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100 Baggers: Stocks That Return 100-To-1 and How to Find Them
This book is about 100-baggers. These are stocks that return $100 for every $1 invested. That means a $10,000 investment turns into $1 million. Chris Mayer can help you find them.
It sounds like an outrageous quest with a wildly improbable chance of success. But when Mayer studied 100-baggers of the past, definite patterns emerged.
In 100-Baggers, you will
-The key characteristics of 100-baggers
-Why anybody can do this (It is truly an everyman's approach. You don't need an MBA or a finance degree. Some basic financial concepts are all you need.)
-A number of crutches or techniques that can help you get more out of your stocks and investing
The emphasis is always on the practical, so there are many stories and anecdotes to help illustrate important points.
You should read this book if you want to get more out of your stocks. Even if you never get a 100-bagger, this book will help you turn up big winners and keep you away from losers and sleepy stocks that go nowhere.
After reading 100-Baggers, you will never look at investing the same way again. It will energize and excite you about what is possible.
It sounds like an outrageous quest with a wildly improbable chance of success. But when Mayer studied 100-baggers of the past, definite patterns emerged.
In 100-Baggers, you will
-The key characteristics of 100-baggers
-Why anybody can do this (It is truly an everyman's approach. You don't need an MBA or a finance degree. Some basic financial concepts are all you need.)
-A number of crutches or techniques that can help you get more out of your stocks and investing
The emphasis is always on the practical, so there are many stories and anecdotes to help illustrate important points.
You should read this book if you want to get more out of your stocks. Even if you never get a 100-bagger, this book will help you turn up big winners and keep you away from losers and sleepy stocks that go nowhere.
After reading 100-Baggers, you will never look at investing the same way again. It will energize and excite you about what is possible.
215 pages, Kindle Edition
First published January 1, 2015
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February 17, 2021
Mohnish Pabrai on 100 baggers
https://www.youtube.com/watch?v=Jo1Xg...
Charlie Munger's case study on the inversion of Coca Cola
100x is a BIG idea
Buy right and hold on: The key is not only finding them, but keeping them.
Invest in long term enterprises which have the potential to vastly outpace other companies and industries and stick with them as long as the theme is intact. Forget about the trading and use the time you would have spent monitoring the trade with your family.
To make money in stocks you must have “the vision to see them, the courage to buy them and the patience to hold them.”
Patience is critical: "Inactivity bordering on sloth is the cornerstone of our investment approach." -Warren Buffett
100-bagger is the product of time and growth. To net a 100-bagger, you need to hang onto a quality stock for a number of years (10-30 yrs).
Buy right and sit tight: If the job has been correctly done when a common stock is purchased, the time to sell it is—almost never.
The story of Ronald Read (janitor at JC Penny who left behind a $8m estate) shows you the power of simple investing concepts: keeping fees low, investing in quality companies, reinvesting dividends and—most importantly for our purposes—the power of just holding on.
https://www.cnbc.com/2016/08/29/janit...
3 factors determines terminal wealth = fn(initial capital, compounding rate, length of runway)
“Does it deserve my capital?” - Li Lu
Great concept, great economics, great product
Vitamin vs antidote? What's the pain point? How large is the prize?
“Every human problem is an investment opportunity if you can anticipate the solution,”
It takes vision and imagination and a forward-looking view into what a business can achieve and how big it can get.
You need to have a long runway to grow.
Understanding how a company could create value in the years ahead. If you can’t see how or where a company adds value for customers in its business model, then you can be pretty sure that it won’t be a 100-bagger (or it is not within your circle of competence).
Great companies that will continue to be great. Wide moats.
Re: ‘Measuring the Moat’ Mike Mauboussin 2002
A truly great business must have an enduring “moat” that protects excellent returns on invested capital.
* Without shelf space for your products you are just a couple of people with ideas
* If you have a brand that catches on, grows, and hits scale, the costs start to slowly unwind
* It costs a lot to switch
* Network effects
* What matters is the amount of the market you need to capture to make it hard for others to compete
* Stable industries are more conducive to sustainable value creation
* Gross profit margins are surprisingly resilient and do not contribute meaningfully to fade rates
Growth, growth and more growth are what power these big movers
GROWTH in all its dimensions—sales, margin and valuation
Great stocks often offer extensive periods during which to buy them.
Earnings just seem to step higher and higher, like going up a staircase. All of these studies show us that past multi-baggers enjoyed strong growth for a long time.
There is no way around it. Almost all of the businesses in the 100-bagger study were substantially bigger businesses at the end than when they began.
Focus on growth in sales and earnings per share.
Find a business that has lots of room to expand—it’s what drives those reinvestment opportunities.
