{"id":8098,"date":"2013-04-26T11:06:22","date_gmt":"2013-04-26T05:36:22","guid":{"rendered":"https:\/\/www.moneyworks4me.com\/investmentshastra\/?p=8098"},"modified":"2020-03-02T18:13:14","modified_gmt":"2020-03-02T12:43:14","slug":"peter-lynch-principles-of-safe-stock-investing","status":"publish","type":"post","link":"https:\/\/www.moneyworks4me.com\/investmentshastra\/peter-lynch-principles-of-safe-stock-investing\/","title":{"rendered":"Investing Style Apt for Individual Investor – The Peter Lynch Style!"},"content":{"rendered":"

“Go for a business that any idiot can run \u2013 because sooner or later, any idiot is probably going to run it.”<\/strong><\/p>\n

These are the interesting and popular words of Peter Lynch, a Wharton MBA graduate, a chameleon investor, and the man behind the 29% average annual returns<\/strong> that the Fidelity Magellan Fund<\/strong> made during 1977 – 1990, growing its assets from $20 million to $14 billion<\/strong>!!<\/p>\n

About Peter Lynch . . . <\/span><\/h3>\n

After graduating in 1968, Peter Lynch<\/a> started working for Fidelity Investments<\/strong><\/span> as an investment analyst in 1969; eventually becoming the firm’s director of research by 1974, a position he held till 1977. Lynch was named manager of the little known Magellan Fund in 1977 and achieved historic portfolio results in the ensuing years until his retirement in 1990.<\/p>\n

His Investment Style<\/span><\/h3>\n

Peter Lynch\u2019s investment style adapted to whatever worked at that time, with special emphasis on due diligence and stock research. He followed a bottom-up approach<\/strong><\/span>, concentrating on the company\u2019s fundamentals. He only invested for the long run and paid little attention to short-term market fluctuations. His stock selection comprised more of growth and recovery stories.<\/strong><\/span><\/p>\n

He specialized in investing in fast growth companies with earnings growth of over 15% per annum. However, he took care that the Price\/Earnings Growth ratio was less than 1.2, since he didn\u2019t want to end up overpaying for growth. He loved companies that carry a lot of cash on the books, and hated those that carried large amounts of debt. He was amongst those, who didn’t pay heed to the macroeconomic conditions or where the interest rates were going. Lynch was a stout believer in investing in what you know, otherwise known as your circle of competence<\/strong>.<\/span> He liked companies that were simple to understand, ones you could ask your neighbour about. He looked for companies with low market caps because he wanted to get in before others.<\/p>\n

On the other hand, Lynch avoided stocks<\/strong> with<\/strong> <\/span>certain characteristics that he found unfavourable, such as:<\/p>\n