Buy Stocks Tip

Peter Lynch is one of the greatest investor. He took Fidelity Magellan mutual fund in May of 1977 with the asset of $20 million. He then turns it into the largest mutual fund in the world, eating the market by 13.4 % per year. Peter Lynch strategies are:
1. Understand the companies business (same like Warren Buffet thought). Only buy stock which you know well. Know its product, market, where it gets its money, where it loses its money, and what will impact its earning. By understanding this, you’ll know the characteristic of the stock, you can know whether the company will have increasing or decreasing earning. Other important thing is know the overall market (interest rate, oil price, and other things which influence the companies earning). Lynch is known for his investment principle, “Invest in what you know”.
2. Look for company with good PEG, company with low Price Earning ratio and high Growth.
3. Look for company with strong cash flow, and below average debt-to-equity ratio. Strong cash flow gave company options when something happened. They can invest their money right away to profitable investment when it arrives.
4. Buy and Hold strategy Lynch strategy is to buy and hold, even though the stock has gone up 1000%. Many people when in this situation sold their winning stock and end up with the looser stock.
Currently, Peter Lynch focused a great deal of time on philanthropy. His foundation, the Lynch Foundation supports education, religious organizations, cultural and historic organizations, and hospital.

Warren Buffet is the greatest investor in the world. In 2006 he is the second richest man on earth. His company Berkshire Hathaway has gave its investor huge profit. A $10,000 investment in Berkshire Hathaway in 1965 would grow to nearly $30 million by 2005. Buffet got his investing style from Benjamin Graham School of value investing. Value investing try to find stocks which are low based on their intrinsic worth. In summary, Buffet look for:
1. Company with stable high and consistent ROE (return on equity).
2. Company with secure finance condition like low debt. This can be seen through low debt/equity ratio.
3. Company with high and increasing profit margin.
4. Company that have competitive advantage, things that other company did not have. Coca-cola has competitive advantage in its distribution that other companies could not match. You can see top companies with competitive advantage through Morningstar’s Bellwether.
Those companies above must be compared with other company in the same sector and size, and also check look for the past 10 years financial performance not just one year. Buffet also tends to stay away from mining or commodity stocks, because he believes that they are selling the same product and doesn’t have the competitive advantage. One other thing that I think many people do not have is patience, which Buffet has.