Peter Lynch

Peter Lynch

Perhaps the most successful mutual fund investor of all-time, Peter Lynch ran Fidelity Management’s Magellan Fund from 1977 until 1990, and achieved returns of 29.2% per annum. His investing strategy is clearly outlined in his book One Up On Wall Street and more recently Beating the Street, in which he writes specifically about the industries and companies in which he has invested. 

Summary

When selecting a business in which to invest, Lynch is the first to say it should be a business that you understand and are familiar with. In addition and put more bluntly in his own words: “Go for a business that any idiot can run – because sooner or later, any idiot probably is going to run it.” The title of Eyes and Ears comes from the bottom-up approach of fundamentally understanding a business from its prospects to its competition to the reasonability of the price at which it can be purchased.

Success Formula Fast Growers

  1. MktCapM  is >= US$ 600 million (basis year 2000) adjusted yearly
  2. Average 5y  EPS growth % is greater than or equal 20%
  3. 0 <=  PEG ratio  <=1
  4. For non-financial and utility companies: 1y Inventory to sales ratio growth % is < 5%
  5. Lynch's Debt-Equity ratio:
  6. If  TTM  Sales is > $1 billion, then latest filing P/E ratio  is <= 40
  7. Take the top 50 stocks with the lowest Average 5y  EPS growth % (above 20%).

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Books

Success Formula Very Fast Growers

  1. MktCapM  is >= US$ 600 million (basis year 2000) adjusted yearly
  2. Average 5y  EPS growth % is greater than or equal to 20%.
  3. 0 <=  PEG ratio  <=1
  4. For non-financial and utility companies: 1y Inventory to sales ratio growth % is < 5%
  5. Lynch's Debt-Equity ratio:
  6. If  TTM  Sales is > $1 billion, then latest filing P/E ratio  is <= 40
  7. Take the top 200 stocks with the lowest average 5y  EPS growth %  (greater 20%).
  8. Take the top 50 stocks with the lowest latest filing Price / Free Cash Flow ratio

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Books

Success Formula Stalwarts

  1. MktCapM is >= US$ 600 million (basis year 2000) adjusted yearly
  2. Average 5y EPS growth % is greater than or equal to 10%
  3. 0 <= PEGY ratio <=1
  4. For non-financial and utility companies: 1y Inventory to sales ratio growth % is < 5%
  5. Lynch's Debt-Equity ratio:
  6. TTM Sales is >= $1.5 billion
  7. TTM EPS > 0
  8. Take the top 50 stocks with the lowest average 5y EPS growth % (over 10%).

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Books

Success Formula Slow Growers

  1. MktCapM is >= US$ 600 million (basis year 2000) adjusted yearly
  2. Average 5y EPS growth % < 10%
  3. 0 <= PEGY ratio <=1.5
  4. For non-financial and utility companies: 1y Inventory to sales ratio growth % is < 5%
  5. Lynch's Debt-Equity ratio:
  6. TTM Sales is >= $1 billion
  7. Take the top 50 stocks with the highest Average 5y EPS growth % (below 10%).

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Books

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