Peter Lynch is one of the best fund managers in the world and presented are some of the key learnings from his investment style and ideas.
Small Market capitalized companies -
Lynch loved small emerging businesses with strong balance sheets,. His extraordinary returns in La Quinta Inns came at a time when the company was in the initial years of development He argued "Big companies don't have big stock moves you’ll get your biggest moves in smaller companies."
Fast growers
- Among Lynch's favorites are companies whose sales and earnings are expanding 20% to 30% a year. He cautions investors from looking at companies that grow more then 30% every year. Companies growing at 50% to 100% are bound to falter and crack. It is therefore imperative to view very high growth ideas with a sense of suspicion.
Dull names, dull products, dead industry
- Lynch loved good managements in simple mundane, colorless businesses. His arguments were that nobody creates excess capacity in dull boring industries and when you can find a winner there it makes sense to jump in.
Lynch was the proponent of the PEG theory. As long as the PE of a company was lower then the growth rate that it expected to generate Lynch would have advocated a buy on the stock.
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