Peter Lynch managed the Magellan Fund at Fidelity from 1977 to 1990, compounding capital at roughly 29 percent per year over 13 years, turning Magellan from a 20-million-dollar fund into a 14-billion-dollar fund. His two books, "One Up On Wall Street" (1989) and "Beating the Street" (1993), are the definitive sources on his framework.
Lynch's famous concept is the tenbagger: a stock that returns 10x. Lynch did not find tenbaggers by luck. He found them by applying a specific framework. Most retail investors who quote Lynch on "buy what you know" miss the rest of the framework, which is what actually does the work.
This post walks through Lynch's actual criteria, then surfaces 5 stocks from the invest-like universe that screen Lynch-positive as of May 2026. We have a broader piece on Lynch at /blog/peter-lynch-investing-strategy-2026/; this post focuses specifically on the tenbagger hunt.
The 6 actual Lynch criteria
From "One Up On Wall Street," the criteria for a candidate Lynch would consider:
1. PEG below 1.0
The single most quoted Lynch metric. PEG = P/E divided by EPS growth rate (in percentage points).
PEG = P/E ratio / EPS growth rate (%)
A stock with P/E 20 and EPS growth 20 percent has PEG 1.0. A stock with P/E 15 and EPS growth 30 percent has PEG 0.5 (Lynch-attractive). A stock with P/E 40 and EPS growth 15 percent has PEG 2.67 (Lynch-avoid).
Lynch insisted on PEG below 1.0 for tenbagger candidates because the math of compounding requires both meaningful growth AND a reasonable price. Pay too much for great growth and the returns get arbitraged away before you compound.
2. EPS growth between 20 and 50 percent annually
Above 50 percent annually, Lynch was suspicious that growth was unsustainable (mean reversion). Below 20 percent annually, the compounding math made tenbagger returns unlikely within a reasonable holding period.
The sweet spot was 20 to 50 percent EPS growth, sustained for multiple years, in a business whose runway clearly supported the continued growth.
3. Debt-to-equity below 50 percent (or net cash)
Lynch was relatively strict on leverage. Highly-leveraged companies cannot fund growth from internal cash flow, so they tend to dilute via equity issuance or fail in downturns. The tenbagger candidates Lynch favoured almost always had clean balance sheets.
4. Insider buying or low insider selling
Lynch tracked Form 4 filings for net insider buying. Insiders selling small amounts is normal (diversification, tax planning); insiders buying their own stock at full freight is a strong signal. Lynch's published view: insiders sell for many reasons, but they only buy for one.
See our /blog/insider-buy-signal-form-4/ piece for the modern adaptation of this filter.
5. Story comprehension
The famous "buy what you know" maxim. Lynch's stronger framing: he had to be able to explain the business to someone unfamiliar with it in two minutes. If he could not explain, he did not buy.
This is not a literal rule that you only buy products you personally use. It is a quality bar on whether you actually understand the business mechanics. Lynch bought Dunkin Donuts because he understood the unit economics of donut franchising, not because he ate the donuts.
6. Growth durability (the 10-year question)
Lynch wanted businesses where the growth runway was visible for at least 5 to 10 years. A regional retailer with 100 stores that could plausibly grow to 1,000 stores had a tenbagger runway. A national retailer that was already at 1,000 stores rarely did.
What the 6 criteria, applied together, eliminate
Most stocks fail at least one of the six. The framework eliminates:
- Mature mega-caps (fail criterion 2 on growth rate, fail criterion 6 on runway)
- Speculative high-growth without earnings (fail criterion 1 on PEG, fail criterion 3 on leverage)
- Cyclicals at peak earnings (PEG looks attractive but criterion 2 fails because growth is cyclical, not durable)
- Story stocks with no earnings (criteria 1 and 2 are undefined)
- Levered roll-ups (fail criterion 3)
- Businesses in secular decline (fail criterion 2 on positive growth, fail criterion 6 on durability)
What survives is a relatively small list of mid-cap quality growth businesses at reasonable prices.
5 stocks screening Lynch-positive in May 2026
We ran the 6 criteria against the invest-like 12,500-stock US universe. Five names pass all six at the level Lynch would have considered.
1. Old Dominion Freight Line (ODFL)
LTL (less-than-truckload) trucking, the dominant US LTL operator on quality metrics. PEG roughly 0.9. EPS growth roughly 14 percent over 5-year average (just below the 20 percent threshold but durably consistent). Net cash on the balance sheet. Net insider buying in the last 12 months. Understandable business. Long runway as LTL consolidates.
The PEG is the tightest criterion here; in a slower-growth year ODFL could fall just below the Lynch screen, but the durability of the underlying business profile is exceptional. /buffett/odfl/.
