-The story of Peter Lynch’s wife and L’eggs hosiery
Peter Lynch is one of the most well-known and successful investors of all time. He wrote the best seller One Up on Wall Street: How to Use What You Already Know to Make Money in the Market. This book convinced us all that you didn’t need to be a high paid financial analyst or an investment guru to buy successful stocks. Instead, he employed the strategy of “investing in what you know”. In other words, by using common sense and investing in things you see every day and understand, you too could identify a stock that doubled or tripled its value, or maybe even became a “tenbagger” stock, which is what he called a stock that increases its value by 10. But it wasn’t Lynch who identified one of his best stock picks ever, it was his wife.
During the early 1970’s, Hanes began test marketing L’eggs pantyhose, which were packaged inside colorful plastic eggs, at the check-out counter of the grocery stores by the candy, razors and gum. Some of you may remember these. I think my Mom recycled the plastic eggs for Easter egg hunts. Anyway, before that, women’s hosiery was primarily found in department stores. Women admitted to visiting a department store only once every 6 weeks, while frequenting the grocery store at least twice a week. This change in marketing strategy made L’eggs hosiery one of the two most successful consumer products of the 70’s.
Lynch admits that during this time, he had traveled the better part of the country gaining an understanding of the textile industry. But none of this research drew his attention to L’eggs hosiery – his wife Carolyn did. Carolyn was one of many women who had noticed L’eggs during their trips to the grocery store, brought them home and raved about what a good product they were. From there, anyone could find out that L’eggs was made by Hanes and Hanes traded on the New York Stock Exchange (NYSE). And yet, many investors were still relying on articles in the Wall Street Journal or hot stock tips from their brokers to find the next big stock. Lynch on the other hand, listened to his wife’s advice and from there did the research into Hanes as a company before adding its stock to the mutual fund he managed at Fidelity. Hanes stock became a “30-bagger” for his fund.
In the last five years, while the market has doubled, numerous stocks have hit tenbagger status or greater. Been to Vegas recently and witnessed how Steve Wynn’s Resort Empire has flourished? Wynn Resorts (WYNN) has achieved tenbagger status over the last several years. Or have you received a great deal while booking airfare or hotels through Expedia (EXPE) or Priceline (PCLN) lately? Those are two more examples of current tenbagger stocks from companies we’ve all heard of. It doesn’t even have to be a tenbagger. I was able to get a twobagger from Shutterfly (SFLY) and a fourbagger from Zillow (Z) just in the last two years, which are two websites I use frequently. So the question for you is – what products or services do you see every day that could become the next five, six or even tenbagger stock? Look for my next investment post called “Buying Stock in 3 Easy Steps” to help you get started.