Peter Lynch is famous as much for his quirky investment strategies as for his enviable 13-year track record as head of Fidelity Magellan. 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 among those with the greatest chance of being overlooked -- and hence mispriced. With that approach, Lynch was able to catch stocks like Automatic Data Processing and Yum! Brands’ Taco Bell well before Wall Street noticed their potential. As investors, we should all take advice from the man who not only minted fundholders a 28-bagger, but also 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 five companies with no more than 10 CAPS-rated Wall Street analysts calling the stock.
They also have:
- Three-year earnings-per-share growth above 25%.
- Price-to-earnings multiples below 30.
- Market capitalizations between $200 million and $10 billion.
- At least 300 active CAPS picks.
- Four- or five-star ratings, the highest possible, 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
|
Sector
|
Market Cap
|
3-Year EPS Growth
|
Price-to-Earnings
|
No. of Wall Street Picks
|
|
Calumet Specialty (Nasdaq: CLMT)
|
Basic Materials
|
$400 million
|
88%
|
8.7
|
1
|
|
Denbury Resources (NYSE: DNR)
|
Basic Materials
|
$4.5 billion
|
27%
|
12.9
|
8
|
|
Dolby (NYSE: DLB)
|
Technology
|
$3.8 billion
|
51%
|
19.9
|
6
|
|
Grey Wolf (AMEX: GW)
|
Basic Materials
|
$1.4 billion
|
21%
|
12.2
|
3
|
|
ICICI (NYSE: IBN)
|
Financial
|
$10.5 billion
|
47%
|
17.0
|
4
|
|
Manitowoc (NYSE: MTW)
|
Industrial Goods
|
$4.8 billion
|
83%
|
4.8
|
6
|
|
USEC (NYSE: USU)
|
Basic Materials
|
$527 million
|
49%
|
7.2
|
2
|
Data from Motley Fool CAPS and Yahoo! Finance as of Sept. 30.
Of course, screens are merely a first step in the stock-selection process. Come and join us on Motley Fool CAPS, and let the collective wisdom of our 115,000-strong CAPS community help you make your investment decisions. We've got information and opinions on more than 5,400 stocks, plus the screening tool to help you sort information. Best of all, it's all free.
On Oct. 7, 2008, Fool co-founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.
Follow along with the Global Gains team as they travel to key business centers in China to uncover the very best investing opportunities! Sign up here to receive their FREE dispatches from the road.
Terms & Conditions
RSS Headlines
Fool UK