Peter Lynch once showed his readers how a supermarket stock could rescue an otherwise forgettable portfolio.

The example in One Up on Wall Street started with $10,000 invested in 10 stocks in December 1980. By October 1983, the account had grown to $13,040.

That was a profit, but the S&P 500 did better. An investor looking at the statement would have been justified in wondering why he bothered.

Add Stop & Shop to the mix, however, and the same starting capital became $21,060.

One big winner turned a disappointing collection of stocks into an account that more than doubled.

The business responsible was selling groceries.

Lynch explained that occasional fivefold and tenfold winners, along with rarer twentyfold winners, helped Magellan outpace the competition even though he owned about 1,400 stocks.

His point was that a few exceptional successes could offset plenty of ordinary results.

He liked smaller companies with room to grow, understandable businesses, durable niches, and financial statements worth reading.

Boring operations could be especially attractive because Wall Street was more likely to overlook them.

That supermarket example deserves more attention than the latest prediction from a television strategist who will explain next month why this month’s prediction was misunderstood.

For aggressive investors, it also raises a question worth answering:

How much of your portfolio actually has a chance to deliver that kind of result?

A sensible portfolio should include plenty of investments that let you sleep at night.

I also believe aggressive investors should reserve some capital for businesses that could make the account considerably larger.

Owning a stock that rises 10 times can change what you can do with your money.

The hunting ground does not have to involve a laboratory, a rocket launch, or a founder explaining why profits are an obsolete concept.

Sometimes it involves a freight terminal, a steakhouse, or the alarm company whose sign sits in the front yard.

People still need those services.

The opportunity comes when the stock price, the business, and the expectations attached to both have drifted far enough apart.

How a Few Big Winners Can Change Everything

Imagine starting with $100,000 spread equally across 20 stocks.

You have $5,000 invested in each company.

Five years later, 13 stocks have delivered exactly the same return as an index earning 8% annually.

Nothing to brag about there.

Five other stocks have lost 80%. You wish you had never heard of them, and you certainly do not intend to bring them up at dinner.

The remaining two investments become ten-baggers.

Your account finishes at approximately $200,506.

The index investment would have reached $146,933.

Despite five dreadful selections and 13 ordinary ones, you finish about $53,573 ahead.

Your annualized return is approximately 14.9%, compared with 8% for the index.

Two exceptional businesses did enough work to double the portfolio while carrying five substantial failures along for the ride.

With three ten-baggers, 12 index-matching holdings, and the same five losers, the account reaches approximately $243,160.

That is about 19.4% annually.

These are illustrations with no additional deposits or rebalancing, before taxes and fees, and with dividends reinvested where applicable.

The winners are allowed to grow into large positions.

The failures receive no endless supply of additional money.

That last detail matters.

You can survive losing $5,000 on a bad idea. Repeatedly sending another $5,000 after it can turn a manageable mistake into a much bigger problem.

A tenfold return in five years requires approximately 58.5% annual compounding.

That is a spectacular outcome.

Give the business 10 years, and the required annual return falls to approximately 25.9%.

We can use five years to understand the payoff without insisting that every promising business meet a five-year deadline.

The stock does not know when you purchased it, and management does not run the company to accommodate your anniversary.

Aggressive investing still requires patience.

It also requires putting enough money into potential winners for success to matter while keeping each initial commitment small enough that failure is tolerable.

For example, putting 10% of a portfolio into 10 separate opportunities gives each one a starting weight of 1%.

The rest of the portfolio can keep doing its job while you hunt.

I want that hunt to begin with a business I can understand.

Customers should have a reason to keep showing up. Cash generation should be real, or there should be convincing evidence that it can become real.

Debt needs to be survivable.

The purchase price needs to leave something for us.

Three companies worth investigating are Forward Air, Bloomin’ Brands, and ADT.

None is an obvious candidate for a tenfold return.

That is part of what makes them interesting.

Forward Air (FWRD): A Leveraged Turnaround With Enormous Potential

Forward Air is the sort of situation that makes investors uncomfortable before it makes them money, if the turnaround succeeds.

The company moves freight through its expedited transportation network and offers broader logistics services through Omni Logistics.

Customers use these services to get goods where they need to go.

The challenge is getting the company’s finances and operations working together well enough for shareholders to benefit.

There is progress to investigate.

Second-quarter revenue reached $673 million, while consolidated EBITDA calculated under the credit agreement increased to about $93 million from $79 million a year earlier.

The company also carried about $1.7 billion of debt, reported a large operating loss that included a goodwill impairment, and had negative quarterly free cash flow despite positive cash generation for the first half.

That debt is central to the opportunity.

If operations improve and cash reduces borrowings, the value left for shareholders can grow much faster than the value of the whole company.

Consider a hypothetical freight business worth $2 billion with $1.7 billion of net debt.

Shareholders’ equity is $300 million.

Years later, better earnings support a business value of $3.7 billion, and net debt has fallen to $700 million.

The shareholders’ portion is now $3 billion.

Their equity value increased tenfold even though the business value did not double.

Those are illustrative figures, not a valuation forecast for Forward Air.

They explain why a successful turnaround can produce such a large stock return.

They also explain why I pay so much attention to credit.

The opportunity belongs to shareholders only if the company can satisfy its creditors and avoid excessive dilution along the way.

Forward Air has identified noncore operations for potential sale to simplify the business and help reduce leverage.

A successful sale would need to leave the remaining company in better financial shape after accounting for the earnings those assets would have generated.

