve hands-on observation that you had been able to make living your real life, being in a supermarket, being in a shopping mall, looking at what people are doing. I think that over the years, that idea has kind of been mischaracterized as

if you use the product that's automatically a good stock, which is not what you meant at all. Could you explain the difference between those two ideas and why that's so important? A lot of people, I've met so many nice people earlier tonight, and a lot of them had read my book, up on Wall Street, and I had this story about I had a great investment. My largest position was in Haynes that had these panty hose called legs.

They weren't that sheer, they really fit. But most pantyholes are being sold in fancy department stores. This was at the supermarket. People go to a supermarket once a week. They go to a fancy store once every couple months. My wife went a little more often, but the, and I went with her. And I went with her. So this was an incredible success.

Incredible success. But then a larger company called Kaiser Roth put the thing right next to it. It was called No Nonsense Pinoes. So I went to two different stores, about 65 different pairs of no nonsense panos. Now, what kind of look did you get from the clerk in the process of that activity? Yeah. Yeah. It was an odd purchase.

I spread it over three stores, but I gave it out to everybody at Fidelity. Yeah. Give me some feedback on this. They said, it's not that good. Okay. It's not that good. Okay. And the other one, the other one, the first stock I bought in Magellan was Taco Bell.

And I had to say to, I own this myself. Is it okay? Who is clapping for Taco Bell? That's not one of my people, was it? Okay. So I said, can I buy some stock that I own myself? I said, sure. You just can't sell it after you buy it.

You have to hold on. So that's when we had Ma Bell and all these Bell companies. And so I called the trade room, I said, I want to buy Taco Bell. Ned Johnson came down, and he says, what is Taco Bell? and I explained what a taco was they're only in Southern California they're going to Central California I didn't get a burrito supreme

I explained to a taco was because it's basically a taco has very little meat a lot of protein you can sell a really good meal for a low price and I get robbed on it because Pepsi Cola bought pizza hot

and they bought some Kentucky to sell Pepsi this stock would have gone to 500 my largest position it was 18, they bought it 30. We'd have gone to 500, 600, but they bought it to sell Pepsi. When Chipotle came along,

did you avail yourself of the opportunity? I did, I did. But how I miss Starbucks, I don't get that, you know. I went Dunkin' Donuts. How did I miss Starbucks? I mean, you missed Starbucks? Brain cramping, I didn't buy it, well. Okay, you've got some great quotes

about portfolio management, and here are a few of them. You said, in the long run, a portfolio of well-chosen stocks and or mutual funds can outperform the most sophisticated investment strategy. I think there is a cottage industry today, and probably there has been

for a long time, of people selling complexity to investors. It's one of the best sellers on Wall Street. Just that simple statement, I think, very much is something that most of us would associate with fidelity and very much is something that we would associate with you.

you. Why do people need to hear that message today? What's funny, earlier on, I met maybe 100 people to chat with them. Somebody said in the audience, they shoveled chicken poop, and they use the word where Hans would hit. Is the person here with the chicken poop in New Jersey? Waving at the top, you won't be able to see. Okay.

Congrats. He decided to be a serious investor do hard work. He said he's done extremely well. Yeah. So do you think that that's still possible today, given how armed to the teeth professional investors are with data and tools and high-frequency access?

Is it still possible to be someone who, just on a part-time basis when they get home from work, reads about stocks and makes decisions? You still believe in that? Well, I'll tell you a story personally. My daughter's get me an iPod. This is before the iPhone. Yep.

And the PC business was terrible. They're selling for $8,900 bucks, making $20. They had a decent balance sheet. The iPod was $200, and they'd make $150 on it. Yeah. The iPod financed the iPhone. You know, it just did some work. And the company had $300 million in cash.

This is Apple in 2001-ish. I'm not sure. Right. Okay. But, you know, things change. Companies are dynamic. Something comes along, and things go from terrible, or we use a term, or appropriate, crappy to semi-crapy,

to better to terrific. Something happened at Apple. They were now going to make a lot of money. I had no idea. I have a phone on me on iPhone, but I had no idea what's falling. But the stock easily was a triple, just on that alone. This is one of your more famous quotes and made famous by being re-quoted by Warren Buffett.

You said, selling your winners and holding your losers is like cutting the flowers and watering the weeds. That's a great one. That's in all time. You were known to hold on to winners for a very long period of time. A lot of people were quick to take profits so they could say I won.

