I just saw a new interview with Peter Lynch, the famed fund manager from Fidelity.
You can watch it from here:
It includes plenty of Peter Lynch famous quotes, and knowledge that he has shared over the years.
This is the transcript below:
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Show Start
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[Music] All right, this is such a this is such
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an incredible treat. I was told, I don't know if you heard this, the last people to sit in these chairs uh was Oprah
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Winfrey. So, uh if anyone finds a a set of keys to a new car under your seat,
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that's not from us. That's that's from a prior uh event. Ladies and gentlemen, this is uh one of the honors of my
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career. I I've been excited about this for weeks. Um Peter needs no introduction, of course, in this room,
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but I'm going to give him one anyway. He asked me not to do a long introduction so that uh we don't embarrass him, but
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um I have a couple I got a couple of things I got to say. Is that okay? Sure. Please. All right. All right.
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Peter is vice chairman of Fidelity Management and Research, the investment advisory firm of Fidelity Investments,
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where he has worked since 1969. He is also president and chairman of the
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Lynch Foundation, which supports programs that focus on education, cultural, and historic preservation,
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healthc care, and medical research. From 1974 to 1977, Peter was director of research
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at Fidelity. And from 1977 until his retirement in 1990, he was manager of
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the Mellin Fund at Fidelity. During his tenure at the Mellin Fund, Peter
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averaged a 29.2% annual return, consistently
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That's right. That's right.
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Consistently more than doubling the S&P 500 market index, making it one of the best perform uh the best performing
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mutual fund in the world and the best 20-year return of any mutual fund ever.
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During that time, Mellin's assets under management increased from $18 million to
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$14 billion. Ladies and gentlemen, Peter Lynch.
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All right. Um, anything you want to get off your chest before I start? Roll. Let's roll.
Going out on Top
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All right. Uh, there are a lot of reasons why you're on the Mount Rushmore of the greatest investors of all time.
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One of them is obviously your track record. Another is how much wisdom you
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were willing to share with everyone else via uh books and interviews which back
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then was very rare. Um but among your greatest achievements is the fact that
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you went out on top literally at the height of your popularity and your performance in 1990. That was 35 years
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ago. You were 46 years old at the time. And I wanted to start by asking you
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about that decision. Well, I love the firm. I still love the firm. It's the best ever put together.
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And uh my father died at 46 and I was 46. I remember that number. And I was in
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the office every Saturday 7:00. We said fell we get up a
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basketball game on Saturday. And in Wellington they couldn't play double solitire, you know. Sorry. So uh
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every day I enjoyed it. People were fantastic. I just we had three daughters and I just wanted to spend more time
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with my wife and the third daughter. So, and I was lucky enough to finally said just stay on. We'll give you some a role
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here with working with young analyst and fund manager. So, it's been it's been great. Great company. The best.
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Did you ever think about getting back into the game? Was there ever a moment or a temptation where you said, "You
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know what? I think I want to I think I could do this better than everyone else out there still, and I want to I want to
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go for it." I had all these offers to do a close-end fund. Okay.
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1 billion, two billion, 2% fees. The mark's up 30fold.
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Yeah. 30fold since I left. Okay. So, if I just did average, it' be a $60
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billion fund. Yeah. The temptation was never great enough though. No. No.
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I'd have to I'd still be working those same hours. Yeah. Because one out of every hundred Americans was a Mellan fund. Is that
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right? One of every hundred Americans was a major fund. Okay. These are people that $5,000, $10,000
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was very meaningful. Did the weight of that uh get to you at all while you were running the fund? The
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the level of responsibility? Okay. I had a perfect record. I think the market went down 10 times those 13
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years. Okay. I went down more every time than the market. Every time. Okay. Um but you somehow managed to get
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through those moments when you were down. Yeah. How did you do that? in ' 87. I got letters from people saying, "Hang in there. It'll be great. Don't
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worry about it." You know, it was amazing. Um, I wanted to ask you if there were
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ever moments where you looked at something that was happening in the market, whether it was a bull market or
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a bare market, and said to yourself, if I were at Mellin, I know exactly what I
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would be doing right now with this opportunity. Had you had those moments? Yeah, I did have that moment when uh
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Pets Stock Tom came public and pets.com. I says, "What? This makes no sense at
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all." And then went up, so I can't short. So, but there was so many
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companies of no value. Yeah. And fortunately, Fidelity didn't own those damn things that So, that was a
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period to say, "Wow, what's wrong here?" You know? Okay. Um, I wanted to uh I wanted to ask
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you who are the professional investors or the corporate leaders or other people
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on Wall Street that you either admire most today or that you looked at and and
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learned from during your tenure managing the who who are your heroes or who are your mentors?
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I'd say Leakoka would be really up there at Chrysler, Ford and Chrysler and then
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Bob Walter at the Well, let's let's pause. WY Aayakoko. What was it about him that you admired? Well, imagine imagine the Thunderbird
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at at the Mustang at Ford. Then he brings in the minivan and Jeep at
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Chrysler. Yeah. Incredible. It's just a wonderful person. And then you know this Bob
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Walter when Cardinal was buying supermarkets had a 37 million value when
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it came public. It's now 37 billion. This guy Bob Walter I mean so good. And
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uh I'm trying to think of another fell. There's so many great entrepreneurs that
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uh aren't that well known that I think it's Al Namad. He's at uh it's a it's
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amazing company in in Florida. That's up 100fold or Ben Camarada. TJ Maxx and TJ
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Maxx is up 100fold. Yeah, that's Ben Camarada. I mean those are great people. One of the things that
Peter’s Introduction to Wall Street
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you've talked about is your Watskco is an income company. Watcoat Watskco. One of the things
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you've talked about is your early introduction to Wall Street. There was a
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lot of disbelief about the stock market in the house you grew up in, but then you got your first job catting on the
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golf course and all you heard was how much money people were making. Tell us a little bit about that time in your life.