CAN SLIM by William O’Neil:
Current quarterly earnings momentum (accelerating earnings growth)
Annual earnings growth (growing earnings)
New products/services; Supply & demand;
Leader vs laggard;
Institutional sponsorship;
Market direction
https://en.wikipedia.org/wiki/CAN_SLIM
New methods, new materials and new products—things that improve life, that solve problems and allow us to do things better, faster and cheaper. There is also an admirable ethical streak - investing in companies that do something good for mankind.
Simple yardstick for company with favorable long-term prospects:
1 EPS growth accelerating
2 ROIC improving
Rapid increase in sales, rising profits and a rising ROE
GARP: Growth at the Right Price
S—Size is small Q—Quality is high for both business and management
G—Growth in earnings is high L—Longevity in both Q and G P—Price is favorable for good returns
A company can report a fall in earnings, but its longer-term earnings power could be unaffected.
Be fearful when others are greedy and greedy when others are fearful
You can’t just willy-nilly buy pricey growth stocks and expect to come up with 100-baggers.
When you get lots of growth and a low multiple you get the twin engine of 100-baggers. That’s where you really get some great lift, with both factors working in your favor.
"It's far better to buy a wonderful business at fair price than a fair business at a wonderful price." -Warren Buffett
You ought to prefer to pay a healthy price for a fast-growing, high-return business (such as Monster) than a cheap price for a mediocre
Good stocks are seldom without friends. Hence, they are rarely cheap in the usual sense. Don’t let a seemingly high initial multiple scare you away from a great stock.
Don't just go for cheap stocks. Go for stocks that appear expensive but are in fact undervalued if properly analyzed.
I like ideas where the story is not obvious from the numbers alone. I want to find that something else is going on in the business that makes it attractive.
The best ideas are often the simplest. Wonderful businesses with pricing power.
e.g. AMZN/BABA: online shopping is a tidal wave
e.g. GOOG = the new Altria
“Never invest in any idea you can’t illustrate with a crayon.” -Peter Lynch
Combination of rising earnings and a higher multiple: the truly big return comes when you have both earnings growth and a rising multiple. Ideally, you’d have both working for you.
A low entry price relative to the company’s long-term profit potential is critical.
Why Warren Buffett bought APPL - growth stock w/ room for multiple expansion
“Never if you can help it take an investment action for a non-investment reason.”
Studying 100-baggers, then, comes down to studying growth
Autozone 100x: Ho-hum growth rates of 2–5 percent. Yet AutoZone bought back huge sums of stock, which powered earnings-per-share growth of 25 percent a year.
But be leery of buybacks and no sales growth. If you have a company with tons of cash flow but top-line [sales] growth is 5% or less, the stock doesn’t go anywhere. IBM is a good example. Good ROE. Cheap. But the absence of top-line growth means the decline in share count has been offset by multiple contraction. As a result, the stock goes nowhere.
Management
“In the ultimate analysis, it is the management alone which is the 100x alchemist.”
Top-management teams that made good capital decisions about how to invest company resources. There was often a large shareholder or an entrepreneurial founder involved.
Constant desire to grow a business is a key characteristic
Honest, rational, competent and avoids institutional imperative
Decentralized organizations release entrepreneurial energies
LBO model: focus on cash flow. Use leverage to acquire more properties. Improve operations. Pay down debt. And repeat.
When done right, buybacks can accelerate the compounding of returns.
When you find a company that drives its shares outstanding lower over time and seems to have a knack for buying at good prices, you should take a deeper look. You may have found a candidate for a 100-bagger.
When markets are high, there is no question that’s when the shysters like to come out and pick the pockets of complacent investors.
But when a man suspects any wrong, it sometimes happens that if he be already involved in the matter, he insensibly strives to cover up his suspicions even from himself.
“Whose bread I eat, his song I sing.” or “Don’t ask your barber if you need a haircut”
- [ ] Charlie Munger’s checklist against Psychology of Misjudgement
- [ ] First, do your work, and only then, talk with management
- [ ] Reading conference-call transcripts is better than listening to them
- [ ] Are questions ever evaded? Which ones?
- [ ] it’s the calls that go like this: “Great quarter, guys.” “Thanks, Mike.” If the transcript is filled with that and there are no pointed questions, then it “smells like a stage-managed call.
- [ ] Read several quarters at a time to look for disappearing initiatives, changes in language.
- [ ] Messy, indecipherable disclosures are clues to stay away. Obfuscation in accounting footnotes is a Red Flag.
ROIC
"Invert; always invert" -Charlie Munger
Finding what will become a 100-bagger is as much about knowing what not to buy as it is about knowing what to buy. The universe of what won’t work is large. Knocking out huge chunks of that universe will help make your search for 100-baggers easier.
“In Africa, where there are no antelope, there are no lions.”
“When looking for the biggest game, be not tempted to shoot at anything small.”
Don’t bother playing the game for eighths and quarters.
Don’t waste limited mental bandwidth on stocks that might pay a good yield or that might rise 30 percent or 50 percent.
You only have so much time and so many resources to devote to stock research. Focus your efforts on the big game: The elephants. The 100-baggers.
