How to find the market’s solid soaraway stocks
All investors dream of finding stocks that rise tenfold or even 20-fold. These “ten-baggers” and “20-baggers” typically produce their spectacular gains over a period of five to 15 years. The term ten-bagger was coined by Peter Lynch, who managed the Magellan Fund from 1977 to 1990. Over this period his fund turned a $1,000 investment into $28,000.
To achieve this excellent performance, he invested in many companies whose share prices grew by between ten and 30 times – or more – during that 13-year period. Multi-baggers needn’t produce their stellar gains immediately. Lynch cites WalMart as an example of a company that went public in 1970 and went on to appreciate 30-fold after 1980.
WalMart shares rose tenfold from 1972 to 1982, then climbed from $0.38 in June 1982 to $10.80 in March 1993, an increase of 28 times in less than 11 years – or 284 times in 21 years. The shares hit $43.40 in December 1999 but only reached that level again in June 2008. The record high of $160 was in April of this year, but the shares have been selling for $130 recently.
This price history shows that a ten-bagger can go on to increase by another ten, 20 or even 30 times. There may also come a point when the shares flatline or fall for several years or merely yield steady, unspectacular growth.
It is therefore all too easy for an investor to sell too early and miss out on a
