Mr. Peter Lynch is one of the best stock pickers in this world. His philosophy about the stock is very different from others. It’s easy and sometimes looks impossible, but I found what he mentions is right. Here are some attributes of his philosophy of investing in how to find a good stock for investing.

  1. It sounds dull or, Even Better, Ridiculous: If it is doing something ridiculous and straightforward. But if the name is shiny, then people will start buying it Analyst start tracking it. If it happens, the company may not be available at a discount. Peter Lynch gave an example is Pep Boys – Manny Moe and Jack. Possibly there are many names. Try to find it. You will realize that most of them are available at a discount. TTK Prestige is an Indian example.
  2. It does something dull: If the business is boring, a few people might think about it—simple. If I am not wrong, Sharda Cropchem is an example. The philosophy behind it is most peoples are not interested in checking annual reports, balance sheets, income statements, Cash flow, etc. Peter Lynch gives the name Crown, Cork, and Seal. When is the wrong time for companies like this? Never. We always need bottle caps and cans. Business is making cans and bottle caps. It is a good business. But the market ignores it. Mr. Lynch mentioned it in his word, “You won’t see an interview with the CEO of this company in time magazine. Just imagine if they are not there, what is our life? Jagaran Prakashan. Business is Printing and publishing Newspapers. Whenever businesses are going to launch any new project, they need to give the advertisement in newspapers. In India, it is Boring but profitable.
  3. It does something disagreeable: Think of any business you hardly think of daily. Like cleaning a car. Dry clean clothes. The best example, if I am not wrong, is Maxwell Industries. The business is Making Underwear. Disagreeable but profitable. Mr. Lynch gave an example of Safety Kleen, a company that cleans gas stations and petrochemical plants.
  4. It’s a spinoff: The reason here is straightforward to understand. It was a part of a company. But they start making so much profit that parents decide to make it different. Examples are many. Pixar, ICICI bank, Marico Kaya, Max industry. Sometimes the reasons are wrong also. Like in the case of AT&T., All we know is that it changed the world drastically. Most of the time, the reason being it is the expertise of that business.
  5. The institution doesn’t own it, and the analyst doesn’t follow it: Whenever they start doing so. The individual investor starts running behind it. Here you are supposed to study hard. But if you find it. Then it will prove one of the best examples. Whenever an institution enters it, the stock movement is high. Then people forget the fundamentals and only start checking which institution buys a stake in it. Then it, not the fundamentals but the Goodwill of that institution. In Mr. Lynch’s words, “when any company tells me that last analyst showed up was three years back. I can hardly contain my enthusiasm” if the analyst is not shown from last sometimes.
  6. Rumors abound like toxic waste, mafia, etc.: In simple words, whenever you get info about the west management company, it will be one of the best investments. The reason is waste is part of human life. So the business will last long. Few people are interested in coming into this business—so there is less competition. Most of the time, technology is not changing vastly in this business; one fine morning, you will realize that your business is useless. Mafias and terrorist groups need the money. So they will find a way to earn money for that. Possibly they will develop it. It is good.
  7. Something depressing about it is like its works: I don’t find Indian companies here, but Mr. Lynch has one. Service Corporation International. A company that is in the business of burials. It is impossible to think that humans will never die after some time. The firm is strong. Mr. Lynch also mentions that they have assets for it that are land. The market still ignored it. But as per Peter Lynch, it was one of his best performers. He mentions the asset base. Four hundred sixty-one funeral parlors, 121 Cemetery, 76 Flower shops, 21 Funeral products, supply manufacturing centers, and 3 Casket Distribution Centers. Fundamentals are good. So go ahead. In India, hospital waste management is an example. I don’t know the company name.
  8. It’s a no-growth industry. Hard to think but true. If you are interested in making money with IT or Pharma, you may have a Supernormal profit. But if you have a considerable profit, think outside the box. Service Corporation International is one example. Another is in India, the Tube industry. A company that makes Still frameworks for Bicycle. Natural rubber is if dull then somewhat no growth also. But not now. Madras Rubber Factory. In other words MRF. India’s most expensive stock. Plastic is another example. But check, and you will realize that one of the best companies, Max India is in this business.
  9. It’s got a niche: If it is a niche, it may be a monopoly. All monopoly is profitable. Mr. Lynch gives an excellent example of a rock pit. He also mentions that Owning a rock pit is safer than Owning a Jewelry Business. The reason is demand. It is big. But another one can’t come into your market and supply it cheaply. Nobody else is competing it because the trucking bill possibly eats his profit. In other simple word, Peter Lynch explains the paradox. Mix rock, sand, and gravel. It is a worthless mixture. $3 per ton is a rate. (As per the writer) Possibly you will get a milkshake or juice at this price. But still, it will give you good profit as less competition. An Indian example is Just Dial or Jubilant Food Work.
  10. People have to keep buying it: FMCG products are a perfect example. HUL, Unilever limited. Simple business but profitable all because people are supposed to keep buying big. Wall-Mart, Proctor & Gamble. Recently Warren Buffett also bought Duracell. The reason is also the same—the company which is in business to sell tea or coffee.
  11. USER OF TECHNOLOGY. : If you are interested in buying Facebook and Google’s share. Then I suppose you might be wrong. This is companies that are facing one big problem is that technology is constantly changing. You are supposed to update yourself. It needs money, and the return is less. Check out with Google. You will realize what I am talking about. So bet on the handset makers. The best example is your favorite. Repurchasing Here supermarkets area better chance as they are not developing the technology. They are using it.
  12. Insiders are buyers in it. Suppose you realize that Promoters are buying. Buy it. The reason is promoters and management know the business more than you. Purchasing a stake means the company is expected to perform better.
  13. The company is buying back shares: In simple words, the buyback is the way to make money with the least cost. After the buyback, next time, few peoples are there to claim their part. So it helps the company most often after the stock’s buyback price is high. The best example is Apple.

Going to end this post with a note. CHECK THE FUNDAMENTALS BEFORE INVESTING.