The CAPS Screen: 10 Peter Lynch Stocks

Peter Lynch is famous not just for his enviable track record as 13-year head of Fidelity Magellan, but also for his quirky investment strategies. The market's best stocks, according to Lynch, are small, growing companies flying below Wall Street's radar.

It makes sense, after all, to pick out the strongest companies that have the greatest chance of being overlooked, and hence, mispriced. As investors, we should all take advice from the man who not only minted fundholders a 28-bagger but actually coined the investing term "-bagger."

With that in mind, I used our new CAPS screening tool to find stocks Peter Lynch might love. Below are 10 companies with no more than five CAPS-rated Wall Street analysts calling the stock.

They also have:

  • Three-year trailing earnings-per-share growth above 25%
  • Price-to-earnings multiples below 30
  • Market capitalizations below $10 billion
  • At least 300 CAPS picks
  • Four or five-star ratings from our CAPS community.

Remember, in the first year for which we have data, four-star companies outperformed with an average gain of more than 19%. Five-star stocks did even better.

Company

Share Price

Sector

Market Cap

Aluminum Corp. China (NYSE: ACH  )

$43.78

Basic Materials

$5.9 billion

American Oriental Bioengineering (NYSE: AOB  )

$11.43

Health Care

$890 million

GigaMedia (Nasdaq: GIGM  )

$17.37

Technology

$931 million

Jones Lang LaSalle

$67.01

Financial

$2.1 billion

Manitowoc (NYSE: MTW  )

$39.50

Industrial Goods

$5.1 billion

Pride International (NYSE: PDE  )

$44.95

Basic Materials

$7.5 billion

Synalloy

$16.69

Basic Materials

$104 million

TGC Industries

$7.17

Basic Materials

$125 million

Tidewater (NYSE: TDW  )

$67.07

Services

$3.5 billion

USEC (NYSE: USU  )

$6.41

Basic Materials

$713 million

Data from Motley Fool CAPS and Yahoo! Finance as of May 23.

Of course, screens are merely a first step in the stock-selection process. Come and join us on Motley Fool CAPS to let the collective wisdom of our 105,000-strong CAPS community help you make your investment decisions. There's information and opinions on more than 5,600 stocks, and don't forget the screening tool to help you sort information. It's all free.

For more Foolish content:

If you'd like to learn more about small-cap investing, you can click here to take a look at the Motley Fool Hidden Gems picks that have been beating the market by an average of 23 points to date. You can see all of our past recommendations as well as our two newest picks, free for 30 days.

Ilan Moscovitz thinks the CAPS screen is the new four square and that Bill Mann is the new Peter Lynch. Jones Lang LaSalle and American Oriental Bioengineering are Hidden Gems recommendations. GigaMedia is a Global Gains selection. The Fool's disclosure policy calls spikes.


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  • Report this Comment On May 23, 2008, at 4:28 PM, lostthemost wrote:

    This is disgusting. Motley should be banned from news categories. Your "news" is shameless promotion.

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