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Peter Lynch | P/E/Growth Investor
Last Update: 5/26/2013
Peter Lynch Profile: Perhaps the greatest mutual fund manager of all-time, Lynch guided Fidelity Investment's Magellan Fund to a 29.2 percent
average annual return from 1977 until his retirement in 1990, almost doubling the S&P 500's 15.8 percent yearly return over that time.
Lynch's common sense approach and quick wit made him one of the most quoted investors on Wall Street. ("Go for a business that any idiot
can run -- because sooner or later, any idiot probably is going to run it," is one of his many pearls of wisdom.) Lynch's bestseller One
Up on Wall Street is something of a "stocks for the everyman/everywoman", breaking his approach down into easy-to-understand concepts.
Peter Lynch Investment Strategy: Lynch's approach centers on a variable that he is famous for developing: The price/earnings/growth ratio, or "PEG".
The PEG divides a stock's price/earnings ratio by its historic growth rate to find growth stocks selling on the cheap. Lynch's rationale: The
faster a firm is growing, the higher the P/E multiple you should be willing to pay for its stock. Lynch is known for saying that investors can
get a leg up on Wall Street by "buying what they know", but that's really just a starting point for him; his strategy goes far beyond investing
in a restaurant chain you like or a retailer whose clothes you buy. Along with the PEG, he focused on fundamental variables like the debt/equity
ratio, earnings per share growth rate, inventory/sales ratio, and free cash flow.
It's important to note that Lynch used different criteria for different categories of stocks, with the three main categories being "fast-growers"
(stocks with EPS growth rates of at least 20 percent per year); "stalwarts" (stocks with growth rates between 10 and 20 percent and
multi-billion-dollar sales); and "slow-growers" (those with single-digit growth rates and high dividend payouts). He also used special
criteria for financial stocks.
Book Used for Peter Lynch Strategy: One Up on Wall Street
Peter Lynch Model Portfolio Performance:
Since Inception: 123.54%
S&P 500: 64.89%
Full Performance Details
Stocks Passing Peter Lynch Strategy: 10 Stock Model Portfolio | 20 Stock Model Portfolio | All Stocks Passing Methodology
Recent Upgrades and Downgrades:
Upgrades - BERKSHIRE HATHAWAY INC. | HSBC HOLDINGS PLC (ADR) | NISSAN MOTOR CO., LTD. (ADR) | THE GAP INC. | FUJIFILM HOLDINGS CORP. (ADR) |
Downgrades - BUNGE LTD | SELECT INCOME REIT | VOXX INTERNATIONAL CORP | ROYAL BANK OF CANADA (USA) | MEDTRONIC, INC. |
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