A 10 bagger is a term used to describe an investment (such as stock) that increases in value by 10 times its initial purchase price. More simply, 10 bagger stocks are investments that have a 1000% return on investment (ROI).
Where Does the Term “10 Bagger” Come from?
This term was coined by the legendary fund manager, Peter Lynch in his best-selling book, "One Up on Wall Street." This popular stock term was inspired by Lynch’s love of baseball. How so? Another name for a base is “bag”, so in baseball, this term is equivalent to two home runs and a double.
This an impressive baseball play, and any investment that increases in value by ten times is equally as impressive.
How Does A Stock Become A 10 Bagger?
Any stock that appreciates ten-fold from the initial purchase date and original price can be considered a 10. For example, if a company's stock is initially priced at $20 per share then increases in value to $200, that’s a 10.
Similarly, if an investor purchases a stock for $5 per share and it increases in value to $50, then that’s also considered a 10. It’s also a pretty great investment especially for someone looking to invest in the stock market.
Although such investments are a rarity on Wall Street, investors often seek out companies with tremendous growth potential in the hopes of finding their next successful investment.
Real Life Examples of 10 Bagger Stocks
Again, while it’s extremely rare for a company's share price to increase so dramatically, these recent examples of 10 baggers (from March 9, 2009 to March 10, 2015) have seen substantial success:
- Regneron Pharmaceuticals (REGN) - Increased 3,322%
- Sirius XM (SIRI) - Increased 2,482%
- UNDER ARMOUR (UAA) - Increased 2,329%
- Tractor Supply (TSCO) - Increased 1,049%
- Netflix (NFLX) - Increased 1,032%
How to Find the Next 10 Bagger Stock
As you can see above, some of those stocks might come as a surprise. If you’re new to investing, you might be able to find a “10” by following new technology and products, paying attention to societal megatrends, and – most importantly – playing the waiting game.