Thanks for the comment. You’re absolutely right – investing is a zero sum game and there is no one silver bullet that can be used to make outsized returns. I think of the PEG ratio like an X-ray….it is only a single tool that assists you in seeing a company from one angle. There are many other tests, exams, MRIs, and symptoms that can be analyzed to understand the true health of a stock or investment. There is no substitute for finding market leading franchises with competitive advantages. In my view, discovering great companies at fair (or cheap) valuations is the key to success. A simple formula, but extremely difficult to execute. I’ll step off my soap box now…WS

Thanks for the comment! If you browse through Investing Cafeeine’s topics (under “Profiles” or “Education”) you may find a few other people and/or tools to use. I’m always interested in learning more about long-term successful investors…not most of the hot air talking windbags on TV . I don’t know much about Jim Slater, but he sounds like an interesting investor/entrepreneur with a wide array of interests (stocks, chess, salmon fishing, junior mining companies, politics, etc.). I look forward to learning more!

Best,
-WS

Best regards,

Guy

Thanks for the heads-up…I’ll definitely check out Mr. Slater (I like the Zulu title)! I don’t think Lynch necessarily takes credit for fathering the PEG ratio, but I have yet to see any prominent investor before or after Lynch talk about adding the dividend yield to the PEG calculation. It wouldn’t surprise me one way or another if Lynch stole the dividend twist to the PEG ratio, but I haven’t researched it enough to find the answer.

Have a great weekend!

~WS

In the UK we tend to hear it was created by Jim Slater (an investor and financier who wrote a brilliant book on small cap investing called The Zulu Principle — well worth checking out).

Lynch is a genius, too, of course.

I agree. No valuation tool is bulletproof (DCF, P/E, Price/Book, Comparables, Replacement Value, etc.). I hear what you’re saying about growth rate assumptions too – PEG analysis on cyclicals is very challenging. Many investors extrapolate short-term growth into long-term growth. If investing was that easy, everyone would be a pro.

-WS

Due dilligence is so much a factor, it’s not even funny as one circumstance in world events could affect stock holdings.

The flip flops in world events seem to move these ‘gurus’ from one end of the room, and back in moments. Cramer is just one of the many. These ‘gurus’ could lose you a lot of money.

The most professional of the professional either don’t get it right, continually flip-flop or, maintain the most conservative hold on securities for those who can afford nothing but, Blue Chips over a long period of time.

Bottom line. Study, learn, make mistakes, finally get it right, and continue to study on your own. Due diligence! Lose your own money or, better yet, make your own profits.