Tell us the Warren Buffett connection to that quote and why it's meaningful? I don't know I get my landline, but I get this call, Annie, I think it was like seven, our middle daughter. This is a Warren Buffett on the phone here. What year do you think this is,

if you could remember, well, what era is this? I know. Who knows? It was way beyond the dark ages. All right. Yeah. So I pick up the phone.

This Warren Buffett from Alabama in Nebraska. My hand report's doing two weeks. I love a quote, Can I use it? This is all in about three seconds. He says, what's the quote? He says, you know, getting rid of your winners

and holding the losers is like, you know, wiring the weeds and cutting the flowers. I said, it's yours. I said, if you don't come to Omaha and see me, your name will be mud in Nebraska. Did you do it?

Oh, yeah, many times. You built a relationship with Warren. He played bridge together. He's the best. I mean, there's no, Imagine he bought Apple like eight years after that iPod story

and made five-fold. Yes. And he had a huge position in IBM and he was going down. He says, I love stocks going down. I think IBM's great. He totally reversed. He got the hell out of IBM. Yeah. He's the best. Yeah. Round of applause.

I wanted to to ask you, is there any idea from the investing realm that you once believed that you no longer believe in? Or is there something that you've changed your mind about as time has gone on? Or do you still mostly believe all of the things that you did in the 70s and the 80s? It's the same thing. I mean, this success of Amazon. Yeah. Costco. Walmart. I mean, forget the, all the, you know, the technology companies at the or Oracle. I mean, that's what's done well

for average investors, and Fidelity was heavy invested in all those. Just using public information. You know, we look at a lot of companies and we find some companies that are turning around. Like, you know, we bought some gold stocks when people hated gold.

Yeah. So the business doesn't change that much. The names of the companies change, the management changes, but the business is still very much as it was when you were. Well, I think there's one major change. I think 15 years ago, there was 8,000 public companies. It's about 3,000 now.

Now there's 3 or 4? Yeah. So part of the upside, that 10-bagger that I love for that term, sometimes you have this great stock, if you hold on to it, it's not the Pepsi steel then. Private equity, you think the stock's going to 30, it's 3, and private equity buys a whole damn thing out at 6. They take it away from the market.

Yep. Yeah. Yeah. That's painful. I wanted to ask you about the modern stock market, specifically the AI boom that's been, for the last three years, arguably, the biggest driving force behind earnings growth, behind revenue growth, excitement about stocks. What do you think about it when you watch it or how involved you with AI stocks with your own money right now? I have zero AI stocks and the um okay I'd literally couldn't pronounce a video until about eight months ago yeah but we had people who fell out they're very tech I yeah I'm the lowest tech guy ever I mean you know my wife was mechanical my daughter's a mechanical yeah I

can't do anything with computers so um I just have yellow pads and a phone you know from your from your position as a third party to this, do you think investors have chased these ideas too far? Are there echoes of the 1999-2000 era to you when you look at it, or are you open-minded about it and you say maybe this is not going to end as badly as that instance did? I have no idea. Okay. I don't have a lot of stocks I like. Okay. Not in that category. So let's talk about your current portfolio. What are the stocks that you like today? Fidelity doesn't let me do this anymore, so. In fact, they don't let any employees do that.

I remember I was on television. I was saying, Coca-Cola's a spectacular company, but based on what they're doing right now, I think in 10 years, I think the stock would be the same price. I mean, the stock's, you know, priced in the next 10 years of growth.

Yeah. And we haven't to manage Coke's, IRA. I mean, they just did not go over big. They weren't thrilled with that. Okay. It was not a big success. So for good reasons. One of the things that you talked about in your books was the necessity of not chasing glamorous stocks. And one of the things you said you liked the best is when a company got

itself into trouble, where it was a salvageable situation, but nobody wanted to be caught dead owning it. One of the examples that you used famously was waste management. You said, nobody wants anything to do with this stock. Number one, they're involved with garbage. Number two, everybody thinks the mafia controls it. You made a lot of money there. Do you think that that heuristic for selecting stocks that are off the beaten paths still works for investors? Again, under my thesis that if 10 people look at it, nine will say this better expected. I don't think people are looking at waste management They just wouldn't look at it

So stocks are mispriced when There's a lot of knowing the class of fidelity We have a lot of good competitors Yeah And they're doing the same work we're doing And sometimes they're not looking at certain categories of stocks And what I also found out I've had companies that were losing $6 a share

And things got They started getting better But the industry hadn't recovered but they had certain things that now they're losing $2 a share. Right. Still not good, but not as bad. But I think that's $4 a share in Brewn.

