Legendary Fidelity mutual fund manager Peter Lynch believed individual investors should buy stocks in companies they understood. His rationale was simple, "If you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them." It was simply a matter of keeping your eyes open to the opportunities around you.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Go With What You Know
Each of us uses products and services on a daily basis with little thought given to their investment potential. That's perfectly normal - we are usually too busy enjoying them to put two-and-two together.

When we step back, however, we realize that we're far more qualified to make educated investment decisions about products we actually use than ones we don't. That's just common sense, and when applied to thorough stock research, provides the foundation for a sound and successful portfolio.

By researching companies whose products and services you use on a daily basis and understanding their financial situation, you'll be able to determine if they meet your criteria for investment. It takes a little legwork, but it's well worth it.

SEE: The Greatest Investors: Peter Lynch

Three Peter Picks
Thinking like Peter Lynch for a moment then, here are three companies you are likely familiar with that you might want to follow up on:

PepsiCo (NYSE:PEP)
This global consumer-goods powerhouse produced sales of approximately $66.5 billion in the last twelve months. Some of the brands that most of us use every day include Quaker Oats hot cereal, Tropicana orange tangerine juice and Lay's potato chips. Operating margins for the latest twelve months are roughly 14.48%. Although not as strong as its biggest direct competitor, Coca Cola (NYSE:KO), PepsiCo is still an extremely profitable company operating in 200 markets around the world.

Columbia Sportswear (Nasdaq:COLM)
Columbia knows its market - outdoor apparel - and it knows it well. Many investors can't help but wonder why Nike (NYSE:NKE) hasn't already bought Columbia Sportswear yet. The two companies' products rarely overlap and both headquarters are located in Oregon. Nike and its approximate $21 billion in sales could probably buy Columbia (sales of roughly $1.7 billion) with ease.

Whirlpool (NYSE:WHR)
In 2005, the company bought out Maytag, its closest rival, creating a home appliance dynamo. Its brands include Whirlpool, Maytag, KitchenAid, Jenn-Air and many others. In addition, it supplies Sears with appliances under the department store's own brand name, Kenmore. Many investors have no doubt owned or used an appliance under one of these brand names.

The Bottom Line
The three stocks listed above are just a small sample of the companies that spring forth if you keep your eyes open the way Peter Lynch became famous for doing. Rather than putting your head in the sand and giving up on investing, consider adopting an investment plan that takes advantage of your built-in knowledge as a consumer. There are opportunities all around us if we take the time to look.

SEE: Pick Stocks Like Peter Lynch

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  2. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  3. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  4. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  5. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  6. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  7. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  8. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  9. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  10. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!