In his book, One Up On Wall Street, Peter Lynch discusses the power of finding “tenbagger” stocks—investments that grow tenfold. He shares how his first stock, Flying Tiger Airlines, became a major success, funding his graduate studies.
Even in weak markets, a single high-performing stock can significantly boost returns. Lynch illustrates this by comparing two strategies: one with and one without a tenbagger, showing how the latter dramatically outperformed.
His key takeaway is that identifying just one great stock can offset multiple poor choices, proving that individual investors can achieve remarkable results with careful stock selection and a long-term perspective.
Here’s an excerpt from the book:
I developed a passion for making ten times my money early in my investing career. The first stock I ever bought, Flying Tiger Airlines, turned out to be a multibagger that put me through graduate school.
In the last decade, the occasional five- and tenbagger, and the rarer twentybagger, has helped my fund outgain the competition—and I own 1,400 stocks. In a small portfolio, even one of these remarkable performers can transform a lost cause into a profitable one. It’s amazing how this works.
The effect is most striking in weak stock markets—yes, there are tenbaggers in weak markets. Let’s go back to 1980, two years before the dawn of the great bull market. Suppose you invested $10,000 in the following ten stocks on December 22, 1980, and held them until October 4, 1983—that’s Strategy A.
Strategy B is the same, except that you added an eleventh stock, Stop & Shop, which turned out to be the tenbagger.
The result from Strategy A is that your $10,000 would have increased to $13,040 for a mediocre 30.4% total return over nearly three years (the S&P 500 offered a total return of 40.6% in the same period).
You’d have a perfect right to look at this and say: “Big deal. Why don’t I leave the investing to the pros.” But if you added Stop & Shop, your $10,000 would have more than doubled to $21,060, giving you a total return of 110.6% and a chance to brag on Wall Street.
Furthermore, if you had added to your position in Stop & Shop as you saw the company’s prospects improving, your overall return might have been twice again as high.
To make this spectacular showing, you only had to find one big winner out of eleven. The more right you are about any one stock, the more wrong you can be on all the others and still triumph as an investor.
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