Then they went from losing two to make and two and the stark corduble. Yeah. It's the same $4. Okay. Why weren't people looking at when they went from what were they doing

they went from losing six to losing two in a bad environment? Things didn't improve. They were doing something right. Can you tell us about the oxymorons of Wall Street? And some of us are here in the room. It was very original.

You went on this kind of tort of force. I don't want to call it a tirade, but this sort of monologue about, don't be fooled into thinking just because someone's a professional that they can do better than you or they know more than you. Warren's got a great quote about this.

He said Wall Street is the only place or people take a Rolls-Royce to get advice from somebody who took the subway. And in fairness, I took the subway to my first job on Wall Street for a long time. But you talked about the oxymorons, people that thought they knew everything just because they had proximity to the exchange.

And I think you were giving a pep talk to the reader of the book telling them, don't think that you can't be good at this too. You still believe that. Absolutely. I mean, I just think people, average people, feel of fidelity, that if they work hard, they're careful.

And things are not clear. I have a term like in poker term, the next car to turn over. This next car to turn over, I don't know what's going to be. It could be positive, it could be negative. But two years from now, this company's going to be better. Yeah.

And if the next car turns out, it's positive. But I think you should buy some now. This, and I don't, the next quarter may be, may not be better. I mean, we don't know. Companies are, get really tight in these quiet periods. So you're doing your best you can, but there's three things going to make this company have higher earnings in two to three years.

We should own it right now. Okay. And that's, and that you still think that approach is still the way people should be thinking and not think that somebody knows more than them? Well, I think, I think people, tend to concentrate on what's in the new high list.

And that's a good place to operate. I mean, one point, BJ's was on the new high list. One point, you know, raw stores on the new high list or Carvano is in the new high list. So companies in the new high list can go up, but I look at the stocks

on there on the new low list. Okay. And most some are crap, some of the good. That style of investing has fallen out of favor in recent years. Do you think it'll make a comeback? I hope so.

Some call it value investing, some call it bottom fishing, whatever the term is. Yeah. Okay, you still think there's something there. Well, we get one of the great managers ever. Bruce Johnson. Bruce here somewhere here.

Yeah, Bruce is here. Bruce Johnstone's in the audience tonight. He's a superstar buying down-out companies with a dividend yield. Yeah. Turn around. He worked incredibly hard. He did a lot longer.

and I did. He's a superstar, and he's a great person of Boop. He was very thorough and careful and prudent. And just like me, he was wrong, you know, four times out of ten. He's saying three. Only three. So I understand you don't, you're not particularly investing per se in the magnificent seven stocks. But you've always been an admirer of great businesses. These are, I, I I think you'd agree. These are among the greatest publicly traded companies we've ever seen in America. These are companies that, yes, they have trillion dollar market caps and they're not cheap. But these are companies with 30 and 40% profit margins, 20% revenue growth year after year after year.

You must, surely you must be impressed by these companies. Yeah. Facebook or Meta is incredible company. Yeah. Microsoft's a great company. Google is a great company. Amazon is a standard company. I'm a little vague on Tesla, but this BYD is making a car now in Hungary.

It's a third of the price and a good car. I mean, I can't get this humanoid thing about it. But every employee at Fidelity, we call on 1015 and say, I'd like to buy these three stocks, sell these three stocks, and they say, nope, can't do it. Fidelity is buying or selling. Every employee does that. So I don't have a chance of buying meta or Amazon these Fidelity's buying.

But that's fair. You could buy the Fidelity Spartan index fund if you want exposure to those. I don't know a lot of fidelity funds. Yeah. One of the concerns that probably a lot of people in the audience have right now, large cap stocks in general are selling at some of the highest multiples we've ever seen. Historically high, not the highest ever, but in the desile, let's say. So we're selling currently S&P 500, 22 times trailing 12 months earnings.

Granted earnings are growing, interest rates are falling. It sort of makes sense when you think about this being a CAPEX boom and low unemployment. There are a lot of justifiable reasons for it. Do you worry about future returns for the investor who puts a dollar to work today in the market? I'll ask somebody in the room. Do we run Costco's iron? or Walmart's IRA. This Costco's like a 55 times earnings.

Costco has an AI stock multiple, but they sell paper towels. It's a great company, right? Yeah. 55 times earnings. Or Walmart is 70 years old. Sam Walt was at J.C. Penny, then this great formula,

went in small towns. Imagine, example of being, you don't have sometimes you don't have to be in the first inning. Walmart comes public. He said, gee, it's a little common in southwest and southeast. I'm not sure

about them. So 10 years after they went public, the stock's up 10-fold. It's gone up 10th place. I missed it. It's now up 80-fold since then. 10 years, they're a 25-year-old company.