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Well, actually, you know, people, you know, if you grew up in the 40s, you
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heard about the big one, the depression. Yeah. There's one coming. What you think?
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Risk averse. It was risk averse, the borrow of four. And uh but I was a caddy
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and uh people would talk about what stocks they're buying. I'd look it up and a few months later
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they were higher. Yeah. This pretty good deal, you know. So, I didn't have money, but I uh addition to
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talking about their shots, but it was it's a great role of a caddy because you're like a an adviser to somebody. Just tell them, you know, if you miss a
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screen, don't miss it to the right or don't be short or line of putts. It's a incredible my friends were delivering
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newspapers, you know, 5:00 a.m. I was making more on Saturdays than making the whole week.
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So, and the president was Mr. Johnson was the CEO and and Djour Sullivan was
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the president and I caddy for him. They said, "Gee,
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why don't you interview for job at Fidelli?" How how old were you when when that offer came? 21 or
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Okay. So, summer of 66, I was a somehow I was the only one to caddy for the president.
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So, I got the job. There's like I think there was 75 applicants for three spots, but I got the spot in ' 66.
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And uh so then I had to do one more year war and two years in the army. Came back in ' 69. So I owe it all to being a
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caddy. What uh what did you have to do at Fidelity to pay your dues to the point
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where they were willing to give you money to invest for other people? Yeah, I think they forgot all my
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mistakes because I had the uh I had the textile the worst groups the textile stocks, the steel stocks, the metal
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stocks. I don't I don't know how he ever survived that that they were there weren't many winners ever.
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They gave you the stocks to cover that nobody else cared about. Well, everybody had groups. Somebody did retailers, somebody did electronics,
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somebody did oil, somebody did truckers, somebody did railroads. I wound up with the drags.
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I wanted to ask you what were some of the traits in the investors that you were learning from or the people that
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you admired in money management? What were some of the qualities in those people or their habits that probably
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still resonate for investors today? We one when I started with this person Allan Gray, he he went back to South
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Africa about 10 years later, but he would work hard. He'd research companies. He'd listen to my stories. He
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he was probably the best role model. I remember Alan Gray. Okay. And but our our my peers were all great.
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I mean, all the people around me, everybody in the research was really talented. So, we're loaded with skill.
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It's funny. I um I interviewed one of your colleagues yesterday. She's a
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quantitative analyst at Fidelity. And it's so funny to hear you say that because she said the exact same thing.
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She said, "Any question I have about markets or the economy, this whole building is filled with talented people
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who know what's going on, and all I have to do is walk down the hall and get the answer to my question."
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Right. You still feel that way about the organization today? It's unbelievable. I mean, Steve Wymer, John McDow, Joel Tillyas, Will Dan off.
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I mean, you know, this like the the Yankees were, you know, in the 1920s,
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and we're we're playing the Yankees right now. I won't I won't tell you who I'm rooting
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for. So, I I thought it would be funny to take some of your legendary quotes
Famous Quotes
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and witisms. Um, they've all been attributed to you. you'll tell me if they're not actually you, but um these
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have been taken from interviews you've given over the years, from the books that you've written, from the things that you've you've written and and and
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published. I thought it'd be fun to share some of these with the audience. The audience probably can quote some of
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these by heart uh and just have you react to them and tell and tell us uh
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where it came from or what the lesson is behind the thing that you were trying to get across. Um, I've got a couple of
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categories for for these quotes. I kind of I did a little taxonomy. So, the
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first category involves the risk of investing in stocks. And you said the
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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?
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Well, more important to that is I have this expression, know what you own.
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I was going to do that one later. I'll cross over. But that's most that's it. That's the most important lesson,
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okay? Because you'll get shaken out if the song goes from 10 to 8. You don't know what they're doing. What are you going
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to do with it? And uh I was telling you earlier, I got a call. I did an ad for Fidelity with Lily Tomlin. She's very
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close to Barbara Stryand. So I'm on vacation, my wife and two other couples, and my secretary Paul says, "Barbara
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Streand's called three times. She'd really like to talk to you." And she's very nice. And you know, I said, "Sure,
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I'll I got some time." So, I called him and she says, "I own all these stocks and I'm getting up at 5:00 a.m. and look
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at this stuff." And he says, "I" she said, "I never did drugs. I never did marijuana. I I I'm just can't sleep.
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What do I do?" I says, "Tell me five things you own." She named five
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companies. I say, "Okay, what did they do?" She didn't have any idea. Here's an
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incredibly talented person. She had no idea what those companies did, right? So, what are you going to do if they go down 50%.
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Yeah. If you don't understand what you own, you're toast. It sounds so obvious um to hear you say
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it, but it's it's amazing. Uh pe you talk about people spend more time
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researching a refrigerator they're going to buy than they do a stock they're going to invest part of their life savings.
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People are very careful. They spend hours get 50 bucks off on an airplane flight. They they look at everything,
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right? And they put $10,000 in some crazy stock they heard on the bus, you know, and uh you know, and they
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have no idea what they're doing. And somebody invented this awful term before I got in the business called play the market.
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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
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the market is not what you do. Okay. You buy good companies and some
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work and you have to know what they do. There was this farm in western Massachusetts, the two companies, Tampax
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out there. Friendly ice cream. He put $1,000 in a month for 10 years.
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Brilliant idea. He says if they stop hiring, I'm I'm going to leave. Okay.
