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Spring brings with it the perfect opportunity for a fresh start — not just for tidying up our homes — but also for assessing and revitalizing our investment portfolios. And for our portfolios, we can take a cue from legendary investor Peter Lynch. He’s renowned for his exceptional management of the Fidelity Magellan Fund, which achieved remarkable returns during his tenure from 1977 to 1990.

While the S&P 500 Index delivered an average annualized return of about 11% over the same period, Lynch nearly tripled that, boasting an impressive average of around 29% per year.

His success wasn’t built on complex theories or intricate algorithms. Rather, it was simple, timeless principles that allowed Lynch to achieve stunning results.

“Water the Flowers, Cut the Weeds”

One of Lynch’s most famous phrases — “water the flowers and cut the weeds” — captures his philosophy on portfolio management.

Just as we tend to our gardens, nurturing the flourishing plants while removing the unsightly weeds, investors should focus on fostering successful investments while pruning or eliminating the underperforming ones.

Seasonal trading helps us to do that, although it goes beyond simply heeding Lynch’s advice to “cut the weeds,” and not the flowers. Seasonal trading involves recognizing recurring patterns in the market’s behavior throughout the year. That’s what I often do.

For example, the “January Effect” is a well-known seasonal pattern, where small-cap stocks tend to outperform large-cap stocks in the early months of the year. Of course, I’ve identified many other, more sophisticated patterns that occur throughout the year and give us the chance to collect profits.

Our Next Season Trade

This week, we are closing a position in Sprouts Farmers Market, Inc. (SFM) for a gain of about 20%. We added this stock in February, which was the ideal time to buy stocks in the food sector, according to my research.

This year, we achieved a gain of about 9X that of the S&P 500 with this trade.

Understanding these seasonal patterns — and knowing the optimal times to enter and exit them — allows us to continually maintain our portfolio, keeping it filled with flowers and pulling any weeds quickly if they appear.

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