Peter Lynch highlights that below sentences is common knowledge among Wall Street analysts: Professional investors usually invest in large and well-known companies because these companies are “more popular”. You have to keep in mind that analysts are not only looking to get good returns, but also to keep their jobs. That’s why they often invest in popular companies and don’t pay attention to small businesses. If these big companies get poor results and the share price drops, they will excuse themselves by saying “the company has had a bad year”.Īccording to Peter Lynch, no one gets fired because a popular company has bad results. This is why the average person has an advantage over Wall Street’s professional analysts. The investor does not have to choose well-known companies to please his boss. You should search for companies that perform well, even if they are not popular. Simply by using common sense, the investor can make extraordinary profits.Īccess here my complete guide on index funds. The PEGY ratio is introduced in One up on Wall Street as a way to value companies through the fundamental analysis. It consists of dividing the P/E (Price to Earnings) by the sum of the expected earnings growth and the dividend yield. Peter Lynch advocates buying companies whose P/E is lower than their expected earnings growth. As a result, its PEGY ratio is less than 1.

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