Understanding Peter Lynch's 6 Stock Categories

Stocks with flat earnings and stock charts Stocks growing between 10-12% per year Stocks growing 20-25% per year Stocks that follow the economy's cycles

Grows faster than the market between 10-12% per year Experiences 50-100% price spikes that may not be justified by earnings growth Follows the economy's cycles, dropping sharply during recessions Grows an extremely fast 20-25% per year

True

False

Growing 20-25% per year Having a proven, profitable business model Avoiding 'hot' stocks growing over 50% per year Maintaining a high price-to-earnings ratio

True

False

How the stock has performed during previous recessions Whether the company is diversifying into 'stupid' growth areas If the stock's price has spiked 50-100% recently The company's dividend payout ratio

They will continue growing at 20-25% per year indefinitely They will eventually stop growing and turn into something else They will maintain a high price-to-earnings ratio They will be able to expand profitably into new markets

Perform well during economic recessions Typically experience 50% drops during downturns Have predictable 3-4 year cycles of good and bad years Require careful timing to buy at the right part of the cycle