10 Stock Picks With Peter Lynch Qualities

Peter Lynch, as manager of the Fidelity Magellan Fund (FMAGX) between 1977 and 1990, rode masterful stock picks to outsize gains. FMAGX delivered average annual total returns of more than 29% to fund investors during his 13-year tenure, clobbering the stock market by over 13 percentage points. A $10,000 investment in Fidelity Magellan Fund starting when Lynch took the reins would have grown to nearly $280,000 by the time he departed.

Lynch attributed his success to investing principles he shared in One Up on Wall Street and Beating the Street. His overall strategy, based on a few core concepts, is surprisingly simple. A few of the most salient points:

Invest in what you know. This is perhaps the most-quoted Peter Lynch saying. Lynch was wary of complex investment stories; he preferred stocks that were readily understandable. Some of Lynch's best ideas came from walking through grocery stores and talking with family and friends. He reasoned that, with consumer spending driving two-thirds of the U.S. economy, products and services desired by most consumers would be good investments, too. Invest in companies with strong foundations. Companies with certain traits make them easier to buy and hold for the long run. On the business side, look for competitive advantages, such as high barriers to entry or efficient scale. Lynch also preferred stocks that had solid cash balances and conservative debt-to-equity ratios. "It's hard to go backward if you have no debt," he once said. Focus on value. Peter Lynch liked value stocks that traded at cheap valuations based on their price-to-earnings (P/E) ratio. However, he also considered growth as part of the equation and thus wouldn't reject a high-P/E stock if it had a high growth rate, too. Lynch is famous for introducing price/earnings-to-growth (PEG), which factors growth into value. He also used a dividend-adjusted PEG ratio, since cash from dividends is part of the total-return equation. Moreover, Lynch coveted strong companies that were undervalued because they operated in out-of-favor industries.

With that in mind, here are 10 stock picks with Peter Lynch qualities. Some of these companies have one or more of the aforementioned traits, while some possess other qualities that the legendary investor prized.

Read more: https://www.kiplinger.com/slideshow/investing/T052-S001-10-stock-picks-with-peter-lynch-qualities/index.html

7 Dividend-Rich Sin Stocks to Buy Now

Pop culture has always loved the bad boy. From James Dean's Jim Stark in Rebel Without a Cause to Harrison Ford's Han Solo of Star Wars fame, everyone roots for the lovable rogue. But that's generally not true in the stock market, where "sin stocks" or "vice stocks" often get the stink eye.

Investors, and particularly large institutional investors, have reputations to manage. Pensions and endowments, in particular, increasingly have environmental, social and corporate governance (ESG) mandates that prohibit them from investing in industries that are politically incorrect or deemed to be socially harmful.

In the past, this has generally meant vice stocks such as tobacco, alcohol, tobacco, gambling and even defense companies. (No one in polite company wants to be branded as a merchant of death.) But today, the net is cast a little wider. Oil and gas stocks are now personae non gratae in many ESG-compliant portfolios, as are opioid-producing pharmaceuticals. Companies with a lack of diversity on their boards of directors are also often singled out.

Of course, if we take this to an extreme, nearly any industry could find itself blacklisted. Coca-Cola (KO) and PepsiCo (PEP) contribute to the obesity epidemic. Twitter (TWTR) and Facebook (FB) have become mediums for hate speech, and Alphabet (GOOGL) tracks a scary amount of data on its users that could be used for nefarious purposes.

The point here is not to justify bad behavior by companies or knock the idea of socially responsible investing, however. If you find a company's products or business practices objectionable, there's nothing wrong with excluding it from your portfolio. But a sin stock that one person finds objectionable might be personally fine to another. Some of the best stocks of the past decade included companies that glued people to their sofas and stuffed them with carbs.

Today, we're going to look at seven of the best sin stocks to buy now. Betting against the least ESG-friendly of stocks isn't without its risks. But if you're willing to dip your toe into sectors that are politically incorrect, the rewards can be substantial. And most of these picks offer value pricing and/or significant dividend yield.

SEE ALSO: All 30 Dow Stocks Ranked: The Analysts Weigh In

Read more: https://www.kiplinger.com/slideshow/investing/T018-S001-7-dividend-rich-sin-stocks-to-buy-now/index.html

Is Anything Wrong with Your Estate Plan? Here are 5 Common MistakesWhen's the last time you updated your will? Could your beneficiaries have changed? If you have a trust, did you actually fund it? Is your plan ready for the new SECURE Act? Here are five mistakes you don't want to make.

Read more: https://www.kiplinger.com/article/retirement/T021-C032-S014-is-anything-wrong-with-your-estate-plan.html

7 of Wall Street's Most Heavily Shorted Stocks

"Short interest" is one of the most interesting pieces of stock data that you might pay little or no attention to. But this little metric of negative sentiment, while popular among traders, can be valuable even to buy-and-hold investors who never want to place a single bearish bet.

If you believe a stock will rise, you buy it. Easy. But what if you're bearish on a company's prospects and want to profit off that belief? A popular technique is short selling: To sell a stock short, you borrow shares so you can immediately turn around and sell them. You wait for shares to fall in price, then buy them back and return those shares to the lender. Your profit is the difference between the price you sold and the price you bought back.

But that gamble can go wrong - to the delight of bullish investors. Short sellers incur losses when the stock's price goes higher. Also, time is against you when you short a stock, because you pay interest when you borrow shares. If you want to exit your short trade, you have to buy back shares, which in turn drives the stock price higher. That might force other short sellers to cut their losses, leading to a virtuous cycle of buying called a "short squeeze."

That's why short interest (how many shares are currently sold short to bet against a company) matters. There's no concrete level, but anything above 10% of the float, which is the number of shares available for public trading, is worth watching. If you're a conservative, buy-and-hold investor who hates volatility, you might want to avoid stocks with high short interest. If you're an aggressive investor, however, you might consider buying these stocks in the hope that a small bit of positive news will trigger a short squeeze, netting large returns in a short time.

Here, we'll look at seven heavily shorted stocks to watch. These companies have short interest ranging anywhere from 14% to 96%, and many of them are the kinds of hot-moving growth stocks that are typical among short-selling targets.

SEE ALSO: The 20 Best Stocks to Buy for 2020

Read more: https://www.kiplinger.com/slideshow/investing/T052-S001-7-of-wall-streets-most-heavily-shorted-stocks/index.html

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