I’m looking to build a portfolio using the following Peter Lynch Style strategy. What I’m wondering is, do you think this is a good approach? Is there anything you’d change about it?
Here’s the strategy:
Screen stocks using Peter Lynch’s approach for Fast Growers:
Market Cap is >= US$ 600 million (basis year 2000) adjusted yearly, Average 5y EPS growth % is greater than or equal 20%, 0 <= PEG ratio <=1, For non-financial and utility companies: 1y Inventory to sales ratio growth % is < 5%, For financial companies: Equity to asset ratio is >= 13.5 AND latest filing RoA% is >= 1%, For non-financial companies: Debt to Equity ratio is < 30, If TTM Sales is > $1 billion, then latest filing P/E ratio is <= 40
Investigate any stocks meeting this criteria in detail and buy stocks in 20 companies than I’m happy with (with a good mix across industries). Initially my budget is $10,000 so I will buy 5% ($500) of each stock.
- Continue to send $1000 a month buying more stock ie buying $50 extra of each stock every month.
- At the end of the year, run the screen again- Any companies no longer meeting the screen criteria will be sold and replaced by companies that do meet the screen.
- Stock in these companies will be bought in such away that the amount owned in each company is rebalanced to 5% of the total portfolio.
