Lynch from Investment Guru interview :
You could have bought Wal-mart 10 years after it went public. Let's say you're very cautious. You wait another 10 years. This was not a startup any more, even then you would have made 30 times your money. The reason is that after 10 years it had reached only 15% of te country.
You could say, this company has minimal costs, they're efficient, all competition says they're great, the balance sheet is great, products are terrific and they're self-funding. Why can't they go to 25%? Think of that and buy and hold. You have to ask: why can't this company go from 20 stores to 400 stores?
Q Some people say there is no point in trying to beat the market. Academics say that Lynch and Buffett are the outliers on the right tail of the distribution curve, the lucky orangutans that do things by luck. How do you answer this ?
Lynch : Well you could say that there are going to be a million tennis matches this weekend. And 500,000 people will lose and 500,000 people will win. Therefore should people not practice their backhand or serve? The question is : why not be a winner rather than a loser? You could be a better investor if you look at the balance sheet, if you knew what the company did, if you use the information you have. You would simply do a better job . Just like you would be a better tennis player if you worked on your weakness and improved strengths. The concept is maybe we should ban tennis, since half the people are going to lose so the other half can win.
Q What do you think of technical analysis?
Lynch : I like only one formation. The stock goes from 50 to 8. Then sideways for a few years between 8 and 11. Such stocks may make a nice research list. Now see what the situation is, if you're right it'll go up, if not it'll go sideways and you won't lose money.
PB Remember : The key is to increase your odds. Get more favorable odds. I'd like to believe that my odds are getting better with education. You can't be perfect but can increase odds only.
The fact that you're working with just a small part of the market and avoiding the whole (which includes bad ones) can translate in bettering the market if due diligence is done.
e.g. if I had read a bit about market P/Es etc, would maybe not have purchased tech stocks in 1998-99.
