Stalking The Ten-Bagger
In this chapter, the author talks about ten-baggers, which means that stocks will experience a ten-fold increase in the value over a period of time which is unspecific.
The best place to begin looking for the ten-bagger is close to home—if not in the backyard then down at the shopping mall, and especially wherever you happen to work.
According to him, many of the ten baggers of his time includes Dunkin’ Donuts (NASDAQ: DNKN), L’eggs (NYSE: HBI) and Subaru (TSE:9778), who first manifested themselves as products which are relatively more significant than stocks.
According to him, one doesn't have to be the Vice President of a company to sense if the company is prospering or growing. One can be of any profession to understand the same.
There are several advantages listed by Lynch, which the non-professional investors have over the professional investors. According to him, there are 2 kinds of amateur investors:
(1) ones who possess professional knowledge about industries,
(2) a “grassroots observer’s” or amateur’s awareness of exceptional products.
One can pick winners, irrespective of what they enjoy, be it grassroots edge or professional: “Whichever edge applies, the exciting part is that you can develop your stock detection system outside the normal channels of Wall Street, where you’ll always get the news late.”
According to the author, one can find a ten-bagger when they go shopping. When a stock is about to rise quickly, there's a sign which people can look forward to: the warm reaction from customers. Working in a business offers an edge because one can get exposure to successful firms of that business. He suggests people understand the company's size as smaller companies can have a massive swing in value.
It is important for one to invest in companies that they can comprehend well, this can give them an edge. He believed that a person who has an advantage always has the place and the position to be above a person who doesn't have an edge.