“Charles Glasgow has idolized Peter Lynch since the early 1990s, when he read his investment book ‘One Up on Wall Street.’ So when the 66-year-old former college professor heard of a stock Mr. Lynch had bought with his own money, he jumped at the chance to invest alongside him,” write Ianthe Duggan in today’s Wall Street Journal.

“A regulatory filing in August 2003 showed that Mr. Lynch, the celebrated former skipper of Fidelity Magellan Fund, owned 1.8 million shares of tiny SafeScript Pharmacies Inc.”

” ‘He is the most brilliant investor ever,’ says Mr. Glasgow, of Denton, Texas. ‘I would not have touched this little company with a 10-foot pole except for his involvement.” But “if it was good enough for Peter Lynch, it was good enough for me,’ Mr. Glasgow says, adding that he plowed nearly $498,000 into the stock and his relatives invested, too.”

“They were among hundreds of fans of Mr. Lynch following him into SafeScript stock. By late January this year, SafeScript had a stock-market value of $125 million. Mr. Lynch owned nearly 8%.”

“Then the roof fell in. In February, the company announced regulators were investigating its accounting. The chief executive and two other managers quit. Soon, the company filed for Chapter 11 bankruptcy protection. This month, the Securities and Exchange Commission revoked its stock registration and sued the company and four former officials, alleging it had inflated revenue and profit.”

“Mr. Lynch says he was baffled. ‘It was a total surprise, out of left field,’ he says. ‘It’s a terrible tragedy.’ “

“Even the best investors have their misses, and Mr. Lynch freely admits this was one. ‘Just because I buy something doesn’t mean it’s going to work,’ he says. ‘People have to do their own homework.’ Mr. Lynch says he never sold any of his SafeScript stock, and took a beating along with others when it tanked.”

“But unlike those who mimicked his moves, he might still salvage something. After the trouble broke, a buyout group came forward and agreed to buy all of SafeScript for $3 million. According to people familiar with the situation, the buyers include Mr. Lynch. He declines to say one way or the other.”

“The case shows how badly things can go wrong as small investors try to ape the moves of celebrity stock-pickers. This copycat behavior is made easier by the Internet, because investors can quickly find out if an investment star has bought a 5% stake in a company and filed the required report to the SEC.”

“Big investors sometimes are getting stock more cheaply than the ordinary investor, by buying bonds convertible into stock or by doing deals with the target company such as purchasing shares directly from it.”

“Moreover, copycats frequently remain a step behind famous investors. In July 2002, Warren Buffett’s Berkshire Hathaway Inc. bought convertible bonds of Level 3 Communications Inc. Investors jumped into Level 3’s stock and drove it up 50%, to $4.36 a share. By February 2004, it was at $7.40. Only then did investors learn that Mr. Buffett had converted his bonds to Level 3 stock two months earlier — and sold it. Level 3’s share price is now down by half.”