there was no longer an economic benefit in forcing people into a life of servitude. - Peter Lynch

If the p/e of Coca-Cola is 15, you’d expect the company to be growing at about 15 percent a year, etc. But if the p/e ratio is less than the growth rate, you may have found yourself a bargain. A company, say, with a growth rate of 12 percent a year (also known as a “12-percent grower”) and a p/e ratio of 6 is a very attractive prospect.

By now you might be wondering what’s the point of investing in a stodgy old company such as IBM, GM, or U.S. Steel? There are several reasons you might do this. First, big companies are less risky, in that they generally are in no danger of going out of business. Second, they are likely to pay a dividend. Third, they have valuable assets that might be sold off at a profit.

This is investing, where the smart money isn’t so smart, and the dumb money isn’t really as dumb as it thinks. Dumb money is only dumb when it listens to the smart money.