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Peter Lynch Success Story And Investment Strategies

by admin   ·  June 29, 2022   ·  

You are welcome to my new blog. In this blog, we will discuss a successful investor who has made many investors as successful investors.

Peter Lynch began his journey of investment at a very young age. He showed interest in investments since he was 11 years old. His childhood was very full of struggle. And there is also a story of how the purported journey of his investment started.

Peter lynch Working as a Caddy in Golf Club:

When Peter Lynch was ten years old, his father died after that, when he started to help the family. He started a caddy job in a golf club at the age of 11 years.

The golf club at which Peter Lynch used to work was many investors and used to talk about stocks and investments. It was from here that Peter Lynch came to know about the stock market. After this, he started learning about the stock market and thought about investing, and started investing at a very young age.

In childhood, he made the first investment in the air cargo industry. He started an analysis of the Air Cargo industry and bought some stocks of flying tiger airlines. At that time, the company performed well and got good returns. They made their graduation fees from the investment returns only.

Director of research:

After graduation, he got an internship at Fidelity Fund Management Company in 1966 year. Later, in the same company, he got an investment analyst Job. Peter Lynch was focusing on text tiles, mining, metal, and chemical sectors.

Due to good performance and analysis in Fidelity, he got the post of Director of Research. And in 1977 started managing the fund called Magellan Fund. At that time, there were assets of $ 18 million in that fund, after that Peter Lynch started managing the funds and his growth started to grow.

Due to the good performance of that fund, more and more people started investing in Magellan funds. Funds of $ 13 million were gained in 1977 to $ 14 billion due to good performance. In these 13 years, Peter Lynch gave investors a 29.2 per cent return annually. Through his fund, Peter Lynch invested in many companies like Ford, FannieMae, Philip Morris International, and Volvo and earned many good returns.

After retirement, Peter Lynch focused his attention on making people aware of philanthropic activities and investments.

Now let’s talk about Peter Lynch’s investment philosophy.

Invest In What You Know:

Peter Lynch says to invest in what you know. This means you can invest in those products and services which you know about.

What do you know, best? For example, if you are working in a travel agency, then you will know more about the airline sector, if you are working in a steel company, then you will know about the metal sector, and if you work in a bank, then you will better know the banking sector. Would be good to know This gives you a competitive advantage.

Because you are connected to a particular sector, you will get help with analyzing the businesses. In our daily life, we use many products such as oil, home appliances, electrical products, cosmetics and food products. You have been using many products for many years, so you can invest in those companies that you trust, or you most like.

The products we use in daily life are coconut oil made by MARICO, Washing power Henko made by Jyothy Laboratories, Colgate by Colgate-Palmolive, and Soap by Godrej Industries Limited. we go to grocery stores like in Dmart as Avenue Supermarts Ltd. And many products and services we use in daily life, then we can invest in those companies which are more knowledgeable and familiar.

Peter Lynch invested in companies that had more knowledge and also in those companies which showed good growth.

Company Valuation:

Peter Lynch has been a major contributor to the company’s valuation, Peter Lynch has taught the investor well how to understand the valuation of the company.

PE Ratio:

And for this, the price-to-earnings ratio was introduced. The price then earning ratio tells us how much a person is paying for that company against his profit.

If the price-to-earnings ratio of a company is 15, you have to pay 15 times the profit to buy that company. But the confusion is how much the price-to-earnings ratio should be. It is not that if the company’s PE ratio is good, then the company is good. Many companies have a low PE ratio due to bad performances.

PEG Ratio:

Peter Lynch introduces the PEG ratio to solve the PE ratio problem. In which the price-to-earnings ratio is divided by growth. You have to predict the growth of the company by self-analyzing the company.

If you want to find a good company at a good valuation, then you should find that the growth rate of the company should always be higher than the PE ratio of the company.

So the company whose growth rate is much higher than the company’s price to earnings, then it is called an undervalued company, and the company in which the company growth rate is less than the PE ratio that company is called an overvalued company. Therefore, you must use the PEG ratio while analyzing the company.

Peter Lynch’s advice to new investors:

Initially, focus on the company’s stories, if the company’s stock price goes upside from 500 to 1000, then you find out what has reason happened for that upside move. You also have to see which company’s stocks have increased or decreased in the long term, and why? Start all this with a paper portfolio. Read more

Pradip Wasre

Having 4 years of experience in trading, investing and making financial reports. Investments are important and it also helps in the passive income in the long run. Experience makes a man perfect so stick to it.

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