The Peter Lynch Crayon Test Could Save Your Investment Portfolio

Peter Lynch, the gentleman that achieved 29% annual returns while running Fidelity’s Magellan Fund from 1977 through 1990, is famous for saying that you should never invest in any idea that you can’t illustrate with a crayon. A variation of this advice is that you should never own a business where it takes more than a few sentences to explain how the company turns a profit.

The highest-quality businesses can usually be explained quite simply.

Coca-Cola makes its profits by making syrup concentrates that allow them to make about $0.30 or so on every dollar once it is said and done.

Hershey sells chocolate in varying serving sizes in such a way that the company can achieve 16% total returns on assets.

Philip Morris International manufactures cigarettes for pennies per pack, and sells them for $5-$10 per pack.

Procter & Gamble sells household products like Tide Laundry Detergent, Gillette razors, … Read the rest of this article!

A&T Stock Looks Intriguing At 6% Dividend Yield

AT&T (T) stock has long fascinated me. It’s the staple of nearly every income investor’s portfolio. And for good reason. If you get your hands on a meaningful block of AT&T stock early enough in your life, you can have a whole lot of fun with it.

Ten years ago, a mere $20,000 investment could have gotten your hands on 1,000 shares of T. Since that time, AT&T has paid out $19.80 per share in dividends. If you paid $20 per share, you have essentially gotten your investment back in a decade of your life without any need to reinvest.

That has tremendous utility, either to supplement your lifestyle or to provide a regular, dependable dividend stream to make future investments.

You may be thinking, “Okay, that ten-year date came from 2008, the year of the last recession. Surely that is a cherry-picking comparison that is of limited use today?” … Read the rest of this article!