Over the long term, it’s hard for a stock to earn a much better return than the business which underlies it earns.
We’re looking for companies with very high returns on capital. That’s one of the key requirements 100-baggers must meet.
Monster shows us the power of high sales growth and building a brand and the potent mix of high sales growth and rising profit margins and rising return on equity.
Return on capital is extremely important. If a company can continue to reinvest at high rates of return, the stock (and earnings) compound . . . getting you that parabolic effect.”
What are the reinvestment dynamics of this business ?
Businesses that can reinvest their free cash flow in a manner that continues to earn above-average returns. You need a business with a high return on capital with the ability to reinvest and earn that high return on capital for years and years.
See something beyond the reported earnings e.g. AMZN: the power of sales growth and the ability to see something beyond the reported earnings.
How does the company finance its growth?
When a company can build book value per share over time at a high clip, that means it has the power to invest at high rates of return.
The rich have access to networks—through social and business connections—that give them better information. It helps them keep their edge over less connected peers.
Macro
Economists are probably the one group who make astrologers look like professionals when it comes to telling the future.
“Extraordinary performance comes only from correct non-consensus forecasts,”
We will continue to ignore political and economic forecasts which are an expensive distraction for many investors and businessmen.
The idea of wholesale shifts [in and out of the market at different stages of the business cycle] is for various reasons impracticable and undesirable.
Slumps are experiences to be lived through and survived with as much equanimity and patience as possible.
Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%. . . . But, surprise—none of these blockbuster events made the slightest dent in Ben Graham’s investment principles.
Lower prices, as found in such disasters, create “easier” opportunities to make hundredfold returns.
In 2008, when the stock market tanked, many people I know were afraid to invest.
Risk of losing one's job makes it difficult to commit additional risk capital during economic depression
“General markets tend to come back strongly in periods subsequent to price crashes! That was the case in 1932, 1937, 1962, 1974–75, 1980–82, 1987 and 2001–2002. A comeback also seems likely after the unprecedented crash of 2007–2008.”
The ultimate permanent impairment is when a firm goes out of business.
The best inflation fighters are 100-baggers.
The ideal business during an inflationary time is one that can (a) raise prices easily and (b) doesn’t require investment in a lot of assets.
These intellectual businesses are wonderful investments in both inflationary and disinflationary environment
Asset-heavy businesses generally earn low rates of return rates that often barely provide enough capital to fund the inflationary needs of the existing business, with nothing left over for real growth, for distribution to owners, or for acquisition of new businesses.
Destroy your best loved ideas
Looked forward to having his own ideas tested and knocked down:
I have no attachment to ideas. I have no problem changing my mind. In fact, I look forward to doing so and actively try to poke holes in my own ideas and theories. Be suspicious of abstractions.
Hunting for 100-baggers is completely independent of whatever is happening in the market. You should never stop looking for 100-baggers, bear market or bull.
Few bets, infrequent bets & big bets
Limiting his activities to buying only when he found intrinsic values far above stock prices.
Don’t be afraid to hold onto cash until you find those special 100-bagger opportunities. It’s good to have cash and not be afraid to buy when things look bad.
What is the "right" level of cash? Trade off b/w cash drag on returns vs cash optionality
Kelly's Formula/Kelly's Criterion = Expected net winnings / Net winnings if you win = edge/odds = W - [(1-W)/R] where W: winning probability; R: win/loss ratio
Better to own fewer stocks and more of your very best ideas than spread yourself too thin.
“Sorry to have gone too large on Elder Dempster. I was suffering from my chronic delusion that
one good share is safer than 10 bad ones.” -Lord Keynes
He rejected the idea, as Buffett and other great investors have, that you should dilute your best bets by holding a long list of stocks.
Tobin's Q/Sam Zell’s replacement cost
More zeal for consolidating businesses than for expanding them or initiating them. With stock prices low, the cash-rich investors in corporate America had a chance to steal some things. Why invest in new oil wells when you can buy them on the stock market for less than half of what it would cost you to drill new ones? Why build new factories when you can buy a competitor for 20 cents on the dollar?
Conversation w/ Chris Mayer - CFA India conference
https://11thiic2021.cfasocietyindia.l...
https://www.youtube.com/watch?v=Jo1Xg...
Charlie Munger's case study on the inversion of Coca Cola
100x is a BIG idea
Buy right and hold on: The key is not only finding them, but keeping them.
Invest in long term enterprises which have the potential to vastly outpace other companies and industries and stick with them as long as the theme is intact. Forget about the trading and use the time you would have spent monitoring the trade with your family.
To make money in stocks you must have “the vision to see them, the courage to buy them and the patience to hold them.”
Patience is critical: "Inactivity bordering on sloth is the cornerstone of our investment approach." -Warren Buffett
100-bagger is the product of time and growth. To net a 100-bagger, you need to hang onto a quality stock for a number of years (10-30 yrs).
