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To explain the same he uses an example of Wal-Mart, Microsoft and Amazon. He is of the opinion that every investor has adequate time to go for good companies which become great over a period of time.
- Lynch mentions that Wal-Mart (NYSE: WMT ) was a 10-bagger -- i.e. its stock rose to 10 times its initial price -- 10 years after it went public. Even if you had gotten in after waiting a decade, though, you'd be sitting on a 100-bagger. Just remember that the company may no longer show a monster growth story, but one will be able to get 20% returns on equity year after year. That type of consistent ROE is a huge positive indicator of management's ability to effectively allocate capital.
- Take an example of Microsoft which is still delivering impressive current return on equity (42%).
- Not to forget the Amazon which is just 13 years old as a public company, has seen its stock double since its 10th birthday.
Peter Lynch Best Bet in Present Time
He is of the opinion that Amazon is a company which is still trading at growth-stock valuations. Internet revolution is catching up and Amazon ability to expand its role as the premier online retailer, and its upside in the cloud-computing space; can provide great returns to the company.
Verdict
One may miss the bus or one may not be immediately required to jump the gun as one has ample time for research and can enter at leisure with some good realistic returns. We do apply the same philosophy of Peter Lynch while going for our short term stock tips as we get you profit even when you have missed the bus in quality stocks.
