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I think Peter Lynch is my favorite investor. I like Buffett of course but I think Peter Lynch articulates value investing so smoothly.
So Today I will show you how to use a stock screener like Peter Lynch. I’ll have a list of criteria you can use yourself and I’ll do a demonstration to show you.
Peter Lynch ran the Megellan fund at Fidelity Investments from 1977 to 1990 and averaged about 30% annual return.
The was more then double the S&P 500 So not a bad person to try and copy.
It was the best performing mutual fund in the world and He wrote one of my favorite investing books called, One Up On Wall Street.
Peter Lynch’s Criteria
1. It sounds dull – or, even better, ridiculous
2. It does something dull
3. It does something disagreeable
4. It’s a spin-off
5. The institutions don’t own it, and the analysts don’t follow it
6. The rumours abound: It’s involved with toxic waste and/or the mafia
7. There’s something depressing about it
8. It’s a no-growth industry
9. It’s got a niche
10. People have to keep buying it
11. The insiders are buying (nvidia insiders are selling, no buying) (Prudential, recent buying)
12. The company is buying back shares (nvidia not currently) (Prudential yes)
Now Peter Lynch suggests that every company falls into at least one of these categories.
Slow grower - large, mature, less than 5% expected long term growth
Stalwart - large, mature, more than 10% expected long term growth
Fast grower - small, 25% + expected growth
Cyclical - Up and down depending on the cycle
Asset Play - Assets are worth far more than the stock price
Turn Around - heavily discounted, maybe in dire straights…
Peter Lynch’s Stalwarts Stock Screen
Market cap Over $2billion
EPS growth past 5 years greater than 10%
PEG less than 1
Current EPS positive
Current debt to equity less than 0.3
He prefers to stay out of the financial sector. (He doesn’t like bank debt)
Peter Lynch’s Fast Growers Stock Screen
Market Cap Over $300mln
EPS growth past 5 years greater than 20%
PEG less than 1
Current debt to equity less than 0.3
PE less than 40
Start with the lowest growth (too fast growth is unsustainable.)
Peter Lynch’s Slow Growers Stock Screen
Market cap Over $2billion
EPS growth past 5 years less than than 10%
PEG less than 1.5
Current debt to equity less than 0.3
He prefers to stay out of the financial sector. (He doesn’t like bank debt)
Start with the highest growth (too fast growth is unsustainable.)
But remember this is just a starting list you still need to develop a thesis and do far more research into the company.
Maybe you find something here that Peter Lynch would also love to see. Maybe none of them are good enough. I’ll leave that to you to decide.
Something that I like to do, when looking at this list, is to play around with the filters.
If you liked this video make sure to subscribe so you don’t miss future videos I’ll see you in that next video.