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You made a million dollars. Huh. I mean, people have all these edges. People in the steel industry know it's
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getting better before I do. these people have an edge and they
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they might as well go to a casino and bet on red, you know. So, by knowing the companies that you're invested in, there's a higher likelihood
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that you'll be able to stick with them when other people are scared. Yeah. The average range for a stock on the New York Stock Exchange, the average
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high, average low every year is 100%. The stock might start at 20, sell at 28,
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finish at 14, finish at 20. There's a 100% move every So, it's 50% up, 50%
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downish. And that's how it's 100% swing in the price. That's the average stock.
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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
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is powerful, like Watskco or Chrysler, you might buy it up.
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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 one. How
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much can I lose?" And I say, "Well, wait a second. If somebody put $10,000 in at 50 and you
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put $50,000 at one, if it goes to zero, who loses the most?
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I mean, stocks go to zero? I've had them. You know, I wasn't buying them on the way to zero, but stocks go down. If
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you don't understand what they do, if you can't explain to an 11year-old in a minute or less why you own it, not this
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sucker is going up. I've heard that one before. Why? What is what's the story of this company? They have good business,
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good balance sheet, they're fine. That's why I own it. Yeah. If you can't do that, you should buy a
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fund. You've instructed investors to write a script for the stock they're going to buy. Yeah.
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Write the story down. Why is the stock going to work or why is it undervalued? Because I've told this to people in high
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school and college saying, make a paper portfolio. Yeah. Pick 10 stocks and watch them over a
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year or two and say why you bought them. list the reasons and see what happens.
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Right? That's that's what this we're about. We do this. We have those our fund managers. They don't wait for the
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analysts come in. They're out researching companies. They're on the phone talking to companies. Every fund manager is the highest role is an
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analyst, fundraiser analyst. We have analysts under that. We have all this information coming in.
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It's staggering now information. I could go back in time. We own a lot of Nike. This story is amazing. I own a lot of
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Nike and their inventories were out of whack. Not a good sign. This before the
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internet. We We had to go to a library and get their quarterly report. Our
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library fell. We got the came in. We open up inventories went down. We backed up the truck. I mean, the concept of,
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you know, they used to mail it out by mail to the shareholders. Now they have a website. It's everybody on the planet
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knows what they do. Yeah. Information J is unbelievable. If you you can't understand they have company
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presentations. It's a lot easier to understand what you own today. So I think you're saying in today's day
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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. It's
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websites. Here's another one on risk. You said far more money has been lost by investors
Timing the Market / Know what you Own
18:33
preparing for corrections or trying to anticipate corrections than has been
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lost in corrections themselves. Talk about that. Well, I think people, you
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know, they're always worried the market's going to run and and it does, as I mentioned. Um, and
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you know, two years ago they were saying 2024 was going to be a a down year for
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the economy and 25 has been a down year. I mean, every year I think economists predicted 33 of the
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last 11 recessions. Yes. And with great certainty in my head.
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Yeah. Yep. And I think, you know, people are they're basically
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it's a you look dumb in this business. You're terrific in this business. If you write six and a half times out of 10,
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that's a great score. Yeah. Even if you're right five times out of 10, if you own Costco or Walmart or or
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I can't pronounce in the video. I'm getting close to be able to pronounce it. I think you I think you nailed it just
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there. Yeah, that offsets your mistakes. Yeah, you have to have these winners offset
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mistakes. And that's what we've done for 70 years at PI.
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So, you've got two more on this topic. I'll I'll read them both. Um, you said you get recessions, you have stock
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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
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also said people who succeed in the stock market also accept periodic losses, setbacks, and unexpected
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occurrences. How important is it for the average, I hate the term average investor, for the typical investor to go
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into this business understanding there's no way to dance around these things. They're going to take place.
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You're going to you're going to have to live through them. Would you say that's the param one of the paramount things? Because that's
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what I think. Well, the point is, what if somebody has three children about to
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start college in two years? They shouldn't be in the stock market. That's right. They should be in the money market fund.
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But depends if you got your house, paid down your mortgage,
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then you can invest and it's been a great place to be since, you know,
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you're 1900. Yeah. Um, one of the more timeless things that you've said, and it comes
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off as sarcastic, but I think the last 15 years have really uh, proven the
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value of this idea. Um, coming out of the great financial crisis, the most
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invogue style of investing was macroeconomic uh, hedge funds because there were a
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small handful of people who who determined that the housing crisis would ultimately bring about a recession. and
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those people were revered for a couple of years. Um, you've never really been big on trying
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to outguess everyone else on the economy. And you said if you spend more than 13 minutes analyzing economic and
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market forecasts, you've wasted 10 minutes. Y
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I I still quote you uh to this day when when clients call up and they want to
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talk about the latest labor report or what the Fed's going to do. Te tell us how long did it take you to figure that
21:55
out and how much push back did you get when you said it from people that were economists or focused on the macro?
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Well, I I don't remember if I ever have an economist. So, we just buy stocks and she's uh she's here tonight.
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Okay. So, I'd love to get next next year's Wall Street Journal. Yeah, I pay at least $5 for next year's Wall
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Street Journal. Know that. And hands off to the people did the big short. I had no idea how bad
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the housing market was, how bad people had second mortgages. They had home improvement loans. They were underwater
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in their house. I had no idea. Hats off to them. Yeah. But uh and but I look at facts like
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what's happened to debt, credit card debt, what's you can get that now.
