The advantage of being an unsophisticated investor - Peter Lynch Investor

The advantage of being an unsophisticated investor

Jan. 19, 2019   Category: Education, Stocks

No one could accuse me of being a sophisticated investor.

  • I don’t have an M.B.A.
  • I never studied accounting.
  • I’ve never worked on Wall Street (and never will).

The reasons for why I don’t qualify as a professional investor are many. Too many to list. Despite my lack of pedigree, I’m successful at finding worthwhile investments. How’s this possible? I use what Peter Lynch calls my “amateur’s edge.”

Here’s a story of my amateur’s edge leading me to a great company.

J and J Snack Foods (JJSF)

After reading “One Up on Wall Street” in the early 2000’s, I took Lynch’s advice. I went to the public library and began reading the Value Line. It’s a monster. You can’t borrow it like a regular library book. There’s only one. Cement blocks weigh less. If you haven’t combed through its pages, I encourage you to try. It’s how I found J and J Snack Foods.

Back then I was a greenhorn. I was bewildered by the amount of information contained within the Value Line. Having never read financial statements, I was quickly overwhelmed. To stay buoyant in the cascade of information, I marked all the important pages of One Up on Wall Street. Anywhere Lynch outlined the makings of a decent investment, I bookmarked. As I read the Value Line, I kept coming back to those bookmarks to see if what I was looking at qualified as a Lynch-worthy investment. More times than I can count, they were not.

After many hours and free weekends searching through the Value Line I compiled a list of companies. There were a lot of different kinds but because of my lack of sophistication one stood out… J and J Snack Foods.

I eat junk food but should I invest in it?

It’s likely you’ve never heard of J and J Snack Foods but you’ve probably consumed at least one of their products. They make junk food. The kind of junk food you buy at a corner store or gas station. Slurpees, pretzels and burrito’s are counted as J and J Snack Foods products.

As a connoisseur of junk food, it was the company from my Value Line list I understood best. It wasn’t complicated like a high-tech computer networking company. As a result, I decided to invest.

I owned J and J Snack Foods for several years. I made some money on it. That was great. What was better? The confidence gained from proving Lynch’s theory worked. There’s no way I would have invested in J and J Snack Foods if I had taken the advice of an investment adviser at the bank. The only regret I have was not taking Lynch’s advice on holding stocks for the long haul. I could have had a 14-bagger. Lesson learned.

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