Peter Lynch is one of the best professional portfolio
managers of all time. During his tenure as portfolio manager of the Fidelity
Magellan Fund between 1977 and 1990, his fund generated annual returns of
29.2%. To put this into perspective, a 29.2% annual return over 13 years would
have turned a $10,000 investment into nearly $280,000. One of Lynch’s core
investing principles is to do your research, meaning investors should always
conduct thorough due diligence before buying individual stocks. This includes
valuation analysis as an important part of the research process.
The price-to-earnings growth ratio, or PEG ratio for short,
can be a helpful valuation tool for investors to find undervalued stocks.
Occidental Petroleum Corporation (OXY) currently has a PEG ratio of just 0.24,
based on its expected earnings growth over the next five years. This low of a
PEG ratio means the stock could be significantly undervalued. In addition, the
stock has a high dividend yield of 4%. As a result, Occidental Petroleum could
be an attractive stock for value and income investors..
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