Buy right and sit tight: If the job has been correctly done when a common stock is purchased, the time to sell it is—almost never.
The story of Ronald Read (janitor at JC Penny who left behind a $8m estate) shows you the power of simple investing concepts: keeping fees low, investing in quality companies, reinvesting dividends and—most importantly for our purposes—the power of just holding on.
https://www.cnbc.com/2016/08/29/janit...
3 factors determines terminal wealth = fn(initial capital, compounding rate, length of runway)
“Does it deserve my capital?” - Li Lu
Great concept, great economics, great product
Vitamin vs antidote? What's the pain point? How large is the prize?
“Every human problem is an investment opportunity if you can anticipate the solution,”
It takes vision and imagination and a forward-looking view into what a business can achieve and how big it can get.
You need to have a long runway to grow.
Understanding how a company could create value in the years ahead. If you can’t see how or where a company adds value for customers in its business model, then you can be pretty sure that it won’t be a 100-bagger (or it is not within your circle of competence).
Great companies that will continue to be great. Wide moats.
Re: ‘Measuring the Moat’ Mike Mauboussin 2002
A truly great business must have an enduring “moat” that protects excellent returns on invested capital.
* Without shelf space for your products you are just a couple of people with ideas
* If you have a brand that catches on, grows, and hits scale, the costs start to slowly unwind
* It costs a lot to switch
* Network effects
* What matters is the amount of the market you need to capture to make it hard for others to compete
* Stable industries are more conducive to sustainable value creation
* Gross profit margins are surprisingly resilient and do not contribute meaningfully to fade rates
Growth, growth and more growth are what power these big movers
GROWTH in all its dimensions—sales, margin and valuation
Great stocks often offer extensive periods during which to buy them.
Earnings just seem to step higher and higher, like going up a staircase. All of these studies show us that past multi-baggers enjoyed strong growth for a long time.
There is no way around it. Almost all of the businesses in the 100-bagger study were substantially bigger businesses at the end than when they began.
Focus on growth in sales and earnings per share.
Find a business that has lots of room to expand—it’s what drives those reinvestment opportunities.
CAN SLIM by William O’Neil:
Current quarterly earnings momentum (accelerating earnings growth)
Annual earnings growth (growing earnings)
New products/services; Supply & demand;
Leader vs laggard;
Institutional sponsorship;
Market direction
https://en.wikipedia.org/wiki/CAN_SLIM
New methods, new materials and new products—things that improve life, that solve problems and allow us to do things better, faster and cheaper. There is also an admirable ethical streak - investing in companies that do something good for mankind.
Simple yardstick for company with favorable long-term prospects:
1 EPS growth accelerating
2 ROIC improving
Rapid increase in sales, rising profits and a rising ROE
GARP: Growth at the Right Price
S—Size is small Q—Quality is high for both business and management
G—Growth in earnings is high L—Longevity in both Q and G P—Price is favorable for good returns
A company can report a fall in earnings, but its longer-term earnings power could be unaffected.
Be fearful when others are greedy and greedy when others are fearful
You can’t just willy-nilly buy pricey growth stocks and expect to come up with 100-baggers.
When you get lots of growth and a low multiple you get the twin engine of 100-baggers. That’s where you really get some great lift, with both factors working in your favor.
"It's far better to buy a wonderful business at fair price than a fair business at a wonderful price." -Warren Buffett
You ought to prefer to pay a healthy price for a fast-growing, high-return business (such as Monster) than a cheap price for a mediocre
Good stocks are seldom without friends. Hence, they are rarely cheap in the usual sense. Don’t let a seemingly high initial multiple scare you away from a great stock.
Don't just go for cheap stocks. Go for stocks that appear expensive but are in fact undervalued if properly analyzed.
I like ideas where the story is not obvious from the numbers alone. I want to find that something else is going on in the business that makes it attractive.
The best ideas are often the simplest. Wonderful businesses with pricing power.
e.g. AMZN/BABA: online shopping is a tidal wave
e.g. GOOG = the new Altria
“Never invest in any idea you can’t illustrate with a crayon.” -Peter Lynch
Combination of rising earnings and a higher multiple: the truly big return comes when you have both earnings growth and a rising multiple. Ideally, you’d have both working for you.
A low entry price relative to the company’s long-term profit potential is critical.
Why Warren Buffett bought APPL - growth stock w/ room for multiple expansion
“Never if you can help it take an investment action for a non-investment reason.”
Studying 100-baggers, then, comes down to studying growth
Autozone 100x: Ho-hum growth rates of 2–5 percent. Yet AutoZone bought back huge sums of stock, which powered earnings-per-share growth of 25 percent a year.
But be leery of buybacks and no sales growth. If you have a company with tons of cash flow but top-line [sales] growth is 5% or less, the stock doesn’t go anywhere. IBM is a good example. Good ROE. Cheap. But the absence of top-line growth means the decline in share count has been offset by multiple contraction. As a result, the stock goes nowhere.
