Peter Lynch asset classification and evaluation template
Classify and evaluate a stock through the Peter Lunch s approach can be done easily by using this simple template.
Just fill in all the information needed, then classify the stock according to the 6 Peter Lynch types:
Large and mainly old companies expected to grow only slightly faster than the economy . These generally make up for their growth by paying large regular dividends.
Usually large companies still able to grow. Annual earnings growth rates of around 10% , 12%. If purchased at a good price, Lynch says he expects good but not enormous returns–certainly no more than 50% in two years.
Small, aggressive new firms with annual earnings growth of 20% to 25% a year. These do not have to be in fast-growing industries. Fast-growers are among Lynch’s favourites, and he says that an investor’s biggest gains will come from this type of stock.
Companies in which sales and profits tend to rise and fall in somewhat predictable patterns based on the economic cycle; examples include companies in the auto industry, airlines, and steel.
Turnarounds are companies that were on the verge of bankruptcy but have been revived. This could be because the government bailed them out or another company made a strategic investment in them. Lynch calls these “no-growers”.
Finding these hidden assets requires a real working knowledge of the company that owns the assets, and Lynch points out that within this category, the “local” edge–your own knowledge and experience–can be used to greatest advantage. Companies that have assets that Wall Street analysts and others have overlooked. Lynch points to several general areas where asset plays can often be found--metals and oil, newspapers and TV stations, and patented drugs. However, finding these hidden assets requires a real working knowledge of the company that owns the assets.
Some further reading material
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