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What's happened to savings rate? What's happened to employment? I'd love to know what's happened in the future. I've been
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hoping I could get that in the last 81 years. It's it's not available. So I just deal with what's now. What's
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happened to used car prices? What's happen price of oil? You know what what's you know and you look at
23:02
industries that have gone from miserable to getting better like like Chrysler. I mean I remember people says gee you were
23:09
really good on that show but how could you possibly recommend Chrysler? You know that it's gone bankrupt. you know,
23:15
well, they had 2 billion in cash and they they had enough money for the next three years. They weren't going
23:20
bankrupt. But, you know, so I think the best talks I had, I think if 100 people did work on it, 99 would say that's
23:28
better than I expected. So, I use this for one of our great fun
23:34
Joel Tillingast. I wrote a forward to his book and uh always said the person that wins the
23:39
most turns of the most rocks wins the game. And I said, Joel Sing is a great geologist because if you look at 10
23:46
stocks, you probably find one that's mispriced. Yeah. Look at 20, you'll find two. Look at 40,
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you'll find four. And that's what we've been doing at Fidelity. We just don't
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look We look at everything. Yeah. So, you're not discounting the value of economic data.
24:05
Great. You're you're you're saying if it's not from the future Yeah. the market already understands this.
24:10
Yeah. I mean the I just I want to know facts right now. Yeah, that's that's important.
24:16
You said behind every stock is a company. Find out what it's doing. Some of the great stories about your big
24:23
investment success involve hands-on observations that you had been able to
24:29
make living your real life, being in a supermarket, being in a shopping mall, looking at what people are doing. I
24:36
think that over the years that idea has kind of been mischaracterized as
24:42
if you use the product it's automatically a good stock which is not what you meant at all. Could you could you explain the
24:48
difference between those two ideas and and why that's so important? Well, a lot of people I met so many nice
24:53
people earlier tonight and a lot of them had read my book one up on Wall Street and I
24:58
had the story about I had a great investment. My largest position was in Hannes that had these pantyhoes called
25:05
legs. They weren't that sheer. They really fit. But but most panty hoes
25:12
are being sold in fancy department stores. This was at the supermarkets. Yeah. And people go to a supermarket once a
25:19
week. They go to a fancy store once every couple months. My wife went a little more often, but the uh the uh and
25:26
I went with her. the uh so this was an incredible success, incredible success.
25:33
But then a larger company called Kaiser Roth put the thing right next to it and
25:38
it was called nononsense pant. So I went to two different stores about 65 different pairs of nononsense
25:45
pantyos. Now what kind of look did you get from the clerk in the in the process of that activity?
25:53
Yeah, it was an odd purchase, but uh I spread it over three stores, but the uh but I
26:00
gave it out to everybody at Fidel. He Yeah, give me some feedback on this.
26:06
They said it's not that good. Okay. Fundamentals, it's not that good.
26:12
Okay. So, and the other one the other one the first stock I bought
26:17
at in Mellan was Taco Bell and I had to say I had to say to I own
26:24
this myself. Is it okay? Who was clapping for Taco Bell? Is that It's not one of my people, was it? Okay.
26:32
And uh so I said, "Can I buy some stock that I own myself?" Said, "Sure." You
26:37
just can't sell it after you buy. You have to hold on. So, so that's when we had Ma Bell and all these Bell
26:44
companies. And so I called the trade room. I said, "I want to buy Taco Bell." They said, "What is Taco Bell?"
26:51
And I explained what a taco was. They're only in Southern California. They're going to central California. I
26:57
didn't get a burrito Supreme, but I get I explain a taco because it's basically a taco has very little meat, a lot of
27:04
protein. You can sell a really good meal for a low price. And I got robbed on it because Pepsicola bought Pizza Hut and
27:12
they bought some Kentucky by Chicken. They bought Taco to sell Pepsi, right? This stock would have gone to 500.
27:18
Yeah. My largest position was 18. They bought at 30. Okay. Would have gone to 500, 600. But they
27:24
bought it to sell Pepsi. When Chipotle came along, did you avail yourself of the opportunity?
27:30
I did. I did. But how I miss Starbucks? I don't get that. You know, cuz I own Dunkin Donuts.
27:36
How did I miss Starbucks? I mean, you missed Starbucks. Brain cramp. I didn't buy it. Well, okay. Um, you've got some great quotes
27:44
about portfolio management, and here are a few of them. You said, "In the long
27:49
run, a portfolio of well-chosen stocks and or mutual funds can outperform the
27:55
most sophisticated investment strategy." I think there's a cottage industry today
28:01
and probably there has been for a long time of people selling complexity to investors, right?
28:07
It's one of the best sellers on Wall Street. Um just that that that simple statement I
28:14
think uh very much is something that most of us would associate with Fidelity and very much is something that we would
28:20
associate with you. Why do people need to hear that message today? What's funny earlier on I met maybe hundred people to
28:27
chat with them and somebody's in the audience they they shovel chicken poop and they use
28:34
the word Ronzo hit who's there's a person here with the chicken poop in New
28:39
Jersey and he waving at the top you won't be
28:44
able to see okay congrats but but he he decided to be a serious investor do
28:52
hard work he said he's done extremely well. Yeah.
28:57
So, do you think that that's still possible today given how armed to the teeth professional investors are with
29:04
data and tools and high frequency access? Is it still possible to be
29:09
someone who just on a part-time basis when they get home from work reads about stocks and makes decisions? You still
29:16
believe in that? Well, I'll tell you a story personally. My daughters get me an iPod. This before
29:23
the iPhone. Yep. And the the PC business was terrible. They're selling for 80 or 900 bucks,
29:30
making $20. They had a decent balance sheet. The iPod was $200. They make 150 on it.
29:38
Yeah. The iPod financed the iPhone. No, it just did some work. And the
29:44
company had 300 million in cash. This is Apple in 2001ish.
