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.
UK stock market legend Jim Slater described in several of his books that, 'elephants don't gallop'. In other words, big companies generally take a lot of work before they can make big gains. It ought to be easier for a $20 million company to double in size than for a $2 billion company to do the same. The companies mentioned above seem to prove him to be correct as the majority of the firms are small by FTSE standards (even after the tremendous growth).
He was always proud of his ability to spot companies that were doing well because his 'wife changed her shopping habits'. This particularly pleased him because it was the kind of thing that anyone should be able to do and as a starting point to selecting companies to investigate, it doesn't get much simpler. He clearly felt that the disconnected relationship between Wall Street financiers and Main Street shoppers was wrong. In his books he pointed out several situations in which ordinary common sense was missing on Wall Street where almost anyone with any sense could have done better. It is a testament to his clear thinking and writing style that virtually anyone could read his books and believe that they have 'what it takes' to become a successful investor. Both books (One Up On Wall Street and Beating The Street) have sold over 1 million copies around the world. Your author has read, and can recommend, both books to novice and intermediary investors. One Up On Wall Street even made me laugh out loud on a couple of occassions, which is something of a rarity in books about investment! To read more related articles, please visit:
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