MARKET COMMENT
Top Ten-Year Tenbaggers

By Maynard Paton (TMFMayn)
February 20, 2004

It's the ambition of every buy and hold investor: choose a share, sit on it for ten years and watch the price increase ten-fold. Sadly, picking long-term tenbaggers (a term coined by Peter Lynch) is likely to remain a pipe dream for most. Of the 699 companies currently in the FTSE All-Share index, just nine have transformed into tenbaggers since February 1994:

Company	Market   value   (£m)	Share   price   (p)	10-year share price growth (%)	10-year pre-tax profit growth (%)
Sage (LSE: SGE)	2,578	204	1,703	1,467
French Connection (LSE: FCCN)	380	402	1,249	1,806
Amstrad (LSE: AMT)	148	186	1,179	893
RPS (LSE: RPS)	305	161	1,175	2,407
T Clarke (LSE: CTO)	71	574	1,171	664
Dyson (LSE: DYS)	85	276	1,068	386
Capita (LSE: CPI)	1,869	281	1,065	2,115
Cairn Energy (LSE: CNE)	1,017	685	1,047	3,461
Merchant Retail (LSE: MRT)	190	174	988	1,400

So what are the common characteristics of a ten-year tenbagger? For starters, substantial earnings growth is a requirement. Only Dyson (a producer of chemical fibres and nothing to do with vacuum cleaners) was aided by a significant re-rating, its price to earnings ratio going from seven to seventeen in the last ten years. The other clear feature of a potential tenbagger is that it will start small. Six of the nine shares listed above were valued at less than £40m in 1994.

Interestingly, investors don't have to bet on technology to win big. Only Sage (accountancy software) and Amstrad (no-frills electronic goods) have some 'new economy' twist to their businesses. New industries, though, can provide rich pickings. Capita (outsourcing) and RPS (environmental consulting) are two excellent examples of non-tech growth.

Thankfully, more mundane industries can also produce the stuff of long-term legend. As well as Dyson, who'd have thought electrical engineer T Clarke would make the list? Selling fashionable clothes (French Connection) and cheap perfume (Merchant Retail) is not really rocket science either.

No list of out-performers though would be complete without a bit of punt. Following a big find, oil explorer Cairn Energy suddenly went from being ten-year sixbagger to a ten-year elevenbagger last month. However, company followers have had to endure a real roller coaster. Cairn's shares traded at 60p ten years ago, had increased ten-fold by 1997, fell 90% in 1998/1999, only then to rally ten-fold (again) to 685p by 2004.

Going on this volatile ride, and the fact that very few companies have the wherewithall to become long-term tenbaggers anyway, the best advice for holding a share up ten-fold is simple: take profits.

More: Peter Lynch | Finding Lynch's Tenbaggers | Ten Top Tenbaggers