29:49
I'm not sure. Right. Okay. But it, you know, things change. Companies are dynamic. Something
29:55
comes along and things go from terrible or we use a term or appropriate crappy
30:02
to semi crappy to better to terrific. Something happened at Apple and they
30:09
they were now going to make a lot of money. I had no idea. I have a phone on me, an iPhone, but I had no idea what's
30:16
falling. The stock easily was a triple just on that alone. Um, this is one of your more famous
“…Cutting the Flowers and Watering the Weeds”
30:23
quotes and made famous by being uh recqued by Warren Buffett. You said,
30:30
"Selling your winners and holding your losers is like cutting the flowers and
30:36
watering the weeds." That's a great one. That's an all time. Yeah. Um, you were known to to hold on to
30:42
winners for a very long period of time. Y um, a lot of people were quick to take profits so they could say, "I won." Yep.
30:47
Yep. Um, tell us the Warren Buffett connection to that quote and and why it's meaningful.
30:53
I don't know how I got my landline, but I got this call. Annie, I think it was like seven, our middle daughter says there's a Warren
31:00
Buffett on the phone here. You know, I thought what year what year do you think this is? If you could remember. Well, what
31:05
era is this? I don't. Who knows? Was way beyond the dark ages. I was
31:11
all right. Yeah. But the So, I pick up the phone. This is Warren Buffet from Moment Nebraska. My end report's due in two
31:19
weeks. I love a quote. Can I use it? This is all in about three seconds. You know,
31:25
he says, "What's the quote?" He says, "You know, getting rid of your winners and holding the losers is like, you
31:31
know, wiring the weeds and cutting the flowers." I said, "It's yours." He said, "If you don't come to Omaha and see me,
31:38
your name will be mud in Nebraska." Did you do it? Oh, yeah. Many times. You you built a relationship with uh
31:46
Warren played bridge together. He's he's the best. I mean there's no imagine he
31:51
bought Apple like eight years after I I was that I iPod story and made fivefold.
31:57
Yes. And he and he had a huge position IBM. It was going down. He says I love stocks
32:03
going down. I think IBM's great. He totally reversed. He got the hell out of IBM.
32:08
Yeah. He's the best. Yeah. Round round of applause.
32:19
I wanted to ask you is there any idea from the investing realm that you once believed um you you just said I am
32:27
axiomatic about this this aspect of investing that you no longer believe in
32:33
or is there something that you've changed your mind about as time has gone on or do you still mostly believe all of
32:40
the things that you did in the 70s and the 80s the same thing I
32:45
this success of Amazon. Yeah. Costco, Walmart. I mean, forget the all
32:52
the, you know, the technology companies that or Oracle. I mean, that's what
32:58
that's what's done well for average investors and Fidelity was heavy
33:04
invested in all those. Okay. Just using public information. You know, you know, we look at a lot of companies
33:09
and we find some companies that turning around like, you know, we bought some gold stocks when people hated gold.
33:16
Yeah. So, the business doesn't change that much. This the names of the companies changed. The management
33:22
changes, but the business is still very much as it was when you were Well, I think there's one major change.
33:28
I think 15 years ago there was 8,000 public companies. There's about 3,000. Now there's three or four.
33:33
Yeah. So part of the upside that 10 bagger that I love that term
33:40
sometimes you have this great stock if you hold on to it it's not the Pepsi steel then private equity you think the
33:47
stock's going to 30 it's three and private equity buys the whole damn thing out at six they take it away from the market.
AI and The Market
33:53
Yep. Yeah. That's that's painful. I wanted to ask you about the modern
33:58
stock market. um specifically the AI boom that's been for the last 3 years
34:05
arguably the the biggest driving force behind earnings growth, behind revenue
34:11
growth, excitement about stocks. Um what do you think about it when you when you
34:16
watch it or how involved are you with AI stocks with your own money right now?
34:22
I have zero AI stocks and uh the um Okay. I I literally couldn't pronounce Nvidia
34:28
until about eight months ago. The u but we have people that are very tech. I
34:35
Yeah, I am the lowest tech guy ever. I mean, you know, my wife is mechanical, my daughter's a mechanical, I can't do
34:42
anything with computers. So, um I just have yellow pads and a phone.
34:47
Yeah. From your from your position as a third party to this, do you um do you think
34:54
investors have chased these ideas too far? Are there echoes of the 1999
35:01
2000 era to you when you look at it or are you open-minded about it and you say
35:06
maybe this is not going to end as badly as that instance did? I have no idea.
35:12
Okay. Don't have any. I have a lot of stocks I like but not in that category. So let's
35:18
talk about your current portfolio. What are the stocks that you like today? Fidelli doesn't let me do this anymore. So
35:23
okay, in fact they don't let any any uh employees do that. Okay. I remember I
35:29
was on television I was saying uh how Coca-Cola is a spectacular company.
35:35
But based on what they're doing right now, I think in 10 years I I think the
35:41
stock will be the same price. I mean it's the stocks, you know, priced in the
35:46
next 10 years of growth. Yeah. And we happen to manage KO's IRA. I mean, this did not go over big.
35:53
We weren't thrilled with that. Okay. It was not a big success. So, so for good reasons. Um, one of the
36:00
things that you talked about in your books was the necessity of not chasing
36:05
glamorous stocks. And one of the things you said you like the best is when a
36:11
company got itself into trouble where it was a salvageable situation but nobody wanted to be caught dead owning
36:18
it. One of the examples that you used famously was uh waste management. You said
36:23
nobody wants anything to do with this stock. Number one, they're involved with garbage. Number two, everybody thinks
36:28
the mafia controls it. Um you made a lot of money there. Oh yeah. Um, do you think that that
36:34
heristic for selecting stocks that are off the beaten path still works for investors?
