Legendary investor Peter Lynch coined the term “tenbagger”. It refers to stocks that increase 10 times in value, generating 1,000% returns for early investors. In his investing bible, “One Up on Wall Street,” Lynch revealed his methodology for identifying these massive winners early.
So what should investors look for in potential tenbagger Peter Lynch stocks?
First, reasonable valuation. Lynch sought stocks trading at P/E ratios below the industry average and their own 5-year average. Next, strong fundamentals like over 20% revenue and earnings growth. Also critical – being underfollowed and undiscovered, so investors can get in early before the herd. Finally, patience to hold these winners for years as they realize their full potential.
Finding the next 10X stock is challenging. However, diversification across a basket of stocks means investors can significantly boost their odds. Let’s explore three Peter Lynch stocks demonstrating these attributes and positioned to multiply investment 10X this decade.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) has exceeded everyone’s expectations, emerging as a trailblazer in accelerated computing, catalyzing transformative innovations in AI, data center platforms, gaming, automation, and beyond.
In its recent Q4 2024 earnings, Nvidia revealed record quarterly revenue, up 22% quarter-over-quarter (QOQ) to $22.1 billion. For FY2024, NVDA achieved $60.9 billion in total revenue, a 126% surge from the previous year. With data center revenue specifically skyrocketing 217% to $47.5 billion in 2024, Nvidia has immense growth potential.
Also, the company has cemented powerful partnerships with top tech firms to propel its data center and AI platforms. For example, some deals include Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL NASDAQ:GOOG), Amazon (NASDAQ:AMZN) and Cisco Systems (NASDAQ:CSCO). Furthermore, between its Nvidia Omniverse simulation technologies powering industries from automotive to healthcare and its booming GeForce RTX gaming ecosystem with over 100 million users, NVDA is innovating on all fronts.
While the stock might be currently overvalued, it still has excellent potential. This is particularly true in the event of any headwinds that could cause temporary corrections or a recession. With robust revenue streams fueling heavy research and development (R&D) investments over $1 billion in 2024 alone, Nvidia can overcome any setbacks.
Warrior Met Coal (HCC)
Mohnish Pabrai added a total of one stock to his portfolio this quarter (Q4 2023) – Warrior Met Coal (NYSE:HCC). Pabrai bought 629,712 shares, accounting for 15.47% of the portfolio and a total value of $38.39 million.
Why should investors care? Well, Pabrai’s investment philosophy is deeply rooted in value investing. He often targets Peter Lynch stocks with a market cap around the half-billion-dollar range currently out of favor.
HCC stands poised to be a Peter Lynch-style multi-bagger over the next decade. The company achieved record financial results in 2023. Thus, its net income came in at $478.6 million and adjusted EBITDA was $698.9 million. Also, sales and production volumes grew substantially, by 34% and 21% respectively, compared to 2022.
Further, the company is investing heavily in the large-scale Blue Creek growth project, funding it entirely from strong operational cash flows. The endeavor will add 4.8 million tons per year of premium metallurgical coal production starting in 2026.
With coal demand growing amid tight supply, Warrior Met Coal’s solid operational excellence and world-class expansion plans make it a compelling Peter Lynch-style pick. Therefore, Mohnish Pabrai’s large new stake signals the stock’s attractive upside potential to multiply an investment ten times or more over the next decade.
Evolution AB (EVVTY)
Evolution AB (OTCMKTS:EVVTY) is riding the crest of a megatrend in online gambling – Live Casino.
As the leading B2B provider globally over 600 operators as customers, this Swedish innovator has built a scalable platform. And, its comprehensive suite of industry-leading solutions earned them Live Casino Supplier of the Year for 10 years straight.
Clearly, the numbers speak for themselves, with Evolution seeing a 48% revenue CAGR from 2015 to 2019. Most recently, Q4 2023 saw the company achieve a 16.65% year-over-year (YOY) revenue growth to 475.31 million EUR. Also, it saw a 26.56% jump in net income to 282.86 million EUR.
Looking ahead, the company is doubling down on U.S. expansion via a new strategic agreement with Caesars Digital. Clearly, Evolution’s proven business model and established leadership status signal a company in growth mode.
On the date of publication, Andrea van Schalkwyk held long positions in GOOGL, AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