Management
“In the ultimate analysis, it is the management alone which is the 100x alchemist.”
Top-management teams that made good capital decisions about how to invest company resources. There was often a large shareholder or an entrepreneurial founder involved.
Constant desire to grow a business is a key characteristic
Honest, rational, competent and avoids institutional imperative
Decentralized organizations release entrepreneurial energies
LBO model: focus on cash flow. Use leverage to acquire more properties. Improve operations. Pay down debt. And repeat.
When done right, buybacks can accelerate the compounding of returns.
When you find a company that drives its shares outstanding lower over time and seems to have a knack for buying at good prices, you should take a deeper look. You may have found a candidate for a 100-bagger.
When markets are high, there is no question that’s when the shysters like to come out and pick the pockets of complacent investors.
But when a man suspects any wrong, it sometimes happens that if he be already involved in the matter, he insensibly strives to cover up his suspicions even from himself.
“Whose bread I eat, his song I sing.” or “Don’t ask your barber if you need a haircut”
- [ ] Charlie Munger’s checklist against Psychology of Misjudgement
- [ ] First, do your work, and only then, talk with management
- [ ] Reading conference-call transcripts is better than listening to them
- [ ] Are questions ever evaded? Which ones?
- [ ] it’s the calls that go like this: “Great quarter, guys.” “Thanks, Mike.” If the transcript is filled with that and there are no pointed questions, then it “smells like a stage-managed call.
- [ ] Read several quarters at a time to look for disappearing initiatives, changes in language.
- [ ] Messy, indecipherable disclosures are clues to stay away. Obfuscation in accounting footnotes is a Red Flag.
ROIC
"Invert; always invert" -Charlie Munger
Finding what will become a 100-bagger is as much about knowing what not to buy as it is about knowing what to buy. The universe of what won’t work is large. Knocking out huge chunks of that universe will help make your search for 100-baggers easier.
“In Africa, where there are no antelope, there are no lions.”
“When looking for the biggest game, be not tempted to shoot at anything small.”
Don’t bother playing the game for eighths and quarters.
Don’t waste limited mental bandwidth on stocks that might pay a good yield or that might rise 30 percent or 50 percent.
You only have so much time and so many resources to devote to stock research. Focus your efforts on the big game: The elephants. The 100-baggers.
Over the long term, it’s hard for a stock to earn a much better return than the business which underlies it earns.
We’re looking for companies with very high returns on capital. That’s one of the key requirements 100-baggers must meet.
Monster shows us the power of high sales growth and building a brand and the potent mix of high sales growth and rising profit margins and rising return on equity.
Return on capital is extremely important. If a company can continue to reinvest at high rates of return, the stock (and earnings) compound . . . getting you that parabolic effect.”
What are the reinvestment dynamics of this business ?
Businesses that can reinvest their free cash flow in a manner that continues to earn above-average returns. You need a business with a high return on capital with the ability to reinvest and earn that high return on capital for years and years.
See something beyond the reported earnings e.g. AMZN: the power of sales growth and the ability to see something beyond the reported earnings.
How does the company finance its growth?
When a company can build book value per share over time at a high clip, that means it has the power to invest at high rates of return.
The rich have access to networks—through social and business connections—that give them better information. It helps them keep their edge over less connected peers.
Macro
Economists are probably the one group who make astrologers look like professionals when it comes to telling the future.
“Extraordinary performance comes only from correct non-consensus forecasts,”
We will continue to ignore political and economic forecasts which are an expensive distraction for many investors and businessmen.
The idea of wholesale shifts [in and out of the market at different stages of the business cycle] is for various reasons impracticable and undesirable.
Slumps are experiences to be lived through and survived with as much equanimity and patience as possible.
Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%. . . . But, surprise—none of these blockbuster events made the slightest dent in Ben Graham’s investment principles.
Lower prices, as found in such disasters, create “easier” opportunities to make hundredfold returns.
In 2008, when the stock market tanked, many people I know were afraid to invest.
Risk of losing one's job makes it difficult to commit additional risk capital during economic depression
“General markets tend to come back strongly in periods subsequent to price crashes! That was the case in 1932, 1937, 1962, 1974–75, 1980–82, 1987 and 2001–2002. A comeback also seems likely after the unprecedented crash of 2007–2008.”
The ultimate permanent impairment is when a firm goes out of business.
The best inflation fighters are 100-baggers.
The ideal business during an inflationary time is one that can (a) raise prices easily and (b) doesn’t require investment in a lot of assets.
These intellectual businesses are wonderful investments in both inflationary and disinflationary environment
Asset-heavy businesses generally earn low rates of return rates that often barely provide enough capital to fund the inflationary needs of the existing business, with nothing left over for real growth, for distribution to owners, or for acquisition of new businesses.