36:39
Well, again, under my thesis that if 10 people look at it, one nine will say
36:44
this better than expected. Yeah. I don't think people are looking at waste management. They just wouldn't
36:49
look at it. So, stocks are mispriced when there's a lot of knowing the class
36:55
of fidelity. We have a lot of good competitors. Yeah. and and they're they're doing the same work we're doing and sometimes
37:02
they're not looking at certain categories of stocks. And what I also found out,
37:07
I've had companies that were losing $6 a share and things got they started getting
37:13
better. The industry hadn't recovered, but they did certain things and now they're losing $2 a share,
37:19
right? Still not good, but not as bad. But I think that's $4 a share of brewing. Then they went from losing two
37:26
to making two. The stock quadrupled. Yeah. It's the same $4.
37:32
Okay. Why weren't people looking when they went from What were they doing? They went from losing six to losing two in a
37:37
bad environment. Things didn't improve. They were doing something right. Can you tell us about the oxymorons of
The Oxymorons of Wall Street
37:43
Wall Street? And some of us are some of us are here in the room. Um you you it was very
37:52
original. uh you went on this kind of to force I don't want to call it a tirade
37:58
but this this um this sort of monologue about don't be fooled into thinking just
38:05
because someone's a professional that they can do better than you or they know more than you. Um Warren's got a great
38:12
quote about this. He said Wall Street is the only place that people take a Rolls-Royce to get advice from somebody
38:17
who took the subway. And uh
38:23
in fairness, I took the subway to my my first job on Wall Street for a long time. Um but you you you talked about the oxymorons,
38:30
people that thought they knew everything just because they were had proximity to the exchange.
38:36
And I think you were giving a pep talk to the reader of the book. I'm telling them, don't think that you
38:41
can't be good at this too. You still believe that? Absolutely. I mean I just think people
38:48
average people feel fidelity that if they work hard they're careful and
38:54
things are not clear. I have a term like the in poker term the next card to turn
38:59
over. This next card to turn over I don't know what it's going to be. It could be positive could be negative but
39:06
two years from now this company is going to be better. Yeah. And if the next car turns out it's positive buy it. But I think you should
39:13
buy some now. this and I don't the next quarter maybe may not be better. I mean
39:18
we don't know companies are get really tight in these quiet periods. So you're doing your best you can but there's
39:25
three things going to make this company have higher earnings in two to three years. We should own it right now.
39:32
Okay. And that's and that you still think that approach is still the way people should be thinking and not think
39:38
that somebody knows more than them? Well, I think I think people tend to
39:45
concentrate on what's hitting the new high list. Yeah. And uh and that's a good place to
39:50
operate. I mean, one point BJ's was on the new high list. One point, you know,
39:56
you know, Ross store is on the new high list or so or Carvano is a new high list. So, yeah,
40:01
companies new high list can go up, but I look at the stocks and they're on the new low list.
40:07
Okay. Most of them are crap. It's some are good. It's fall that style of investing has fallen out of favor in recent years.
40:13
Do you think it'll make a comeback? I hope so. Some some call it value investing, some
40:18
call it bottom fishing, what whatever the term is. Yep. Okay. You still think there's there's something there.
40:24
Well, we get one of the great managers ever. Bruce Johnson. Bruce, you're here somewhere. Yeah, Bruce is here. Uh Bruce Johnston's
40:30
in the audience tonight.
40:35
He's a superstar buying down companies with a dividend yield. Yeah.
40:40
Turned around. He worked incredibly hard. Did a lot longer than I did. He's a superstar and uh and he's great person
40:47
to boot, but he he was very thorough and careful and prudent and and just like me, he uh he was wrong, you know, four
40:55
times out of 10. He's saying three only three. Um, are you impre I so I
41:02
understand you don't you're you're not particularly investing per se in the magnificent seven stocks but you've
41:10
always been an admirer of great businesses. These are I I think you'd agree these are among the greatest
41:16
publicly traded companies we've ever seen in America. These are companies that yes they have trillion dollar
41:22
market caps and they're not cheap, right? But these are companies with 30 and 40% profit margins, 20% revenue growth. year
41:30
after year after year. You must surely you must be impressed by these these companies.
41:35
Yeah, Facebook or Meta is incredible company. Yeah, Microsoft's a great company. Google's a
41:40
great company. Amazon's a staggering company. I'm a little vague on Tesla, but uh you know
41:48
this BYD is making a car now in Hungary. It's a third the price and a good car. I
41:53
mean, I can't get this humanoid thing about, you know, but uh no, but every
41:59
employee at Fidelity, we call in a 10:15 and say, "I'd like to buy these three stocks, sell these three stocks, and
42:05
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 Neta
42:12
or or uh Amazon because Fidel's buying. But that's fair. You could buy the Fidelity Spartan index
42:19
fund if you want exposure to those. I own a lot of Fidelity funds. Yeah. Yeah. Um, one of the concerns that
42:25
probably a lot of people in the audience have right now, large cap stocks in general are selling at some of the
42:31
highest multiples we've ever seen. Yep. Um, historically high, not the highest ever, but in the decileis, let's say.
42:38
So, we're selling currently S&P 500 22 times, trailing 12 months earnings.
42:44
Granted, earnings are growing, interest rates are falling. It sort of makes sense when you think about this being
42:51
right a capex boom and low unemployment. There are a lot of justifiable reasons for it.
42:57
Do you worry about future returns for the investor who puts a dollar or work to work today?
43:03
Yeah. Uh in in the market, I'll ask somebody in the room, do we run Costco's IRA or or Walmart's IRA?
