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Toro: Listen To Phil Fisher And Peter Lynch

Mar. 08, 2021 8:53 AM ETThe Toro Company (TTC)5 Comments
Gary Gambino profile picture
Gary Gambino


  • Phil Fisher and Peter Lynch both advised against selling stocks of good companies simply because they look expensive.
  • Toro still possesses many of the characteristics Fisher and Lynch looked for in companies to buy.
  • Toro's high valuation isn't a sell signal by itself, but investors should watch the company to make sure it can continue to deliver growth.

Evaluating Toro Like Fisher Or Lynch

Two investing books I still have on my shelf are Common Stocks and Uncommon Profits by Phil Fisher and One Up On Wall Street by Peter Lynch. While Fisher's book was first published in 1958 and Lynch's in 1989, I find them still highly relevant today. I consider myself predominantly a value investor, but both of these books have helped me get more comfortable with "growth" stocks while still avoiding the highflyers that can crash and burn when the market turns. Phil Fisher was an early proponent of using qualitative analysis to help identify companies with potential to increase sales and earnings over time. Warren Buffett credits Fisher for broadening his focus beyond Ben Graham "cigar butt" value stocks. Peter Lynch was best known for his tenure as manager of Fidelity Magellan (FMAGX) in the 1980's where he averaged a 22.5% annual return compared to 16.5% for the S&P 500. Lynch's book focuses on buying lesser-known companies in overlooked industries that still have growth potential. Both investors used qualitative as well as quantitative metrics to judge stocks and were not quick to sell simply because a company has reached a particular valuation.

The Toro Company (NYSE:TTC) has been a well-run company in an unglamorous industry that has continued to grow over time due to innovation (through both internal R&D and acquisitions) as well as good balance sheet management. The company recently reported fiscal Q1 2021 results which showed a recovery in the Professional segment (sales +9.3%, earnings +14.0%) even as the anticipated post-pandemic slowdown in the Residential segment has not yet started. (sales +31.3%, earnings +48.9%)

Despite these great comparisons against the pre-pandemic period of November 2019 - January 2020, Toro did not raise its guidance for FY 2021 which remains at a midpoint of $3.40 EPS. Although the

This article was written by

Gary Gambino profile picture
I am a Chemical Engineer by training and have an MBA with concentrations in Finance and Operations Management. I retired early after 22 years in the energy industry with roles in engineering, planning, and financial analysis. I have managed my own portfolio since 1998 and have met my goal to match the S+P 500 return over the long term with lower volatility and higher income yield. I plan to focus my writing on positions I already hold or am considering changing, however my bias is toward long-term holding unless there is a very compelling reason to sell.

Analyst’s Disclosure: I am/we are long TTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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