Paul, I have never forgotten what Peter Lynch said about most of his performance coming from a few (5-10 bagger) stocks and the rest being "noise"; and that he often held for quite some time before being right. Since I do not have an unlimited amount of money, nor the desire to follow an unlimited number of stocks, I wait patiently for one of those few to come along. Don's "THERE IS ALWAYS ANOTHER TRADE" is a gross overstatement of how often I see potential 5-10 baggers, where I consider that the odds favor it happening. (By the way, I like making few investment decisions.)
For example, I bought PIHC.OB last Spring at 45 cents when the company was cleaning up a death-spiral convertible, just before the general market collapse. I had followed the stock since it was under 20 cents when it had that critical problem really overhanging it and was in the process of also cleaning up its business, including a costly misadventure into the Internet. It had since achieved stability in a reasonably stable business, and was doing this deal to clean up the only remaining issue. Since I was paying 45 cents for a company making 15 cents a share (untaxed), with a tolerable (not good) balance sheet, and some growth prospects as well, it met my criteria. By the way, it subsequently met Peter Lynch's as well at perhaps a quarter higher, based on a public 5% ownership filing. It might take me 3 years for this to see $2-3, if it works out, and I feel no need to follow it closely. (The stock is now 85 cents.)
With the exception of the lows in October when there were a lot of 5 bagger stocks for a brief time, like ATML and VTSS, I find them rarely, usually in companies where there has been some change in company management or fundamentals, or both. |
