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. And with that approach, Lynch was able to catch stocks like Automatic Data Processing (NYSE:ADP) and Yum! Brands' (NYSE:YUM) Taco Bell well before Wall Street noticed their potential. As investors, we should all take advice from the man who not only minted fund holders 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 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 350 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.


Share Price


Market Cap

Wall Street Picks

Allegheny Technologies (NYSE:ATI)


Basic Materials

$6.4 billion


Dynamic Materials (NASDAQ:BOOM)


Basic Materials

$445 million


Frontier Oil (NYSE:FTO)


Basic Materials

$2.7 billion


Hansen Natural (NASDAQ:HANS)


Consumer Goods

$3.3 billion


Titanium Metals (NYSE:TIE)


Basic Materials

$2.8 billion


Data from Motley Fool CAPS and Yahoo! Finance as of June 19.

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 110,000-strong CAPS community help you make your investment decisions. There's information and opinions on more than 5,500 stocks, and don't forget the screening tool to help you sort information. It's all free.

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