Quote of the Day by Peter Lynch: ‘What the stock price does today, tomorrow, or next week is only a distraction’

“What the stock price does today, tomorrow, or next week is only a distraction” ― Peter Lynch

Peter Lynch, ace investor and the former manager of the Fidelity Magellan Fund, is known for his wise quotes on investment. Having taking Fidelity Magellan Fund to new heights during his leadership tenure, Lynch’s profound wisdom often focuses on the best ways to invest your wealth.

Quote of the day by Peter Lynch

“If you can follow only one bit of data, follow the earnings—assuming the company in question has earnings. As you’ll see in this text, I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities. What the stock price does today, tomorrow, or next week is only a distraction.”

The quote is from Peter Lynch’s book “One Up On Wall Street: How To Use What You Already Know To Make Money In”, which was originally published in 1989.

What does Peter Lynch’s quote mean?

In this quote, Peter Lynch talks about a crucial parameter to maximise gains from your investments in the stock market.

Here, Lynch emphasises on the importance of tracking corporate earnings, calling it the most important parameter and a long-term driver of stock prices.

He first says, “If you can follow only one bit of data, follow the earnings—assuming the company in question has earnings.”

Here, Peter Lynch notes that if investors can follow even one bit of data, they should follow the company’s corporate earnings if they have invested in that stock. He also notes that this can only be done if the company they have invested in has earnings. It must be noted that listed corporates disclose their earnings on stock exchanges and to the public.

Next, Lynch talks about the “crusty notion” he has.

“As you’ll see in this text, I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities,” he says.

Here, the ace investor and legendary fund manager expresses his views on corporate earnings. He says that in time, earnings make or break a stock market investment. This essentially means that your investment in the stock market should depend on how much profit and revenue the company generates, as that will determine how much you gain or lose.

“What the stock price does today, tomorrow, or next week is only a distraction,” he says.

Here, Lynch calls short-term dips a “distraction”.

Therefore, through this quotes, Peter Lynch essentially means that if the corporate earnings of the company you have invested in are in place, stock price rise will eventually follow.

Earnings determine long-term success as if they grow consistently, the stock price has been historically seen rising.

He calls short-term stock crashes a ‘distraction’. Daily stock prices are often moved by news, fear, greed, market sentiments, profit booking, buying the dip and essentially speculation.

However, these things do not essentially determine the value of a company. It is determined by the earnings. If that is consistent, investments will follow and the market value of the company will increase — taking stock prices higher.