43:13
Is Costco's like at 55 times earnings? Costco has an AI stock multiple, but
43:18
they sell paper towels. It's a great company, man. Yeah. 55 times earnings.
43:25
Or Walmart is 70 years old. You know, Sam Sam Walt was at J C Penney this
43:33
great formula went in small towns. Imagine here's example of being you don't have
43:40
sometimes you don't have to be in the first inning. Walmart comes public. He said, "Gee, it's a little common in
43:47
southwest and southeast. Not sure about them." So, 10 years after
43:53
they went public, the stock's up 10fold. It's gone up 10 places. I missed it.
43:59
It's now up 80fold since then. These 10 years, they're 25 year old
44:06
company. Yeah. And they copied the Kmart formula. They're lower cost. They went to the big
44:11
cities. They could kill Kmart, kill Sears. So went up 80fold after going up
44:17
10fold because after it's a 25-y old company, 10 years in public, they're in
44:22
18% of the United States. Then they went to 19, then the 20, then the 23.
44:28
Yeah. And you know, and then they had Sam's Club. And I had the same example with McDonald's. McDonald's was my biggest
44:35
position. People said, "It's all over for McDonald's." I says, "Well, wait a second. Why is
44:42
that?" Well, how many more McDonald's can I have? Well, I think they can do really well in Europe. There's 450
44:48
McDonald's in France. Yeah. In France, Germany, 380. There's over
44:53
300 in England. There's 300 in Spain. There's more McDonald's outside the United States. So, McDonald's went up
44:59
10fold after that. People said McDonald's is done.
45:05
They just didn't they didn't think it through. Is the message to that the fact that a stock has already been successful
45:10
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 their way to
45:17
400. They had 20 in Germany. They had 20 in Spain. This was not an idea. They were doing it. Yeah.
45:23
And people were lining up to buy a Big Mac everywhere. Um, I wanted to ask you in the in the
The Modern Market
45:30
time that we have remaining a couple of other things about the modern market just so we could all get your take on
45:36
them. And if and if you have no opinion, that's okay, too. Uh in the last uh week, the SEC has said they would study
45:44
an idea proposed by President Trump to um ease up on the quarterly reporting
45:51
burden for public companies and allow companies to report earnings on a
45:57
semiannual basis, which is how they do it in the UK. Do you do you have an opinion, not a political political
46:03
opinion, but do you have an opinion on what that means for investors or whether or not that's something we should
46:09
celebrate or have cause for concern? Is that is that something that you think about? I haven't really devoted a lot of
46:15
attention to that, but I think 3 months is a very short period. Yeah, very short period. And you measured with
46:22
it and maybe the year before was very strong. So, you're up against a strong. So there's some merit to having a longer
46:29
period to see what's really happened to the company than just 3 months. So I have not made a decision on that one.
46:36
I wanted to ask you um about the meme stock phenomenon that took place during
46:41
the pandemic. From my perspective, and I'd love to hear if you agree with me or not. From my perspective, obviously
46:48
there were some elements of that that were reckless, but the byproduct is we
46:54
got 25 or 30 million people to open their first brokerage account, mostly people under the age of 30. Um, where
47:01
the prior generation was very slow to embrace stocks. So, I sort of looked at it like it had a silver lining. Yeah.
47:08
Would you agree with that or do you have a different take? The market bottom in ' 82 was 777.
47:16
Yeah. Not 7,000. 777. The Dow Dow.
47:21
Yeah. So, we've had a incredible bull market since 82. We've had, you know, 10 or 12
47:27
declines, but maybe a few more. So, people today, you know, they're not used
47:32
to Everybody I knew grew up, they're warned, the big one's coming. We've had
47:40
11 recessions two. We've never had a big one. Yeah. But imagine in in the depression,
47:47
we didn't have social security. It wasn't social security. What a criminal invention. People when they retired,
47:53
they got older. They moved in with their family. The family had to stop
47:59
cut back on their spending. They also we didn't have unemployment conversation. We didn't have the SEC. The SEC did not
48:07
exist. Yeah. Did not exist. There's so many things that are better. And we had a Federal
48:12
Reserve that was asleep. to to booth. So I think there was a lot of things
48:18
that you know this margin requirements now I mean this 9029 no one jumped out
48:25
of windows that was fabricated you said 1% of Americans own stocks 9029
48:33
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
48:41
30% of people out of work not enough food, travel farming
48:46
environment. It was it was awful and and people went through that.
48:54
I've read stories about it was grim. You think we have evolved the economy and the markets to the point where it
49:00
would be very difficult to repeat the quote unquote big one. Well, we've had 11 tests,
49:06
11 recessions since, and no one's ever got worse than, you know, five, six% decline in GDP. There's
49:13
a lot of cushions now. Yeah, 63% of Americans own their house.
49:18
You know, that was not true in the 1920s. You know, people have IAS that if
49:24
they're Fidelity, they they're not they're not going to panic. Um people people are careful with their savings.
49:31
Uh I mean, the GI Bill allowed people to buy houses, you know, with 5% down
49:38
create a lot of people with wealth. Most wealth in America is in their house. Yeah. And that was not true in the 20s.