My bullish case is that better freight conditions, operating improvements, and debt reduction could produce a much more valuable equity over time.

I want to see cash after interest and investment needs confirm that case.

This is an aggressive turnaround worth following closely, with the potential for a payoff much larger than an ordinary market return.

Bloomin’ Brands (BLMN): A Restaurant Recovery Worth Watching

The next stop is Bloomin’ Brands, owner of Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s.

There is something appealing about a turnaround where you can explain the business over the very product it sells.

The customer wants a good meal, reasonable value, and service that makes coming back seem like a good idea.

Management needs to deliver that experience consistently and earn enough money doing it.

A restaurant already has rent to pay, equipment in place, and people working the shift.

More customers and better execution can improve the economics considerably.

When profits are depressed, even modest improvements in operating margins can produce a large percentage increase in earnings.

Bloomin’ has begun showing encouraging results.

U.S. comparable restaurant sales rose 2.3% in the second quarter.

Outback increased 1.4%, while Bonefish rose 8.1%.

Management raised its full-year adjusted earnings outlook to 90 cents to $1 per share.

The financing picture also received a useful update.

On Sept. 29, the company announced an extension of its $1.2 billion revolving credit facility to September 2031.

It did not reduce leverage, and it added a new secured leverage covenant, but it extended the maturity while keeping pricing substantially unchanged.

Better restaurant results and more time on the credit facility give us something to work with.

My bullish case is a sustained recovery in customer traffic and restaurant profitability, followed by stronger cash generation, debt reduction, and eventually a smaller share count.

If those improvements hold, investors may become willing to pay more for each dollar of earnings as well.

Bloomin’ closed at $8.06 on Sept. 29.

Ten times that price is $80.60.

At an illustrative 20 times earnings, the company would need approximately $4.03 in annual earnings per share to support that value.

That is a major climb from management’s current outlook.

I want investors to understand what the big prize requires.

The case depends on a durable operating recovery and substantial further improvement, rather than a brief burst of enthusiasm about restaurant stocks.

There is an established business here with recognizable brands and customers who already know the menu.

For an aggressive investor, the possibility of buying before a full recovery becomes obvious is worth investigating.

Outback already knows how to serve a steak.

The work is getting more customers to choose it and more profit to reach the bottom line.

ADT (ADT): A Familiar Business With Powerful Cash Flow

ADT brings us back to the house.

The security system is installed, the customer pays for monitoring, and the service continues month after month.

A business with recurring revenue can give management considerable flexibility when it converts that revenue into cash.

ADT produced $666 million of operating cash flow in the second quarter.

Adjusted free cash flow, including interest rate swaps, was $406 million.

The company repurchased and retired 68 million shares for $478 million during the quarter and raised its outlook for annual adjusted free cash flow growth to approximately 30%.

Those repurchases get my attention.

When a company buys back stock below its value, remaining shareholders own more of the business without writing another check.

The company also has approximately $7.7 billion of debt.

Maintaining customers, controlling acquisition costs, and allocating cash between debt, investment, and repurchases will determine how much of the opportunity shareholders collect.

Some of the recent cash improvement came from taxes, working capital, and lower subscriber acquisition spending.

One strong quarter cannot carry the entire thesis.

My bullish case is that durable cash generation and disciplined capital allocation could create much more value per share over time.

ADT is larger and more mature than the small companies Lynch often favored.

Its path to a huge return would rely heavily on cash, debt management, and a shrinking share count.

Here is an illustrative route.

Total sustainable earnings become 2.5 times larger, the share count falls by half, and the earnings multiple doubles.

Earnings per share increase fivefold, and the stock value rises tenfold.

That is a demanding scenario, not management guidance.

I would give ADT a decade or longer to pursue that kind of outcome.

The appeal is owning a familiar service whose cash can gradually buy remaining shareholders a larger claim on the business.

The Opportunity Is in the Business, Not the Excitement

Freight, restaurants, and alarm monitoring will never compete with a rocket company for cocktail party attention.

I am perfectly comfortable with that.

I would rather spend time on the relationship between cash flow and the purchase price than on finding a stock fashionable enough to impress strangers.

For aggressive investors, these are three different opportunities to investigate for ten-bagger potential.

Forward Air offers the possibility of a powerful financial turnaround.

Bloomin’ Brands offers the prospect of recovering earnings in established restaurant brands.

ADT offers recurring cash and the chance to concentrate that cash in fewer shares.

Success requires following the businesses after the purchase.

Watch whether Forward Air’s operating progress reaches cash flow.

Watch whether Bloomin’ keeps earning its customers’ return visits.

Watch whether ADT can retain customers while buying back shares and keeping debt under control.

A falling price alone is no reason to buy more.

Improving evidence can be.

Keep the initial positions manageable and spread the opportunities across different businesses.

Allow a failed thesis to cost you a small amount of capital rather than years of savings.

When a company starts delivering, give it enough room in the portfolio for the success to count.

Selling some shares can protect capital.

Selling every successful investment back to a tiny position can also prevent the very outcome you were hoping to capture.

A business that keeps improving deserves a fresh assessment of its future, even after the stock has already rewarded you.

Lynch’s supermarket example worked because the investor owned the winner while it became a winner.

That is easy to understand when looking backward at the numbers and much harder when looking forward through uncertainty.

Aggressive investors should make room for that uncertainty.

Keep the foundation of the portfolio sound, do the work on the businesses, and reserve some capital for the chance to own something exceptional