When was the last time you bought a stock that gained over 1,000%?

Peter Lynch bought more than a hundred of them during his 13-year stint as head of Fidelity’s Magellan fund.

He called them “ten baggers” – stocks that increased in price more than tenfold. Some of his best picks include Fannie Mae, Ford Motor, Philip Morris, Taco Bell, Dunkin’ Donuts and General Electric to name a few.

Combining Growth and Value

Peter Lynch is best described as a growth/value investor. And his 29.2% annualized return over 13 years at Fidelity makes him the greatest mutual fund manager of all time. But what made him a true legend?

After stepping down from the Magellan throne, Lynch shared his secrets with retail investors.

His best-selling books, One Up On Wall Street and Beating the Street, laid out his investment process in clear and concise detail. Through these works, he taught small investors how to achieve market-beating success by using knowledge they already possessed.

His famous investment philosophy is simply, “Invest in what you know.” Since most people tend to become experts in a particular field, Lynch believed this basic principal could help individual investors find good undervalued stocks.

What separates him from other growth stock investors is his discipline to buy only at reasonable prices. This combination of growth and value made him a legendary stock picker.

Price Follows Earnings

Peter Lynch’s primary focus was on earnings, knowing that stock prices follow earnings over a large time frame. By buying shares when the price was temporarily depressed in relation to their earnings, he was able to profit from both the correction in price and the hopeful continuation of growth.

Avoid Hot Stocks

Lynch also avoided “hot” stocks and sectors. This included an avoidance of technology producers and seldom exposure to the energy markets. Even though he missed the boat on Apple and a few other tech giants, Lynch assures us that the losses from investing in these sectors would have far outweighed any potential gains.

“You cannot create wealth out of little slips of paper.” 

                                                                      Ludwig von Mises

I suspect the US public is really running out of money. I note the restaurants here in La Jolla are lacking customers. Last night I ate at one of my favorite restaurants, and I was the only one in the room. This lack of money seems to be affecting the big retailers. As proof, glance at the charts of the popular big retailers below.

Target appears to be fading and breaking down below its 200-day MA.

The word is that Walmart’s same store sales are slipping behind last year’s sales, and the stock has suddenly taken a dive.

Costco is super-competitive, but even this stock appears to be going nowhere.

As for gold, the spring and summer months tend to be negative for gold, ending with an extreme low for gold in July. Therefore, once we get past July, I expect better action from silver and gold. Although gold is in a bearish descending triangle, it is holding above support.

………………………………….

I’ve been thinking about the whole idea of the Federal Reserve and the government openly lying to the American people. It’s unbelievable that our representatives would have the unmitigated gall to feed us obvious lies. In the end the truth will come out, and the liars will (I hope) pay the price. 

We have been fed lies about the US economy for months on end. We’ve listened to lies about inflation; we’ve been told lies about our “healthy economy.” As far as I’m concerned, manipulation of the markets is tantamount to lying. Manipulating the markets (as per QE) is forcing the markets to behave in an unnatural way, thereby destroying the normal action of free markets and thwarting the forces of supply and demand. And I ask myself, what’s behind these endless lies?

It’s always a matter of money, position, and power. Thousands of men and women depend for their livelihood on employment at the Federal Reserve. They live in fear of losing their jobs. So naturally, one of their objectives is to preserve or endure their jobs. This means keeping the Fed alive at all costs. Underlying all this is fear. The fear in this case is that Congress may, one day, vote the Fed out of existence. So fear is really behind the lies, and thus the system perpetuates itself. Who, I ask, dares to tell the truth? The truth-teller in the end is too often squashed, and the lies go on. 

It’s up to the private media to expose the lies. But, for instance, when the media faces the question of US gold, the media is somehow silenced. So the ever-present possibility that the truth will come out — hangs in the balance.”

To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.

About Richard Russell

Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.

Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron’s during the late-’50s through the ’90s. Through Barron’s and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-’66 bull market. And almost to the day he called the bottom of the great 1972-’74 bear market, and the beginning of the great bull market which started in December 1974.

The Letters, published every three weeks, cover the US stock market, foreign markets, bonds, precious metals, commodities, economics –plus Russell’s widely-followed comments and observations and stock market philosophy.

Bill Bonner‘s note: You’ve probably heard well-to-do friends and neighbors talk about wealth inequality… and what “should be done about it.” 

Bill’s long-time business partner and editor of The Palm Beach Letter, Mark Ford, calls this “buying cheap seats in the I Want to Feel Good About Myself theater of the absurd.” 

