Peter Lynch Portfolio - One Up On Wall Street

Last Updated: 9/21/2024

Peter Lynch Portfolio Strategy Explanation Video

Perhaps the greatest mutual fund manager of all-time, Lynch guided Fidelity Investment's Magellan Fund to a 29.2 percent average annual return from 1977 until his retirement in 1990, almost doubling the S&P 500's 15.8 percent yearly return over that time. Lynch's common sense approach and quick wit made him one of the most quoted investors on Wall Street. ("Go for a business that any idiot can run -- because sooner or later, any idiot probably is going to run it," is one of his many pearls of wisdom.) Lynch's bestseller One Up on Wall Street is something of a "stocks for the everyman/everywoman", breaking his approach down into easy-to-understand concepts.
*Note: Our guru strategies are based on our interpretation of the published strategies of the gurus we follow. They are not personally endorsed by the gurus. Full Disclaimer

Since 2003, this portfolio has returned 1,030.8%, outperforming the market by 556.0% using its optimal monthly rebalancing period and 20 stock portfolio size.

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* Returns are model returns and do not reflect actual trading. Full performance disclaimer

Peter Lynch Portfolio - P/E/Growth Investor

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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Performance Disclaimer: Returns presented on Validea.com are model returns and do not represent actual trading. As a result, they do not incorporate any commissions or other trading costs or fees. Model portfolios with inception dates on or after 12/30/2005 include a combination of back tested and live model returns. The back-tested performance results shown are hypothetical and are not the result of real-time management of actual accounts. The back-testing of performance differs from actual account performance because the investment strategy may be adjusted at any time, for any reason and can continue to be changed until desired or better performance results are achieved. Back-tested returns are presented to provide general information regarding how the underlying strategy behind the portfolio performed in our historical testing. A back-tested strategy has the benefit of hindsight and the results do not reflect the impact that material economic or market factors may have had on advisor's decision-making if actual client assets were being managed using this approach. The model portfolios offered on Validea are concentrated and as a result they will exhibit high levels of volatility and their performance can be substantially impacted by the performance of individual positions.

Optimal portfolios presented on Validea.com represent the rebalancing period that has led to the best historical performance for each of our equity models. Each optimal portfolio was determined after the fact with performance information that was not available at portfolio inception. As a result, an investor could not have invested in the optimal portfolio since its inception. Optimal portfolios are presented to allow investors to quickly determine the portfolio size and rebalancing period that has performed best for each of our models in our historical testing.

Both the model portfolio and benchmark returns presented for all equity portfolios on Validea.com are not inclusive of dividends. Returns for our ETF portfolios and trend following system, and the benchmarks they are compared to, are inclusive of dividends. The S&P 500 is presented as a benchmark because it is the most widely followed benchmark of the overall US market and is most often used by investors for return comparison purposes. As with any investment strategy, there is potential for profit as well as the possibility of loss and investors may incur a loss despite a past history of gains. Past performance does not guarantee future results. Results will vary with economic and market conditions.

Validea.com is a research provider that is owned and operated by The Reese Group, LLC. Validea.com offers model portfolios, screening and stock analysis that is not customized to any individual. No information on Validea.com should be construed as investment advice. Validea Capital Management is a separate investment advisory firm registered with the state of Connecticut. Validea Capital offers investment management services directly to clients and is a separate entity from The Reese Group, LLC. The Reese Group and Validea Capital are affiliated entities and share partial common ownership.