In this episode, Tracey is joined by Todd Bunton, Zacks Growth and Income Stock Strategist. For years Tracey and Todd have been discussing famed money manager Peter Lynch's investing strategy, which is, to put it simply: "Buy what you know."

Does it work? Could investing really be that easy that you can simply buy whatever you know and be a success?

Lynch ran Fidelity's Magellan mutual fund from 1977 to 1990 averaging 29.2% annual return during that time period. He was a big proponent of the idea that mom and pop investors knew trends and how well some companies were doing simply because they used that company's products or ate in their restaurants.

In his 1989 best-selling book, One Up on Wall Street, he laid out the buy what you know strategy.

Tracey recommended the 2000 updated version of his book in her list of the 5 Best Investment Books of all Time. If you haven't read it yet, you should.

But there are pros and cons to this strategy. As even Lynch himself pointed out, fundamentals do matter. So while investors can use buying what you know to gather investing ideas, the hard work of finding companies with solid fundamentals still has to take place.

What are the criteria that Tracey and Todd look in a company for when buying what they know?

When should you be cautious in being too enthusiastic about a company's outlook?

Tracey and Todd discuss what has gone right and wrong under this strategy. Using the Zacks Rank and earnings estimates to dig into fundamentals, they also grade 3 stocks using the 'buy what you know" strategy: Target Corporation, lululemon and GoPro Inc.

Does a company have to be newer to fit into the buy what you know strategy? Or can a mature company, which has been around for decades

and even pays a dividend, qualify?

Can you make a bet on a company that just has one popular product, or is it better to go with companies that are more diverse?

Should you try the "buy what you know" strategy? Listen to find out.

- Target: http://www.zacks.com/stock/quote/TGT?cid=cs-soundcloud-ft-pod

- Lululemon: http://www.zacks.com/stock/quote/LULU?cid=cs-soundcloud-ft-pod

- GoPro: http://www.zacks.com/stock/quote/GPRO?cid=cs-soundcloud-ft-pod

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