Peter Lynch Lyrics: Houndstooth & Henrietta

Monday, August 25, 2008

Peter Lynch Lyrics: Houndstooth & Henrietta

The following notes was taken from a forum posting. If not mistaken the original writings were posted at Wallstraits.com

Lynch Lyrics
Houndstooth & Henrietta

"Consider my friend Harry Houndstooth--whose name I've changed to protect the unfortunate. Actually, there's a little bit of Houndstooth in all of us. This Designated Investor (each family seems to have one) has just spent the morning reading The Wall Street Journal, plus a $250-a-year stock market newsletter to which he subscribes. He's looking for another exciting stock play, something with limited risk but big potential on the upside. In both the Journal and his newsletter there's a favorable mention of Winchester Disk Drives, a headstrong little firm with a dandy future."

"Houndstooth doesn't know a disk drive from a clay pigeon, but he calls his broker and learns that Merrill Lynch has put Winchester on its "aggressive buy" list. All this can't be pure coincidence, thinks Houndstooth. He is soon convinced that putting $3,000 of his hard-earned money into Winchester is a very clever idea. After all, he's done the research!"

"Houndstooth's wife, Henrietta--also known as the Person Who Doesn't Understand the Serious Business of Money (these roles could be reversed, but usually aren't)--has just returned from the shopping mall where she's discovered a wonderful new women's apparel store called The Limited. The place is mobbed with customers. She can't wait to tell her husband about the friendly salespeople and the terrific bargains."

"While you've been out squandering money, I've been home figuring out how to make it. Winchester Disk Drives is the answer. As near to a sure thing as you could get, say's Houndstooth. Meanwhile, unbeknownst to Houndstooth, the stock price of The Limited, the store that impressed his wife, Henrietta, has been moving steadily higher, from less than 50 cents a share in 1979 to $9 in 1983--already a 20-bagger, eventually to reach $53, over a 100-bagger."

"But our Designated Investor, who had plenty of time to buy The Limited even after he sold out of Winchester Disk Drive at a loss, continued to ignore his wife's tip. By then there were 400 stores nationwide, most crowded, but Houndstooth was too busy to notice. He was following what Boone Pickens was doing with Mesa Petroleum. Sometime in late 1987, Houndstooth finally discovers The Limited on his brokerage firm's buy list, and in a popular finance magazine feature. It has become the darling of the analysts, a respectable buy."

"Funny thing, Houndstooth tells Henrietta, that store you like, The Limited, turns out to be a pretty good investment, now near it's high at $50 per share. Maybe we'll invest a few thousand from our retirement funds. Henrietta says, are you sure, The Limited is overpriced today, no longer unique and I don't even shop there anymore... What's that got to do with anything, scolds Houndstooth, I'm talking about investing here, not shopping!"

Peter Lynch Lyrics: Investing Art & Science

Peter Lynch Lyrics: Market Timing

1 comments:

Gamelion said...: Currently this example is very true compare to our overprice palm oil plantation counters and they are top favourite among the majority of broker anal ysts.; 10:52 AM

Where is Ze Moola

Monday, August 25, 2008