49:45
People were renting, rent went up. I mean, there's so many buffers now that u
49:50
you know, I mean, it's incredible what how many positives there are. I mean, we had a lot of tests. We had many
49:56
opportunities to have a big one. And we've had some incredibly bad presidents, some bad congresses, we've
50:03
had bad economists, and we've made it through. It's a pretty good system. I I
50:08
like I like that message for people who are overdosing on um Great Depression
50:14
content on their social media feeds and constantly being fed that as a realistic
Words of Wisdom
50:20
possibility. Um I wanted to ask you one last question. Um this is an audience of
50:26
some of the most successful, dedicated, self-directed investors, customers of
50:31
Fidelity. Uh first of all, give yourselves a round of applause. [Applause]
50:40
as as someone who for decades has been the leading advocate of the
50:46
self-directed investor, um is there any parting words of wisdom for this
50:51
audience or anything that you think they need to hear from you that maybe they haven't heard from anyone else or
50:57
haven't heard in a while? Is there any encouragement that you'd like to offer? We we'd love to hear it.
51:02
Well, I think this is a special group of friends. These people do hard work. They're careful. They're prudent. They
51:08
they buy stocks. They they understand what they own. You know, you know, that's not true of most people.
51:15
And my my generation growing up, if you worked for telephone company, if you
51:21
worked for utility, a gas, whatever it was, you had a pension. Yeah.
51:26
Didn't worry about it. Now you have an IRA. Company matches it. You've got to decide what you want to do with it.
51:33
You're responsible now for your own retirement in a way that prior generations didn't have to think about. You have to have it right. You have to
51:39
decide. But I had a I had a son-in-law. He he wasn't happy with the company he's
51:45
working for. And and they were going to let's say he's going to put $5,000 in
51:51
and they were going to match it. He says, "I don't want to do that." He says, "Well, could I put $5,000 in? They'll match it. That's a double every
51:58
year. Can I participate in your IRA? You know,
52:04
and I'd love to tell the story about this fear, this AI fear. Please, please.
52:10
So, in fact, I I was talking to Josh earlier. I was listening to a conference call on this company supplies
52:19
semiconductor equipment. They were in this industry. And it was so sad. I was
52:24
so sad. The poor CEO was talking. And he's talking about A1, you know, the
52:30
steak sauce, you know, and my 11-year-old grandchild knows the artificial intelligence that he's
52:36
calling A1. And there must be people saying it's not A1, it's AI, right? But
52:41
uh but there's this fear that all jobs are going to go away. So I get I get a
52:47
good example. 1984 they split up AT&T
52:54
the baby bells and created the nine baby bells including Taco Bell. Yeah, Taco Bell was
53:01
that was a that was a max Southern Bell. Taco Bell. Okay. So
53:07
they split up 1 million people work for AT&T. We had 100 million jobs.
53:14
One out of every 100 Americans worked at AT&T. So it's now that was 84. So it's what 40
53:21
years later. This industry phenomenal growth. There were no cell phones then.
53:27
Remember payoneses? Any remember payones? There's texting. I mean what you do on
53:32
your phone? This has been one of the greatest growth industries. If you add together Verizon, T-Mobile,
53:40
AT&T, they now have 400,000 employees.
53:45
We went from a million to 4,000. It's 153 million Americans working today.
53:52
We've gone from 100 million Americans working to 153. Yeah. It's a great country. We're creative. So
53:59
this incredible conversation, America creates, China duplicates, and Europe
54:05
legislates. Right.
54:12
So from your from your point of view, the people displaced by AI and other
54:17
innovations to come in the future, they'll be doing something else. It's unlikely they'll be sitting there
54:23
saying, "I wish I still had my job that AI took away." Yeah. I'm I think more importantly, you
54:28
know, one job is going to go away. These are good paying jobs. Yeah. The people that drive a truck, a
54:35
tractor trailer from a manufacturing firm to a distribution center on highways, not through Beacon Hill, they
54:42
go back that night. That should be automated. Yeah.
54:47
And like and likely will be, you would say? I would say in 20 years they'll be we'll
54:53
lose 500,000 jobs. Yeah. That's a really And there'll be And safety will be better. Cost go down.
55:02
That's more important to me than AI. And that those are people work hard. They don't need a
55:07
sorry automation is going to have a bigger impact than AI. You're saying
55:12
automation has been a positive. Automation has been dramatically up.
55:18
It's automation has been incredible the last 50 years and we've gone from 100 million jobs to 153 and Eastman Kodak's
55:28
gone down, Peter's gone down. Sears has gone away. I mean, all the
55:34
growth is new companies and companies with 100 to 200 employees or less. The
55:40
largest 500 companies have fewer employees than they did 50 years ago. Yeah. The largest 500 companies have fewer
55:48
employees than they did 50 years ago. All the growth in this country is entrepreneurs starting a little shop,
55:54
starting something else. That makes our country great. And the important thing is banks will lend to them.
56:01
It's a great book, The Shoe Dog. Has anybody read The Shoe Dog? Shoe Dog. Sure. Phil Knight.
56:06
Incredible. I mean, you know, it's a great read. Yeah. Um, I want to thank you so much
56:12
for spending some time with us tonight. How about a round of applause for Peter Lad?
56:18
I also
56:23
I I also want to thank uh the folks at Fidelity for uh putting this event on,
56:28
inviting us all here to be together. Um congratulations on the new app and thank you so much to the whole team who made
56:35
this happen. Really appreciate it. [Applause]
56:41
Um, lastly, I'd be remiss if I didn't thank my team uh who uh set up a lot of
56:48
the equipment that you see surrounding us tonight and will be tirelessly uh working on this video, editing the audio
56:55
so that the people who couldn't be here with us have an opportunity to watch it or listen to it later. Um, so ladies and
57:01
gentlemen, Daniel, John, Nicole, um, and, uh, Graham, Rob, uh, Duncan,
57:09
please give them a round of applause. Thank you guys so much.
57:16
Okay, that's it from us, ladies and gentlemen. Thank you for being a part of this. We'll see you soon. Thank you.
57:23
[Applause] [Music]