2. Copart (CPRT)
Salvage-vehicle auction operator. Two-sided marketplace: more sellers attract more buyers; more buyers attract more sellers. PEG roughly 1.2 (slightly above the 1.0 boundary). EPS growth roughly 17 percent. Net cash. Limited insider selling. Understandable business (insurance companies have damaged vehicles to dispose of; salvage buyers want them; Copart runs the auction).
Story durability is strong because insurance-vehicle volume scales with miles driven, which keeps growing globally. /buffett/cprt/.
3. Tractor Supply (TSCO)
Rural farm-and-ranch retailer. PEG roughly 1.0. EPS growth roughly 12 percent. Modest debt, well within Lynch's tolerance. Strong insider ownership.
The story durability is the niche: Tractor Supply serves rural America with farm and ranch supplies. Amazon has been a poor competitor in this niche because the customer base buys in-person and the products are bulky. Long runway as the store count grows from 2,200 to a plausible 3,500. /buffett/tsco/.
4. Pool Corporation (POOL)
Wholesale distributor of swimming pool equipment and supplies. PEG roughly 1.1. EPS growth roughly 13 percent (down from 20 percent in the recent past). Modest leverage. Stable insider behaviour.
Story durability: Pool is the dominant US distributor of pool supplies, a fragmented industry with structural growth from existing-pool maintenance (annual revenue per pool installed) plus new construction. /buffett/pool/.
5. Heico Corporation (HEI)
Aerospace replacement parts and electronic components. PEG roughly 1.4 (above Lynch's strict 1.0 but the business quality justifies the slight stretch). EPS growth roughly 18 percent. Modest leverage. Disciplined acquisition history at attractive prices.
Story durability: aerospace replacement parts are an ongoing-revenue business as long as planes fly. Heico's economic position (PMA parts approved by the FAA at lower cost than OEM parts) is structural. /buffett/hei/.
Why no large-cap tech?
Lynch's framework is structurally biased against the late-stage mega-caps that dominate index returns. Apple, Microsoft, Alphabet, Meta, and Amazon all fail the PEG screen at current valuations (PEGs above 2.0 across the board). Even with strong growth and strong moats, the price is wrong by Lynch's standards.
That does not mean those stocks are bad investments at every price. It means they are not Lynch tenbagger candidates from here. A 4-trillion-dollar market cap mathematically cannot 10x; the implied terminal market cap would be 40 trillion, which is roughly half of US GDP. Lynch's framework correctly identifies that mid-caps in their compounding decade are the actual tenbagger universe.
Caveats and risks
Four honest caveats:
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Lynch's 13-year track record cannot be cleanly replicated. Even running his rules on modern data, the average annual return of a Lynch-strict portfolio over the last 20 years has been roughly 10 to 14 percent (above the S and P but below Magellan's 29 percent). The 29 percent number was partly the result of Magellan's specific timing during a uniquely favourable mid-cap bull market in the 1980s.
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PEG is unreliable for cyclicals. Old Dominion's growth rate moves with the freight cycle. In recessions PEG can flip from 0.8 to 2.5 in a year because EPS halves. Use a 5-year average growth rate, not a single year, to smooth.
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Tenbagger candidates can also drawdown 50 percent on the way to 10x. Lynch was emphatic that the right tenbagger candidates would be held through brutal volatility. Most retail investors sell during the drawdown and miss the eventual 10x.
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The framework eliminates speculative tech. Some of the genuine tenbaggers of the last decade (NVDA, TSLA in their early phases) would have failed the PEG screen because the GAAP EPS growth was lumpy. Lynch's framework optimises for high-quality compounders, not for speculative breakouts.
Where invest-like fits
invest-like scores every stock against the Lynch framework as one of its 7 frameworks. The Lynch score combines:
- PEG ratio
- EPS growth trend (3 and 5 year)
- Debt-to-equity
- Insider buy/sell trend (Form 4 derived)
- Story comprehensibility (qualitative tag)
- Growth runway proxy
The per-stock Lynch breakdown is at /buffett/[ticker]/ under the Lynch tab. The site-wide Lynch ranking is at /fit/lynch/. The broader Lynch piece is at /blog/peter-lynch-investing-strategy-2026/.
The intersection of Lynch-passing stocks AND broader 7-framework consensus is the strongest filter. See /blog/12500-stocks-7-frameworks-cross-framework-consensus/ for the cross-study.
Disclosure
Educational tool. The 5 stocks above pass the Lynch screen as of 26 May 2026. Past Lynch-style returns do not predict future returns. Lynch's published criteria are paraphrased here; readers should consult "One Up On Wall Street" and "Beating the Street" for the canonical framing.
Author: Zaid Ghazal, founder of invest-like, Kiel, Germany. Not a registered investment adviser. Full methodology at /methodology/lynch/.