Yeah. And they copy the Kmart. formula, they're lower cost, they went to the big cities, they could kill Kmart, kill Sears. So it went up 80-fold after going on 10-fold. It's a 25-year-old company, 10 years of public. They're 18% of the United States. Then they went to 19, then the 20, then the 23. Yeah. And, you know, and then they had Sam's Club. And I had the same example of McDonald's. McDonald's was my biggest position. People said, it's all over for me. McDonald's. I said, well, wait a second. Why is that? Well, how many more McDonald's

can? Well, I think they can do really well in Europe. There's 450 McDonald's in France. Yeah. In France. Germany, 380. There's over 300 in England. There's 300 in Spain. There's more McDonald's outside the United States. So McDonald's that went up tenfold after that. People said, McDonald's is done. They just didn't think it through. Is the message to that the fact that a stock has already been successful tells you nothing about how much more successful it could be in the future? No, the facts were at that point they had 20 stores in France

on the way to 400. They had 20 in Germany. They had 20 in Spain. This was not an idea. They were doing it. Yeah. And people were lining up to buy a Big Mac everywhere. I wanted to ask you,

in the time that we have remaining, a couple of other things about the modern market, just so we could all get your take on them. And if you have no opinion, that's okay, too. In the last week, the SEC has said they would study an idea proposed by President Trump to ease up on the quarterly reporting burden for public companies and allow companies to report earnings on a semi-annual basis, which is how they do it in the UK.

Do you have an opinion, not a political opinion, but do you have an opinion on what that means for an. investors or whether or not that's something we should celebrate or have cause for concern. Is that something that you think about? I haven't really devoted a lot of attention to that, but I think three months is a very short period. Yeah. A very short period.

And you measured whether, and maybe the year before was very strong. So you're up against the strong. So there's some merit to having a longer period to see what's really happening in company than just three months. So I have not made a decision on that one. I wanted to ask you about the meme stock phenomenon that took place during the pandemic. From my perspective, and I'd love to hear if you agree with me or not. From my perspective, obviously, there were some elements of that that were reckless,

but the byproduct is we got 25 or 30 million people to open their first brokerage account, mostly people under the age of 30, where the prior generation was very slow to embrace stocks. So I sort of looked at it like it had a silver lining. Would you agree with that, or do you have a different take? The market bought them in 82 was 777. Yeah. Not 7,000, 777. The Dow.

Yeah. So we've had an incredible market since 82. We've had 10 or 12 declines, but maybe a few more. So people today, they're not used to, everybody I knew grew up, they were warned, The big one's coming. We've had 11 recesses in World02. We've never had a big one. But imagine in the Depression, we didn't have Social Security.

It wasn't Social Security. What a credible mention. People, when they retired, they had older, they moved them in their family. The family had to stop, cut back on their spending. We also, we didn't have unemployment compensation. We didn't have the SEC. The SEC did not exist.

They did not exist. There's so many things that are better, and we had a Federal Reserve that was asleep to move. So I think there was a lot of things that, you know, there's margin requirements now. I mean, this 2029, no one jumped out of windows. That was fabricated. To a minute, you said.

One percent of Americans own stocks in 1920s. I don't think a lot of people understand that. The losses were very contained to a small group of people. But we had an incredible depression. Yeah. 30% of people out of work, none of food, travel, farming environment. It was awful.

And people went through that. I've read stories about it. It was grim. You think we have evolved the economy and the markets to the point where it would be very difficult to repeat the quote-unquote big one? Well, we've had 11 tests. 11 recessions since.

And no one's ever got worse than 5, 6% decline in GDP. There's a lot of cushions now. 63% Americans own their house. You know, that was not true in the 1920s. You know, people have IRAs

and their fidelity. They're not going to panic. People are careful with their savings. I mean, the GI Bill allowed people to buy houses would 5% down create a lot of people with wealth most wealth in America is in their house

and that's not true in the 20s people were renting rent went up I mean there's so many buffers now that you know it's incredible how many positives there are and we had a lot of tests we had many opportunities to have a big one and we've had some

probably bad presidents some bad carverses We've had an economist, and we've made it through. It's a pretty good system. I like that message for people who are overdosing on Great Depression content on their social media feeds and constantly being fed that as a realistic possibility. I wanted to ask you one last question. This is an audience of some of the most successful, dedicated, self-directed investors, customers of fidelity. First of all, give yourselves a round of applause.

