[[Start here]] → [[What works in stocks?|what works]] → [[diversify for resilience|diversity]] → [[there are six different categories of winning stocks|classifications]] → stalwarts ![[inceoglu-stalwarts.png]] Peter Lynch stated in [[Lynch - One Up On Wall Street|One Up On Wall Street]] that [[there are six different categories of winning stocks]]. Stalwarts was one of them. ## About stalwarts - These are good growers, but they climb no Everest. 10-12% annual growth at best. Not yet [[Slow Growers]] - At the time he was writing, Lynch was thinking of Coca-Cola, Procter and Gamble and Hershey's. - They are often huge companies. It's unusual to get a tenbagger out of them. They are likely to be defensives, and some rarely have down quarters. - They offer good protection in hard times and recessions. - Stalwarts can be good performers, not star performers. ## How to deal in stalwarts - Timing is key. You can make big profits in them, but you have to get your timing right. - The key issue is the P/E ratio. Don't overpay, and check to see if growth isn't moderating too much. - If they are up 50% in a year or two, you should think about selling. - They can get "clobbered" if they do get overpriced. - Sell and repeat the process with other similar stocks that have yet to appreciate. > [!quote] Peter Lynch[^1] > When anyone brags about doubling or tripling his money on a stalwart, your next question should be "and how long did you own it?". In many instances, the risk of ownership has not resulted in any advantage to the owner, who therefore took the chances for nothing. ## Typical two-minute monologue > Coca Cola is selling at the low end of its p/e range. The stock hasn't gone anywhere for 2 years. The company has improved in several ways. It sold half its interest in Columbia to the public. Diet drinks have sped up growth rate dramatically. Last year the Japanese drank 36% more Cokes than the year before, and the Spanish upped their consumption 26%. That's phenomenal progress. Foreign sales are excellent. Through a separate stock offering, Coca Cola Enterprises, the company has bought out many of its independent regional distributors. Now the company has better control over distribution and domestic sales. Because of these factors, Coca Cola may do better than people think. ## When to sell a stalwart - Seek to frequently replace with other stalwarts, so sell when the stock price gets too far above the earnings line, or when the P/E ratio gets too far above its historic range. Other reasons - new products have mixed results. P/E is at 15 while comparables are at 11-12. No director buying. One division with 25%+ of earnings is vulnerable to an economic slump. Growth rate slowing, but cost cutting opportunities limited. [^1]: [[Lynch - One Up On Wall Street|One Up On Wall Street]] - Lynch p111