We Asked Fidelity's Ex-President What Made Peter Lynch Great — and Where Private Credit Risk Hides

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Justin J. Carbonneau (0:35)

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Bob Pozen (0:37)

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Matt Zeigler (1:02)

You're watching Excess Return, the channel that makes complex investing ideas simple enough to actually use or better questions lead to better decisions. I'm Matt Ziegler. Justin Carbonneau is with me in the co-host seat. Our guest today, you might know him from when he was president at Fidelity. You might know his name from when he was chairman at MFS. You might know him from his time at the SEC in the George W era. And you might know him because you read the fund industry, how your money is managed, or maybe you're just in his class at MIT and you'll want to win some brownie points by picking up on what he's putting down today. We're going to hit all the bases. Bob Pozen, welcome to Excess Return.

Bob Pozen (1:40)

Thank you for having me.

Matt Zeigler (1:42)

All right.

Maybe not for the brownie points right out the gate, but we're going to go with Peter Lynch. He was at Fidelity. A lot of people know the buy what you know. That's all they quote. What do you think's misunderstood about Peter Lynch today?

Bob Pozen (1:58)

Well, I think the thing that's really impressive about Peter was that he's a great translator, meaning every event that happens in the world, he translates into what it means for stocks. So the rest of us, for instance, if we read about the war on Iran, we start thinking about politics and strategic issues. He made the lead thing to say, which companies are gonna benefit from this? So he's a great translator. The other thing is he's a fearless investor in stocks. He's willing to go into stocks when people are going the other way. That was most evident in October of 1987 when the stock market crashed. But he was a big buyer and of course did very well.

So his view is he's a long-term investor, stock market goes down, it's a buying opportunity. So those are two really impressive things about Peter. And I'd mention a third thing. He's a really good human being. He's been very philanthropic in Boston and he's a great guy to have lunch with.

He's just a really fine person.

Matt Zeigler (3:14)

What kind of lunch does Peter Lynch take?

Bob Pozen (3:18)

We just have a sandwich, nothing special.

Matt Zeigler (3:21)

All right, we'll take it. Well, speaking of lunches, I'll take you to Cherry Cokes and Dairy Queen for a second. Because I think the way that you just explain Peter Lynch rhymes with the way a lot of people think about Warren Buffett.

Compare or contrast those two personalities.

Bob Pozen (3:36)

Well, I think they're both similar in that they're both very smart.

They both have a deep understanding of companies, and they both stay the course. They have a strategy, and they stay with it. But given what their investment vehicle has been, they're very different strategies. Peter was managing Magellan Fund, and people could go in and out of that fund on a daily basis. So he basically had to have a very liquid portfolio, where he could sell stocks if necessary, if people redeemed.

Warren Buffett, on the other hand, is an insurance holding company. So he has a long-term investment perspective. So he can buy liquid stocks, he can buy types of bonds that don't trade very often. So he's got a very different long-term strategy. They both stick with their strategies, but they're very different.

Justin J. Carbonneau (4:40)

And I would imagine, too, the types of shareholder, you know, the shareholder bases of those two are different. In the mutual fund business, you're inevitably going to have performance chasers and in individual stocks, but Berkshire probably has much more long-term shareholders than, I mean, I think Fidelity Magellan and a lot of Fidelity Magellan funds do as well, but inevitably you get the performance chasers coming in, you know, after a great period of returns.