The Peter Lynch Model of Investing Still Works...
Back in the early 90's I read renownedinvestor Peter Lynch's book Beating the Street. For those of you who don't know, Lynch became famous for running Fidelity Magellan, a mutual fund he grew from $18 million in assets in 1977 to more than $14 billion in 1990 when he retired.
One of Lynch's core principles is to buy stocks in companies you respect and want to buy products from. Based on this concept, in early 2003 I bought shares in Green Mountain Coffee (GMCR) at around $15. I bought into GMCR after being impressed by the Keurig "single serve" coffee machines in my office. GMCR at the time owned 25% of Keurig, and has since purchased the rest of the company. I'd never seen a Keurig machine before, but thought the technology was cool and the razor / razor blade business model for the "K Cups" - the little coffee packages - made a lot of sense.
Net/net in this case the Lynch model worked. For a variety of reasons (Keurig being one small component), the company has done exceptionally well, and GMCR shares now trade around $90. You can do the math on the returns here, and see the chart above. I've also put this model to good use buying Salesforce.com and Nordstrom over the years.
Simple concept, often very good returns...
