Mark Perkins sends: Famous portfolio manager Peter Lynch managed the Fidelity Magellan Fund from 1977 to 1990. He began with $20 million in assets and grew Magellan into the largest mutual fund with $13 billion by delivering a 29% annual return during his tenure. Perhaps most well-known for his small-cap growth stocks, he in fact invested in all kinds of industries and companies. With such a large fund he may have actually bought more stocks than Samuel L. Jackson has starred in movies. Maybe.
Many of his investments, like buying Volvo when it was selling for only its cash in the bank, would be considered more value-oriented. One of his keys to his success, As Lynch told Louis Rukeyser of Wall Street Week, one of the keys to his success was seeing over 200 companies and reading over 700 annual reports a year.

In early 1982, most professional money managers thought Chrysler (the then number three auto maker) was going to go bankrupt. Lynch, who did an enormous amount of scuttlebutt in companies, thought otherwise and was not afraid to bet against the crowd. Seeing $1 billion on Chrysler’s balance sheet in cash along with government loan support and great new products, he bet against other investors’ fears in the automaker. Putting the maximum 5% of Magellan’s assets into Chrysler common stock, he said he would have put up to 15 to 20% if he could have - and with good reason. Chrysler doubled after eight months thanks largely to the introduction of the first mini-van and was a 50-bagger (increased 50 fold) by 1987. What can we learn from all this? By not making decisions based on what others are doing and sticking to good fundamental analysis to find cheap, beaten-down stocks, a good foundation to investment success can be established.

What are some companies Peter Lynch might like today? There are many stock screens available that offer something along the lines of a “cheap growth” scan, and starting with some of those yields several oil and gas drilling stocks, like Global SantaFe (GSF), Diamond Offshore (DO), and ValueStockReports Top 25 pick TODCO (THE). Tidewater (TDW), a shipping company that focuses operations on serving the offshore energy industry, also comes up. The concentration of energy companies here is only useful to a point; some non-related names include Vivo (VIV), a Brazilian cell phone carrier, and First Marblehead (FMD), a student loan services company.

Going further down the list and doing some non-screener digging generates a few names one might associate more with Peter Lynch. Ubiquitous coffee shop Starbucks (SBUX) also comes up; with the stock $1 off its 52-week low, it would also fit nicely with the contrarian bet criteria. Buffalo Wild Wings (BWLD), which operates laid-back, bar-type establishments and has nearly tripled in the last year may not be the contrarian play, but it does have quite some room to run with a market capitalization under $1 billion.
American Eagle Outfitters (AEO) growing retail establishment presence doesn’t sell food, but by offering high-quality clothing at reasonable prices the company has built a valuable brand name. At under 7x Operating Cash Flow and with strong double-digit growth potential, AEO is another ValueStockReports Top 25 pick. Forbes recently featured the stock as a combined play on Lynch and Warren Buffett, two notable names who few would mind investing along with.