Peter Lynch and the ' Ten Bagger '

Peter Lynch and the ' Ten Bagger '

Peter Lynch, the fund manager legend from the Fidelity Magellan fund first used the phrase ' ten bagger ' in his excellent book, One Up On Wall Street. The term actually comes from baseball, but Lynch uses it to describe stocks which have risen in value by ten or more times! To the amateur or newbie, the idea of making a 1,000% profit may seem a little extreme, but Lynch built a reputation and his fund on this very ability.

For example, in the UK between July 1996 and July 2006, there were a number of companies that can be described as ten baggers. In fact, there were 19! A few had passed the 1,000% growth mark and then fallen back in price, but the opportunity was there.

The largest of these share prices grew by a staggering 3,049% (Anglo Irish Bank Corporation PLC), the lowest was Goodwin PLC, up by a very respectable 904%.

Other notable performers included: Numis Corporation PLC at 2,021%, Savills PLC at 1,271% and Amstrad PLC at 997%.

As you may imagine, this period included the dot com boom and bust, so companies that showed amazing growth, only to lose the vast majority of the gains are not included in the 19.

The sectors which are best represented in the list of 19 ten baggers are not what you might expect. Rather than being the glamorous sectors like telecoms or mining, they are actually finance, real estate and construction.

UK stock market legend Jim Slater described in several of his books that, 'elephants don't gallop'. The companies seem to prove him to be correct as the majority of the firms are small by FTSE standards (even after the tremendous growth).

Peter Lynch revelled in the fact that his family could spot rising stock market stars before Wall Street could. Thus, his theory that with the right mindset and effort, anyone could become a successful investor. Having spotted firms that seemed to be trading successfully and had products that people wanted, he would then swing into action and investigate thoroughly.


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