One Up On Wall Street: How to Use What You Already Know to Make Money in the Market

A term coined by Lynch, “tenbagger” refers to an investment that appreciates to 10 times its purchase price. This concept is a cornerstone in Lynch’s investment philosophy, highlighting the potential for significant returns in the stock market. He emphasizes the importance of identifying these rare but lucrative opportunities, often found in unassuming companies or industries. Tenbaggers are typically associated with fast-growing companies and require a combination of patience, insight, and a bit of luck to realize. In Lynch’s narrative, the pursuit of tenbaggers is not just about financial gain; it’s a testament to the power of informed and strategic investing.

Lynch plays on the term “diversification” to describe a common pitfall in the world of investing: the act of a company diversifying its business interests to the point where it actually diminishes its value and performance. This typically occurs when a company expands into areas outside its core competencies, leading to inefficient operations and diluted focus. Lynch warns investors to be wary of companies engaging in diworseification, as it often signals a lack of strategic direction and can adversely affect the stock’s performance. It’s crucial for investors to identify companies that stay true to their strengths versus those that are spreading themselves too thin.