Extremely high levels of earnings growth rates are not sustainable but continued high growth may be factored into the price. The growth rate of earnings should fit with the firm’s “story”-fast-growers should have higher growth rates than slow-growers. Here are some of the key numbers Lynch suggests investors examine: For that reason, he also seeks to determine reasonable value. Also, an investor cannot make a profit if the stock was purchased at a too-high price. In examining a company, he is seeking to understand the firm’s business and prospects, including any competitive advantages, and evaluate any potential pitfalls that may prevent the favorable “story” from occurring. Instead, he felt it was better to spend your time looking for superior companies, doing fundamental research and keeping a close eye on the fundamentals of your holdings.Īnalysis is central to Lynch’s approach. Lynch said, “If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes.” It wasn’t that he didn’t understand the importance of these big-picture elements, he just did not believe that it is possible to consistently forecast them in any bankable way.
He did not focus on the direction of the market, the economy or interest rates. Lynch was a bottom-up stock-picker who looked for good companies selling at attractive prices.
Stocks Passing the Lynch Screen (Ranked by Dividend-Adjusted PEG Ratio)Īmerican Association of Individual Investors Fifteen Lynch-inspired prospects are presented below. Lynch warned investors “when you sell in desperation, you always sell cheap.”ĪAII has developed a quantitative stock filter, or stock screen, with the goal of identifying stocks possessing the fundamental characteristics Lynch looks for when selecting stocks. As Lynch pointed out, stocks will go up and down, and rather than panic when they go down, you must have detachment to stay the course. Recent stock market volatility reminds us that long-term stock market success requires a certain detachment and tolerance for short-term pain.
#Lynch one up on wall street professional#
Instead, Lynch strongly believed that individuals could not only succeed at investing, but they also had a distinct advantage over Wall Street and professional money managers by being able to identify trends early, investing in what they know, having the flexibility to invest in a wide array of companies and not being evaluated on a short-term basis. This timeless advice has made One Up on Wall Street a #1 bestseller and a classic book of investment know-how.You would think that one of the top professional investors who earned his keep by managing other people’s money would try to dissuade individual investors from even trying to pick stocks. He offers guidelines for investing in cyclical, turnaround, and fast-growing companies.Īs long as you invest for the long term, Lynch says, your portfolio can reward you.
Lynch offers easy-to-follow advice for sorting out the long shots from the no-shots by reviewing a company’s financial statements and knowing which numbers really count. A few tenbaggers will turn an average stock portfolio into a star performer. When investors get in early, they can find the “tenbaggers,” the stocks that appreciate tenfold from the initial investment. By paying attention to the best ones, we can find companies in which to invest before the professional analysts discover them. From the supermarket to the workplace, we encounter products and services all day long. According to Lynch, investment opportunities are everywhere. More than one million copies have been sold of this seminal book on investing in which legendary mutual-fund manager Peter Lynch explains the advantages that average investors have over professionals and how they can use these advantages to achieve financial success.Īmerica’s most successful money manager tells how average investors can beat the pros by using what they know.
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