Destroy your best loved ideas
Looked forward to having his own ideas tested and knocked down:
I have no attachment to ideas. I have no problem changing my mind. In fact, I look forward to doing so and actively try to poke holes in my own ideas and theories. Be suspicious of abstractions.
Hunting for 100-baggers is completely independent of whatever is happening in the market. You should never stop looking for 100-baggers, bear market or bull.
Few bets, infrequent bets & big bets
Limiting his activities to buying only when he found intrinsic values far above stock prices.
Don’t be afraid to hold onto cash until you find those special 100-bagger opportunities. It’s good to have cash and not be afraid to buy when things look bad.
What is the "right" level of cash? Trade off b/w cash drag on returns vs cash optionality
Kelly's Formula/Kelly's Criterion = Expected net winnings / Net winnings if you win = edge/odds = W - [(1-W)/R] where W: winning probability; R: win/loss ratio
Better to own fewer stocks and more of your very best ideas than spread yourself too thin.
“Sorry to have gone too large on Elder Dempster. I was suffering from my chronic delusion that
one good share is safer than 10 bad ones.” -Lord Keynes
He rejected the idea, as Buffett and other great investors have, that you should dilute your best bets by holding a long list of stocks.
Tobin's Q/Sam Zell’s replacement cost
More zeal for consolidating businesses than for expanding them or initiating them. With stock prices low, the cash-rich investors in corporate America had a chance to steal some things. Why invest in new oil wells when you can buy them on the stock market for less than half of what it would cost you to drill new ones? Why build new factories when you can buy a competitor for 20 cents on the dollar?
Conversation w/ Chris Mayer - CFA India conference
https://11thiic2021.cfasocietyindia.l...
October 10, 2021
This book got more interesting than I thought it would be starting out. I think the important thing to know going into this book is that it's copyright is held by Agora Financial. Agora is considered to be the top direct marketing company in the country and they employ some of the best copywriters to sell for them. This is their claim to fame, not their investment advice. For shits and giggles I've been on their mailing lists for years now, and they have predicted the entire collapse of the US and World economy more times than I can count. They are alarmist fear mongers who prey on a certain type of person who apparently is more than willing to keep buying products at high price points to protect their wealth against non-existent boogeymen rather than think for themselves and wisely invest that money instead of lining the pockets of a direct marketing behemoth. So passages in this book do align with that fear mongering, but fortunately it's kept to a minimum (and to be honest after the first chapter or so its no worse than most investing books for this type of thing).
The premise of this book is about how to find '100 Baggers', that would be stocks that increase ones investment 100 times. Like if you invested 1 dollar in something it would pay you back 100 dollars. He is using an earlier book entitled 100 to 1 in the Stock Market by Thomas Phelps as inspiration / jumping off point, or sort of writing a continuation of that earlier book by looking at more modern examples. I've only read parts of the earlier book, but it's big on the Buy and Hold forever strategy, which has a certain appeal. And Phelps books gives examples of people like the little old lady who bought a handful of high quality stocks when she was younger and then had made millions, and the poor shrewd investor who sold stocks in a company for another investment only to see the original stock become a 100 bagger if he had only held on for another 20 or so years. Of course the problem with anecdotal stories like this are it doesn't show the little old lady who bought garbage and was left with nothing or the investor who sold out of an Enron-esque stock near the top and was saved riding a loser into the ground.
But the problem with a lot of the examples given in this book are that they are after the fact winners, which the author addresses as basically saying he doesn't care (which shows he's aware of it, but as a reader you have to keep this in mind (not that he doesn't care, but that this is part of the make up of the study)). For example, in the book he says this, "The problem isn't only that we're impatient. It that the ride is not often easy... he pointed out that Apple from it's IPO in 1980 through 21012 ws a 225-Bagger. But... Those who held on had to suffer through a peak-to-trought loss of 80 percent-twice! The big move from 2008 came after a 60 percent drawdown. And thre were several 40 percent drops."
After the fact it's easy to see, of course one should hold on to Apple, they are fucking Apple. And of course when Amazon tanked after the Dotcom bubble one should have held on to Amazon, because they are fucking Amazon. They are Bezos and Jobs you don't bet against Bezos and Jobs, right? But... do you remember what Apple was in say 1998? If you don't or maybe weren't old enough to be alive or remember, their reputation was as that computer company that made those little computers we played Oregon Trail on at school which some pretentious hipster design kids liked using for Adobe products and Quark.
Or another example is Netflix, which seems obvious to hold on to in retrospect, but would you have held on to it when it dropped 80% in value over 4 months, or lost 25% of it's value in a single day? Or how about the fourth time it plummeted 25% in a single day? It would be interesting to see how many times a stock drops that much, that fast and makes it back to its previous high, never mind turn into a homerun.
The principles in the book sound good, invest in high quality companies that will use their capital wisely, which have owners who are personally invested in the company which has a nice moat that will repel invaders for the 10, 15, 20 years or more it takes to achieve the 100x returns you might be looking for, buy these unicorns when they aren't 'expensive' and then hold on to them through thick and thin.
