[[Start here]] → [[What works in stocks?|what works]] → [[diversify for resilience|diversity]] → classifications --- ![[lynch-categories.png]] [[Lynch - One Up On Wall Street|Peter Lynch]][^1] describes different categories of stocks, each of which can make you money in the stock market. When selecting stocks, it's important to understand which kind of stock you are dealing with, as it should change how you trade it. > Putting stocks in categories is the first step in developing the story. | Type | Risk | Potential Gain | Comment | | ---------------- | ---- | -------------- | ------------------------------ | | [[Fast Growers]] | High | High | Tenbagger or trouble | | [[Stalwarts]] | Low | Moderate | Climb, but no Everest | | [[Slow Growers]] | Low | Low | Often dividend stocks | | [[Cyclicals]] | Low | High | Can be high risk and low gain! | | [[Turnarounds]] | High | High | Tenbagger or bust | | [[Asset Plays]] | Low | High | hidden value | Companies don't stay in the same category forever. Fast growers burn out into slow growers or stalwarts, some turn into cyclicals. Cyclicals with financial issues, or diworseified Growth companies become Turnarounds. Fast growers can become depressed until they become Asset plays. --- For small investor portfolio design, Lynch recommends owning: - a couple of stalwarts - four fast growers - four turnarounds Managing the portfolio: - Rotate in and out of slow growers for 30-40% gains - Rotate in and out of fast growers after 50% gains if the story cools, but keep them if story is good and earnings keep growing - Rotate in and out of turnarounds/cyclicals if their price has increased and fundamentals deteriorate, there are always alternatives [^1]: [[Lynch - One Up On Wall Street]]