Mark believes you can favor equality… or you can favor freedom… but you can’t favor both. 

Fair warning: This week’s Weekend Edition is not politically correct. But we think you’ll enjoy it nevertheless.

Why You Can’t Have Freedom AND Equality
By Mark Morgan Ford, Editor, The Palm Beach Letter 

At a dinner party last month, our hostess interrupted the small talk to make a little speech. She told us that she really hated oppression and inequality. She then invited us to talk about how we were combating oppression and inequality by doing good. 

A young woman – a yoga teacher – said that she had recently volunteered to teach a class to women in a detention center. She admitted that yoga “might not” change their lives. But she was “very proud” that they could “at least breathe in freedom” for an hour every week. 

The dinner guests oohed and ahhed. 

A man – a successful executive – said that he collects his family’s old shoes, stores them in the back of his Mercedes-Benz, and then distributes them to homeless people on the side of the road. 

The dinner guests oohed and ahhed.

Something – was it the canapés? – was churning in my stomach. I excused myself to have a quick cigar break. 

As I stood outside the posh apartment building trying to sort out my feelings, a relatively well-dressed man approached me and asked for a light. As I lit his cigarette, he informed me that his car had run out of gas. And since he happened to have just lost his wallet, he wondered if I could lend him some money to fill up his tank. 

I told him that I had heard that line before. He insisted that, in his case, it was true. I told him that my personal policy was to direct all my giving to my family’s charitable foundation. “But if you want to work,” I said, “I will pay you a dollar a minute.” 

The look on his face was a mixture of surprise, indignation, and disgust. He uttered a few unkind words and stormed away. 

Had he agreed to work, I would have asked him about his personal situation. I meant to keep an open mind. I don’t know nearly enough about homelessness and financial inequality. I wanted to know more. 

I returned to the party to find the recitations going full bore. But the subject had veered slightly from poverty to victims of prejudice. In particular, to the plight of African Americans, gays, and some group identified by an acronym I can’t quite remember. 

Not everyone was participating. But those who were speaking were positively brimming with good cheer. There is, apparently, nothing that makes some people happier than to tell other people how kind they are. 

This sort of social consciousness is nearly ubiquitous among Hollywood celebrities. It is also quite common among those who write letters to The New York Times. 

These are, for the most part, affluent people with college degrees. I sometimes wonder if they ever stop to think carefully about what they are doing? Do they ever wonder if they are simply buying cheap seats in the I Want to Feel Good About Myself theater of the absurd? 

The economic foundation of such ideas are popularly represented by writers like Paul Krugman, a columnist for The Times. 

Like so many of the guests at that dinner party, Krugman is proudly “in favor of” freedom and equality and worries that capitalism is making them scarce. He divides politicians and economists into two groups: The good guys that love freedom and equality and the bad guys that love capitalism and free markets. 

For most human enterprises, in fact, freedom and equality are nearly polar opposites. Free markets inevitably result in some degree of economic inequality, just as free societies result in some degree of educational, cultural, and social differences. 

There are many reasons for that. But the most fundamental reason is that human beings are not created equal. We are each a mixture of talents and handicaps, intelligence and stupidity, ambition and ennui, diligence and laziness. And even when we use the power of politics to enforce some degree of equality, people find a way to assert their differentness. 

What I’m saying is this: Either you favor freedom or you favor equality. You cannot favor them both. It is intellectually shallow and/or insincere to pretend that you do. 

Bill Bonner’s Note: Mark is editor of a monthly newsletter called The Palm Beach Letter. He has a simple goal – to help readers “get richer every day.” And he specializes in finding low-risk ways to generate wealth. Right now, Mark is offering Diary of a Rogue Economist readers the opportunity to try The Palm Beach Letter for a year (365 days) at his expense. If you’re interested in taking Mark up on his offer, you can find full details here 

Cash Is The Most Underappreciated Asset:

“I don’t see any asset that is terribly attractive. The most underappreciated asset is cash. Nobody likes cash. In the next 10 years, you will earn precisely 0 percent. In fact, you will lose money because Ms. Yellen is a money printer like all the others, and she will make sure that the dollar will depreciate in real terms. But for the next 6 months, cash will be most attractive. I don’t want to be in cash, but in the coming 6 months a lot of opportunities will come along.”

Mortage brokers were abuzz this week when Investors Group announced a 1.99% variable 3 year floating rate mortgage. But is does come with a few surprises.

While there’s no denying the importance of getting a low interest rate when you get a mortgage, but there are big caveats that come with some of the record discounting going on for residential loans.

CLICK HERE to read the complete article