Peter Lynch's six stock categories

'One up on Wall street' by the famous fund manager Peter Lynch is a bible for many stock market investors. In that book, Peter Lynch stated that, in order to know what he is getting into, he classifies the stocks into six categories. While there are many methods and many categories prescribed by many others, Peter Lynch believes these six are more than enough. What are they? Slow growers: These are generally large companies that are usually in the maturity stage of their life cycle, and grow in line or slightly more than the country's GNP or GDP. These companies started out as fast growers and eventually became slow growers due to industry slowdown or the absence of space to grow further. High and consistent dividends are a sign of these companies since they do not have many reinvestment opportunities. Glaxosmithe Pharma has grown its earnings at 2.3 per cent per annum and has a median dividend payout ratio of 90 per cent in the last five years with a current dividend yield of 5.9 per cent. Stalwarts: These companies grow at a medium pace, at 10-12 per cent a year, around double the country's GDP. Even in these stocks, investors can double, triple, or quadruple their money but the time it takes is longer compared to fast growers. Peter Lynch says these companies are protective investments. They grow steadily a

This article was originally published on July 06, 2022.