Peter Lynch: 10-Bagger Tales

Peter Lynch: 10-Bagger Tales

Matthew Schifrin, 02.23.09, 06:00 PM EST

How do you stay one up on Wall Street?
Buy smart and quit, while the going is good.


Who Is Peter Lynch?

If ever a legendary investor benefited from good timing it was Peter Lynch. Lynch was born in 1944 and first became interested in stocks while caddying for executives at a country club in Newton, Mass. His caddying landed him an internship at Fidelity Investments in 1966 and eventually a scholarship to Boston College.

After serving in the army for two years, Lynch eventually graduated with an MBA from the Wharton School of Business at the University of Pennsylvania in 1968. Upon graduation, Lynch returned to Fidelity as a research analyst. At age 25 he was earning $16,000 per year.

Lynch covered a variety of industries from textiles and chemicals to mining. Lynch eventually took over as director of research for the small investment mutual fund company and in 1977 took over portfolio management of Fidelity's Magellan mutual fund. The fund had only $18 million in assets when Lynch began running it.

Lynch ran Magellan from 1977 until 1990, and by the time he stepped down the fund had grown to $19 billion in assets with more than 1,000 stock holdings. Peter Lynch's compounded average annual investment return during the 13 years was 29.2%. A thousand dollars invested the day Lynch took over Magellan would have been worth $28,000 when he quit. Not to be understated is the fact that during Lynch's tenure the S&P 500's bull run was nearly continuous, rising from less than 100 to more than 320. The most severe market reversal Lynch faced was the crash of 1987 when stocks declined more than 30%. By the time Lynch retired a few years later, stocks had recovered most of their losses.

At the end of Lynch's career as a portfolio manager he teamed up with journalist John Rothchild to write his now famous bestseller One Up on Wall Street: How to Use What You Already Know to Make Money in the Market. This cemented Lynch as the everyman's hero because the book convinced millions of investors that you didn't need to be a quant or investing savant to find so-called "10 bagger" stocks (stocks that go up tenfold.) Just use common sense and invest in things you see everyday and understand.

During his tenure at Magellan, Lynch bought more than a hundred "10 bagger" stocks, including Fannie Mae (nyse: FNM - news - people ), Ford Motor (nyse: F - news - people ), Philip Morris International (nyse: PM - news - people ), Taco Bell, Dunkin' Donuts and General Electric (nyse: GE - news - people ).

Since Lynch retired in 1990, he has remained as a director of Fidelity Investments, written several more books and devoted his time to philanthropy.

http://www.forbes.com/2009/02/23/lynch-fidelity-magellan-personal-finance_peter_lynch.html