As someone who for decades has been the leading advocate of the self-directed investor, is there any parting words of wisdom for this audience or anything that you think they need to hear from you, that maybe they haven't heard from anyone else or haven't heard in a while? Is there any encouragement that you'd like to offer? We'd love to hear it. Well, I think this is a special group of friends. These people do hard work. They're careful.

They're prudent. They buy stocks. They understand what they own. You know, that's not true of most people. And my generation growing up, if you worked for a telephone company, if you work for utility, a gas company, whatever was, you had a pension.

You didn't worry about it. Now you have an IRA, a company matches it. You've got to decide what do you want to do with it. You're responsible now for your own retirement in a way that prior generations didn't have to think about it. You have to have it right. You have to decide. I had a son-in-law.

He wasn't happy of the company's working for. And they were going to put $5,000 in, and they were going to match it. He says, I don't want to do it. He says, well, can I put $5,000 in? And they'll match it? That's a double every year. Can I participate?

and you're irate, you know. And I'd love to tell the story about this fear, this AI fear. Please, please. So, in fact, I was talking to Joshua earlier, I was listening to a conference call. This company supplies semiconductor equipment. They were in this industry.

It was so sad. I was so sad. The poor CEO was talking, he was talking about A1, you know, the steak sauce, you know, And my 11-year-old grandchild knows the artificial intelligence. He's calling A-1. There are some people saying, it's not A-1, it's not AI.

But there's this fear that all jobs are going to go away. So I get a good example. 1984, they split up AT&T. The baby bells. It created the... Nine baby bills. Including Taco Bell. Yeah, Taco Bell was...

That was a Mexican one. Southern Bell. I'll go, but okay. So, they split up. One million people work for AT&T. We had 100 million jobs. One of every 100 Americans worked at AT&T. So it was 84.

So it's, what, 40 years later. This industry had phenomenal growth. There were no cell phones then. Remember pay phones? I remember, remember pay phones? There's texting. I mean, what's you doing in your phone? This has been one of the greatest growth.

industries. If you add together Verizon, T-Mobile, AT&T, they now have 400,000 employees. We went from a million to 400,000. It's 153 million Americans working today. We've gone from 100 million Americans working to 153. Yeah. It's a great country. We're creative. So the- This incredible conversation, America creates, China duplicates, and Europe legislates. So from your point of view, the people displaced by AI and other innovations to come in the future, they'll be doing something else. It's unlikely they'll be sitting there saying,

I wish I still had my job that AI took away. Yeah, I think more importantly, one job is going to go away. These are good paying jobs. The people that drive a truck, contracted trailer from a manufacturing firm to a distribution center on highways, not through Beacon Hill. They go back that night. That should be automated. Yeah. And likely will be, you would say? I would say in 20 years there'll be, we'll lose 500,000 jobs. Yeah. That's a really, and safety will be better, cost to go down. That's more important to me

than AI. And those are people who work hard. They don't need a... Sorry, automation is going to have a bigger impact than AI, you're saying? Automation has been incredible the last 50 years. And we've gone for 100 million jobs to 153, and Eastman Kodak's gone down,

your tire has gone down, Sears has gone away. I mean, all the growth is new companies and companies with 100 to 200 employees or less. The largest 500 companies have fewer employees than they did 50 years ago. The largest 500 companies have fewer employees than they did 50 years ago. All the growth in this country is entrepreneurs starting a little shop, starting something else. It makes our country great.

And the important thing is banks will lend to them. It's a great book, The Shoe Dog. Does anybody read the Shoe Dog? Sure. Phil Knight. Incredible. I mean, you know, it's a great read. Yeah. I want to thank you so much for spending some time with us tonight. How about a round of applause for Peter Lynch, ladies and gentlemen.

I also want to thank the folks at Fidelity for putting this event on, inviting us all here to be together. Congratulations on the new app. And thank you so much to the whole team who made this happen. Very appreciate it. Lastly, I'd be remiss if I didn't thank my team who set up a lot of the equipment that you see surrounding us tonight and will be tirelessly working on this video, editing the audio, so that the people who couldn't be here with us have an opportunity to watch it or listen to it later.

So, ladies and gentlemen, Daniel, John, Nicole, and Graham, Rob, Duncan. please give them a round of applause. Thank you guys so much. Okay, that's it from us. Ladies and gentlemen, thank you for being a part of this. We'll see you soon. Thank you.