And those are probably good principles but the book doesn't really give much in the way of how an average person would do this. There is enough populist rhetoric which will make you feel like you have a leg up on the establishment who aren't doing this kind of thing, but when it comes down to how the author finds his own 'unicorns' in real time he shows his hand in a sentence about three quarters of the way through the book that one might never actually notice. He uses a personal network of industry insiders that he has cultivated in over a decade of writing financial newsletters in order to uncover these companies with the right type of managers who are reinvesting their capital well.
The author is clear that this isn't an easy approach at one point, and says that it will take some luck and will involve some trial and error. Which makes sense, that's kind of a given that there is some luck involved and you are going to have to do some hands on learning (what trial and error is), but it's an 'everyman's approach' not look those 'esoteric' people highlighted in Market Wizards books or people like Nicholas Darvas with his crazy boxes (which is an interesting put down in the book's first chapter, since there is a part of the book where Darvas does attempt to follow the type of investing in 100 Baggers and finds that he loses money consistently when the market doesn't follow the conclusions he draws from his research into high quality companies). Of course this was in the first chapter when the Agora Rhetoric was at its peak and the author was firmly establishing his method as populist versus the elitism of other approaches, a hundred pages away from his admission that his network of insiders (page 147, "I talk to a lot of people in the course of a year - investors, executives, analysts and economists (side note: we shit on economists as not knowing what they are talking about a couple of chapters earlier, but whatever). Ideas can come from anywhere. But my best ideas often come from people.").
What I wondered about reading this book, and part of the Phelps book, is how does one actually 'learn' this style versus just getting lucky? If you are playing in a time frame that could be a decade or more, how many times do you get to be wrong as you learn? At what point do you pull the plug on a loser? When it's plummeted more than 80%? When it's lingering in penny stock territory and being threatened to be delisted? When it's about to go bankrupt? The 'crutch' given is to buy a number of potential 100 baggers and keep them in a metaphorical coffee can, and there will be some losers but you'll also have some winners? Will you really? Do you think it's possible you might end up picking duds or stocks that perform around or worse than the average?
If it weren't for the 'anyone' can do this, its so easy to beat the money managers and mutual funds first chapter of the book I think I wouldn't be so critical, but I feel like it's setting people up for failure especially since most of the examples given are obvious in retrospect but holding on to these stocks through their drawdowns sounds to much like the disastrous idea of cost averaging down. Critical parts aside the book does have a number of interesting points.
The premise of this book is about how to find '100 Baggers', that would be stocks that increase ones investment 100 times. Like if you invested 1 dollar in something it would pay you back 100 dollars. He is using an earlier book entitled 100 to 1 in the Stock Market by Thomas Phelps as inspiration / jumping off point, or sort of writing a continuation of that earlier book by looking at more modern examples. I've only read parts of the earlier book, but it's big on the Buy and Hold forever strategy, which has a certain appeal. And Phelps books gives examples of people like the little old lady who bought a handful of high quality stocks when she was younger and then had made millions, and the poor shrewd investor who sold stocks in a company for another investment only to see the original stock become a 100 bagger if he had only held on for another 20 or so years. Of course the problem with anecdotal stories like this are it doesn't show the little old lady who bought garbage and was left with nothing or the investor who sold out of an Enron-esque stock near the top and was saved riding a loser into the ground.
But the problem with a lot of the examples given in this book are that they are after the fact winners, which the author addresses as basically saying he doesn't care (which shows he's aware of it, but as a reader you have to keep this in mind (not that he doesn't care, but that this is part of the make up of the study)). For example, in the book he says this, "The problem isn't only that we're impatient. It that the ride is not often easy... he pointed out that Apple from it's IPO in 1980 through 21012 ws a 225-Bagger. But... Those who held on had to suffer through a peak-to-trought loss of 80 percent-twice! The big move from 2008 came after a 60 percent drawdown. And thre were several 40 percent drops."
After the fact it's easy to see, of course one should hold on to Apple, they are fucking Apple. And of course when Amazon tanked after the Dotcom bubble one should have held on to Amazon, because they are fucking Amazon. They are Bezos and Jobs you don't bet against Bezos and Jobs, right? But... do you remember what Apple was in say 1998? If you don't or maybe weren't old enough to be alive or remember, their reputation was as that computer company that made those little computers we played Oregon Trail on at school which some pretentious hipster design kids liked using for Adobe products and Quark.
Or another example is Netflix, which seems obvious to hold on to in retrospect, but would you have held on to it when it dropped 80% in value over 4 months, or lost 25% of it's value in a single day? Or how about the fourth time it plummeted 25% in a single day? It would be interesting to see how many times a stock drops that much, that fast and makes it back to its previous high, never mind turn into a homerun.
