Peter Lynch called it the "amateur's edge," the ability of nonprofessional investors to outperform Wall Street professionals because (1) they invested in what they knew; and (2) they weren't blinded by Wall Street conventions.

This is how Lynch and John Rothchild begin the chapter in the classic One Up On Wall Street on how to find a 10-bagger, a stock that will go up 10 times while you own it:

"The best place to begin looking for the 10-bagger is close to home -- if not in the back yard, then down at the shopping mall, and especially wherever you happen to work."

I think that's still great advice for the individual investor. But I think it needs a bit of a tweak to fit current conditions.

Lynch was writing in the midst of a fast-growth economy that produced a massive explosion in creativity in the consumer sector of the economy. Companies like Wal-Mart Stores ( WMT) and Dell ( DELL) were inventing new ways of doing business.

Start-ups like Starbucks ( SBUX) and Whole Foods Market ( WFMI) created new market niches, then took them into the consumer mainstream. The amateur investor with an ear to the ground could identify these new businesses early enough to get in at the first stages of opportunity.

A Different World

Things are quite different now. Growth is tepid at 1.6% in the first quarter and at a projected 2.5% or less for the entire year. The creativity that characterized the earlier period has given way to consolidation and extension, as the Dells and Starbucks and the like build on their earlier momentum.

That doesn't mean the current consumer sector isn't going through big changes now -- and won't go through even bigger changes in the years ahead. But if the current period of below-average growth turns out to be an extended one -- and I think there's a good chance it will -- the consumer sector won't be characterized by companies exploiting new demand, but rather by companies trying to take advantage of what I call substitution.

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