I recently read “Beating the Street” by Peter Lynch. Peter was one of the most well know fund managers of his time when he ran the Fidelity Magellan fund. I read the book many years ago and, from time to time, I like to return to formative books such as this.
Often, the tenets of these books remain the same. Often things are very different, especially in the high flying stocks at the time of publishing.
Peter Lynch worships particularly at the alters of the retailers and restaurant chains. His thesis here was that these companies could continue to open spaces across the country and grow at 15-20% over the intermediate term with the stock prices of these companies going along for the ride.
The ability of a retailer to slap enough bricks and mortar together and expand across the country with above average growth levels is long gone…or is it? Maybe it’s just different. Specifically, with the restaurant chains, there are still examples of those that start out small with a niche and explode across the country. Chipotle(CMG: NASDAQ) and Buffalo Wild Wings ( BWLD: NASDAQ) come to mind, recently.
I think that the change as it pertains to restaurants is that the expansion across the country allows for further saturation of their product. Take, Shake Shack (SHAK:NASDAQ) as an example. They have expanded to larger and larger areas and hit their peak, in my opinion, about eighteen months ago. I expect that the new paradigm at McDonalds(MCD:NYSE) will wreak havoc on Shake Shack here shortly. Nevertheless, the model does allow for “maximizing shareholder value” as we all learn is the goal of management.
Retailers are a completely different story now. Specialty retailers are crumbling under the wrath and reach of Amazon ( AMZN:NASDAQ). One Up on Wall Street was written in 1993 before the Internet and online shopping so, no more needs to be said about the impact on retail.
Peter Lynch shares a similar opinion on the merits of investing in stocks that you know and can explain to a fifth grader. Sounds similar to Warren Buffett.
DISCLOSURE: This article was written for informational purposes only. It is not intended as investment advice and should not be relied upon as such. Consult with a qualified financial advisor or tax professional to determine the proper investment plan for you and your circumstances. I do not personally own or plan to purchase any investments spoken of here.