What I Learned From Warren Buffett, John Templeton and Peter Lynch

by Alexander Green, Investment U’s Chief Investment Strategist
Friday, July 8, 2011: Issue #1552

Sometimes I almost feel sorry for the market timers.

Two weeks ago, they were convinced that the political fight over raising the debt limit, the end of the Fed’s bond-buying stimulus program (QE2) on June 30 and continuing debt problems in Greece meant the market – already in a downtrend – had only one place to go: lower.

Yet the pessimism was overdone. Way overdone. So perhaps it’s no surprise that over the last eight sessions the Dow has rallied more than 700 points.

There’s a reason famed money manager Ken Fisher calls the stock market “The Great Humiliator.”

Nobody can know with any certainty what the stock market will do next week, next month, or next year. The sooner you recognize that, the sooner you can start making money in stocks…

Lessons Learned From Buffett, Templeton and Lynch

I learned this lesson from three world-beaters: Warren Buffett, John Templeton and Peter Lynch.

When I started out as a young stockbroker more than 25 years ago, I quickly learned that the analysts in my firm’s research department provided little timing advice of any value to clients. No, they weren’t wrong all the time. (That would have made them the perfect contrarian indicator.) But they were wrong so often that I lost any confidence in them.

After six months of sheer frustration, I had an epiphany…

Instead of listening to the talking heads at my firm, why shouldn’t I listen to the greatest investors in the world? As this was the early 80s, it was Warren Buffett, who ran Berkshire Hathaway, Peter Lynch, who managed the Fidelity Magellan Fund, and John Templeton, who headed the Templeton Growth Fund.

These men had very little in common in their investment approaches:

• Buffett was (and is) a value guy

• Lynch was a growth analyst

• Templeton was a global markets pioneer

But they all started from the same premise: They didn’t have a clue what the stock market was going to do.

A Valuable Investment Lesson for Any Investor

That was fine, because they knew something much more valuable: how to identify companies selling for far less than their intrinsic worth. And when the market recognized that value, they sold them.

I know investors who have spent a lifetime (and a fortune) in the stock market and have still not learned this lesson. Or lack the intestinal fortitude to follow it.

Worse, there are a number of gurus out there who are convinced that they have the smarts – or a system – that allows them to get in and out of the market just in the nick of time. Yet you’ll notice that system (ahem) always goes on the fritz just as soon as you start to follow it.

Count yourself a sophisticated investor the day you wake up and say, “Since no one can tell me with any consistency what the economy and the stock market will do, how should I run my portfolio?”

The answer to that question is: a well-defined, battle-tested investment approach that achieves high returns with strictly limited risk.

Of course, everyone in the industry claims that they’re beating the tar out of the market.

Our approach is based on a market-neutral investment philosophy. Our focus is on teaching investors how to seek out the most undervalued opportunities in the market.

As Buffett, Lynch and Templeton famously proved, that’s what actually works.

Good investing,

Alexander Green

2 Responses to “What I Learned From Warren Buffett, John Templeton and Peter Lynch”

1. bob unger Says:
   
   July 8th, 2011 at 10:07 pm

   Check out what “famed investor” Ken Fisher prognosticated regarding the real estate market in 2008. The man is clairvoyant—-noooot!

   Reply

2. G. Pacaud Says:
   
   July 9th, 2011 at 12:16 am

   Where is Greenbrier Hotel. In which city.
   Not everyone is from USA.
   Please let me know.
   Thank you.

   Reply

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