Peter Lynch is one of the great legends among mutual fund managers, famed in part for his skill at picking stocks of fast-growing young companies to help propel gains for Fidelity Magellan during his tenure from 1977 to 1990. His approach to picking stocks of small and midsize companies is especially useful today because they should benefit from an expected increase in economic growth.

In the previous issue of Bottom Line Personal, I highlighted three undervalued stocks of large companies that legendary investor Warren Buffett might select. In contrast, Lynch’s approach favors smaller companies that can grow their earnings by more than 20% annually for many years.

My favorite Lynch-like stocks now…

BofI Holding Inc. (BOFI) is parent company of Bank of Internet USA, the oldest and one of the fastest-growing Internet-only banks in the US, which has $7.9 billion in assets. Because its operations have such little overhead, it can offer more attractive interest rates to savers and borrowers than traditional banks yet still maintain high profit margins. Recent share price: $28.41.

Jones Lang LaSalle (JLL) provides management and real estate services for commercial properties globally. In a fragmented industry, the company, which operates in more than 80 countries, can grow for decades through continued acquisitions of smaller competitors. Recent share price: $104.94.

United Therapeutics (UTHR) is a biotech company that makes a top-selling drug for treating high blood pressure in the lungs. It also has a pipeline of treatments in clinical trials for cancer and lung disease that have the potential to each generate a billion dollars or more in annual revenue. Recent share price: $131.87.

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