Peter Lynch Resource Page – All in one place

This is from his book BEATING THE STREET.

This should be a very important idea for any retail, DIY or Individual investors. The investor should well understand the company, its business and how it makes money. On this scale, some companies are easy to understand while many others are not so. On a extended note, even Warren Buffett and Charlie Munger had discussed this idea. They study a company and if they find it difficult to understand, label it as “TOO HARD TO UNDERSTAND”. One of the hot stocks in the market last year was IRCTC. Many who invested money in the company would not know the full form of IRCTC! This is not the way that one should take up long term investing.

The idea that Peter Lynch drives is that before an investor commits money to a stock, he/she must be able to clearly explain what the company does, how it makes make and why the investor believes that the investment in the company will be profitable in future.

However it is very important to note that companies do not stay in one category for every. In their life cycle they move from one to another. A company may start as Fast grower, then move to Stalwarts before finally become Slow Growers also. When you investing for a long term, you must periodically study the “current category” and make a proper decision to hold or exit the investment.