Top Peter Lynch Stocks

Validea used the investment strategy outlined in the book One Up On Wall Street written by Peter Lynch to create our P/E/Growth Investor portfolio. Lynch's approach centers on a variable that he is famous for developing: The price/earnings/growth ratio, or 'PEG'. The PEG divides a stock's price/earnings ratio by its historic growth rate to find growth stocks selling on the cheap. Lynch's rationale: The faster a firm is growing, the higher the P/E multiple you should be willing to pay for its stock. Lynch is known for saying that investors can get a leg up on Wall Street by 'buying what they know', but that's really just a starting point for him; his strategy goes far beyond investing in a restaurant chain you like or a retailer whose clothes you buy. Along with the PEG, he focused on fundamental variables like the debt/equity ratio, earnings per share growth rate, inventory/sales ratio, and free cash flow. It's important to note that Lynch used different criteria for different categories of stocks, with the three main categories being 'fast-growers' (stocks with EPS growth rates of at least 20 percent per year); 'stalwarts' (stocks with growth rates between 10 and 20 percent and multi-billion-dollar sales); and 'slow-growers' (those with single-digit growth rates and high dividend payouts). He also used special criteria for financial stocks.

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Stocks With the Highest Scores Using Our Peter Lynch Quantitative Strategy

Ticker P/E/Growth
AEL 100 $21.69
ATH 100 $28.89
BK 100 $37.17
EBSB 100 $11.52
EQC 100 $33.70
EVR 100 $55.11
HSII 100 $22.18
NTB 100 $24.43
SIVB 100 $214.75
STC 100 $30.82

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