Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, November 10, 1995                   TAG: 9511100054
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: TOM SHEAN LANDMARK NEWS SERVICE
DATELINE: NORFOLK                                LENGTH: Medium

LYNCH: IT'S NOT ROCKET SCIENCE; IT'S THE STOCK MARKET

His message was simple. Skillful investors don't need advanced math or insights into the direction of the Dow Jones industrial average.

What they do need are patience and a willingness to do some homework.

Drawing on a mix of experiences from managing the world's biggest mutual fund, Peter S. Lynch said individual investors have to learn what a company does before buying its stock.

Too often, the same individuals who shop for hours to save $300 on a plane ticket will rush to buy shares of a company they know nothing about.

``People who are very good at everything they do for some reason go cuckoo when it comes to the stock market,'' said Lynch, who expanded Fidelity Magellan's assets from $22 million to $13.3 billion in slightly more than a decade.

The retired money manager spoke Tuesday in Norfolk.

The lean, 51-year-old Lynch developed a reputation for grilling corporate executives and combing financial statements. Economic and interest-rate forecasts, he said, proved useless when picking stocks.

Economists failed to warn that the recession of 1980-81 would be the country's most serious downturn since the 1930s. And the so-called soft landing that was predicted for 1990 turned into a full-blown recession.

``If you spend over 13 minutes a year on economics, you've wasted 11 minutes,'' he joked.

Instead of worrying about the future, investors should focus on economic details that could affect a particular stock.

``When I own an auto company, I want to know what's happening to used-car prices,'' Lynch said. ``When I own a steel company, I want to know what's happening to scrap prices.''

Lynch also cautioned against trying to determine a stock's prospects by judging the quality of a company's management. Management, he said, may be the most important variable for a company's success, but it's impossible for an outsider to measure.

``I've always said I want to buy a company that any fool can run, because eventually one will,'' he said.

The companies that attracted Lynch's attention when he headed Fidelity Magellan were smaller ones that other institutional investors ignored and large, battered ones that had fallen out of favor on Wall Street.

A small company that proved especially profitable for Magellan was Dunkin' Donuts Inc. Lynch bought its shares because Dunkin' Donuts was good at what it did and its operations were easy to understand.

``In a recession, you don't have to worry about low-cost Korean imports,'' he said. ``You don't have to worry about somebody inventing a new doughnut.''

Too often, individuals know nothing about a company's operations but justify buying its stock by telling themselves ``The sucker is going up,'' Lynch said. ``If that's the reason you buy a stock, you're in for a rough ball game. That's the first inning of a losing game.''

As the head of Fidelity Magellan, Lynch often bought stocks in European companies at a time when few securities analysts were interested in Europe. But he cautioned individuals against buying stocks in overseas companies unless they were very familiar with developments in that country.

Rather than bemoaning missed opportunities, individuals should look for six or seven promising companies and then buy shares in three or four, Lynch said.

``People torture themselves by saying, `I missed Microsoft. I missed Home Depot,''' he said. ``Don't worry about it. You're going to miss a lot of them. All you need are a few [great performers] in a lifetime.''

Lynch said ordinary individuals can become successful investors on their own.

But individuals will have difficulty matching the sorts of returns that Lynch rang up at the Magellan Fund, said Don Chance, a finance professor at Virginia Tech.

``Most people do not have the time or the access to a company's management that Lynch had,'' said Chance, who expressed admiration for Lynch's investment skills. ``He had the ability to pick up the phone and talk to the management.''