The One Percent Almanack

Wit and Wisdom on Investing, Business, and Life

Special Report: Peter’s Principles

Peter Lynch is a legendary investor whose investment record remains unmatched. He managed Fidelity’s Magellan Fund and stacked up annual returns in excess of 29 percent per annum from 1977 to 1990.

The term tenbagger was coined by Lynch. One Up On Wall Street is his most famous book. His other book — Beating the Street — is equally useful and worth reading several times. In this book, Lynch talks about 21 investing principles. He calls those principles as Peter’s Principles.

This is the Part-1 of the Peter’s Principles series.
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Investor Insights: Amit Mantri

Amit Mantri is the co-founder of 2Point2 Capital, a SEBI-registered Portfolio Management Service (PMS). Previously, he was a Vice-President at Hornbill Capital, a Mumbai based hedge fund. Prior to Hornbill, he has been part of the private equity investment team at IDFC Alternatives and Zephyr Peacock.

Amit has a Post-Graduate Diploma in Management from IIM Bangalore and B. Tech in Computer Science and Engineering from IIT Kharagpur. He is also a CFA® charter holder.

In this interview, Amit shares his thoughts on investing, his process, and the key lessons he has learned over the years of being an investor.

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Exploration Vs Exploitation

In his 2010 letter to shareholders, Warren Buffett tells a joke —

Customer: Thanks for putting me in XYZ stock at 5. I hear it’s up to 18.
Broker: Yes, and that’s just the beginning. In fact, the company is doing so well now, that it’s an even better buy at 18 than it was when you made your purchase.
Customer: Damn, I knew I should have waited.

Reading this joke the first time, I laughed at broker’s convoluted argument and the stupidity of the customer. How can a stock be better buy at 18 than it was at 5?
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Bookworm: Revisiting Deep Work by Cal Newport

The VIA veterans, i.e., the long time readers of Value Investing Almanack newsletter would perhaps be surprised to see the name of this book because we had already covered it in Nov 2016 issue.

So why am I writing about it again? Because Deep Work is such an important book that it needs to be read and reread.

Nassim Taleb, one of my all time favourite author, writes —

A good book gets better at the second reading, a great book at the third. Any book not worth rereading isn’t worth reading.

Plagiarising Taleb’s words, I say any work worth doing is worth doing deeply. And a book about deep work is worth reading deeply, isn’t it?

So if you haven’t read this book, I am going to hard sell it to you and make a strong case why you need to read, reread, and implement its ideas in your work.
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Behaviouronomics: The Veblen Effect

Influence by Robert Cialdini is a book that I always keep face out on my bookshelf. Not a month goes by when I don’t pick it up and thumb through random chapters. Cialdini first published his book in early 1980s and it’s still revered as the bible of human psychology by many including Charlie Munger.

You couldn’t start with a better book than Cialdini’s ‘Influence’, writes Munger, “Academic psychology has some very important merits alongside its defects. I learnt this eventually, in the course of general reading, from this book, ‘Influence’, aimed at a popular audience. I immediately sent copies of Cialdini’s book to all my children. I also gave a share of Berkshire stock [A share] to thank him for what he had done for me and the public.”

Today, a single class-A share of Berkshire stock is valued at over $300,000. On another occasion, Munger wrote –

Fairly late in life I stumbled into this book, Influence, by a psychologist named Bob Cialdini.. Well, it’s an academic book aimed at a popular audience that filled in a lot of holes in my crude system. In those holes it filled in, I thought I had a system that was a good-working tool.

Cialdini opens the first chapter with a story of his friend who had a jewelry store. The story involved a certain turquoise jewelry that she was finding hard to sell. In spite of a busy tourist season and an overcrowded store her customers were ignoring the turquoise pieces. She experimented with few standard sales tricks like displaying them prominently and even asking the sales staff to push the turquoise jewelry items hard. But no luck. She was unable to move them.
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