The principles in the book sound good, invest in high quality companies that will use their capital wisely, which have owners who are personally invested in the company which has a nice moat that will repel invaders for the 10, 15, 20 years or more it takes to achieve the 100x returns you might be looking for, buy these unicorns when they aren't 'expensive' and then hold on to them through thick and thin.
And those are probably good principles but the book doesn't really give much in the way of how an average person would do this. There is enough populist rhetoric which will make you feel like you have a leg up on the establishment who aren't doing this kind of thing, but when it comes down to how the author finds his own 'unicorns' in real time he shows his hand in a sentence about three quarters of the way through the book that one might never actually notice. He uses a personal network of industry insiders that he has cultivated in over a decade of writing financial newsletters in order to uncover these companies with the right type of managers who are reinvesting their capital well.
The author is clear that this isn't an easy approach at one point, and says that it will take some luck and will involve some trial and error. Which makes sense, that's kind of a given that there is some luck involved and you are going to have to do some hands on learning (what trial and error is), but it's an 'everyman's approach' not look those 'esoteric' people highlighted in Market Wizards books or people like Nicholas Darvas with his crazy boxes (which is an interesting put down in the book's first chapter, since there is a part of the book where Darvas does attempt to follow the type of investing in 100 Baggers and finds that he loses money consistently when the market doesn't follow the conclusions he draws from his research into high quality companies). Of course this was in the first chapter when the Agora Rhetoric was at its peak and the author was firmly establishing his method as populist versus the elitism of other approaches, a hundred pages away from his admission that his network of insiders (page 147, "I talk to a lot of people in the course of a year - investors, executives, analysts and economists (side note: we shit on economists as not knowing what they are talking about a couple of chapters earlier, but whatever). Ideas can come from anywhere. But my best ideas often come from people.").
What I wondered about reading this book, and part of the Phelps book, is how does one actually 'learn' this style versus just getting lucky? If you are playing in a time frame that could be a decade or more, how many times do you get to be wrong as you learn? At what point do you pull the plug on a loser? When it's plummeted more than 80%? When it's lingering in penny stock territory and being threatened to be delisted? When it's about to go bankrupt? The 'crutch' given is to buy a number of potential 100 baggers and keep them in a metaphorical coffee can, and there will be some losers but you'll also have some winners? Will you really? Do you think it's possible you might end up picking duds or stocks that perform around or worse than the average?
If it weren't for the 'anyone' can do this, its so easy to beat the money managers and mutual funds first chapter of the book I think I wouldn't be so critical, but I feel like it's setting people up for failure especially since most of the examples given are obvious in retrospect but holding on to these stocks through their drawdowns sounds to much like the disastrous idea of cost averaging down. Critical parts aside the book does have a number of interesting points.
December 20, 2015
Despite the silly title this book probably takes the most integrated approach to investing that I've seen in a while to identify the famed "compounders" that have been core to so many investor's success. I appreciated the quick looks at moat analysis, quantitative finance, "concept stocks", management incentives, capital allocation and behavioral finance to identify and benefit from owning great companies. Although it's nice to dream that these types of investments are easily identifiable, the author correctly acknowledged their rarity and that despite his attempts to craft a systematic framework to identify these investments, an investor does need some amount of luck to accomplish astronomical returns. Despite this caveat, it was a good, worthwhile and highly recommended read.
April 15, 2019
I find that this book is full of anecdotes, quotes and speculations rather than rigorous analysis. Some good general advices those.
May 17, 2021
“Over the course of an investing life, stuff is going to happen—both good and bad—that no one saw coming. Instead of playing the guessing game, focus on the opportunities in front of you. And there are always, in all markets, many opportunities."
I love this book. The study of 100 baggers is an interesting topic. From one side book gives you a lot of hope that it is not that hard to find 100 baggers. On the other hand there is no magic formula that can make it easier for you to identify them. There are however patterns - high growth, owner led with skin in the game, reinvesting profits, extensive moat etc. Mr Mayer did a great job explaining all of them in the book in an easy to understand and entertaining manner.
“I read every day somebody, somewhere writing about QE or interest rates or the dollar. They are mostly rehashing the same old narrative: “When QE stops, stocks will fall.” “The dollar is going to collapse!” “When interest rates go up, stocks will fall.” I mean, for crying out loud, how much more can you read about this stuff?"
Now all I need to do is identify some interesting companies, put them into a "coffee can" and let's see where I will be in 20 - 30 years!
I love this book. The study of 100 baggers is an interesting topic. From one side book gives you a lot of hope that it is not that hard to find 100 baggers. On the other hand there is no magic formula that can make it easier for you to identify them. There are however patterns - high growth, owner led with skin in the game, reinvesting profits, extensive moat etc. Mr Mayer did a great job explaining all of them in the book in an easy to understand and entertaining manner.
“I read every day somebody, somewhere writing about QE or interest rates or the dollar. They are mostly rehashing the same old narrative: “When QE stops, stocks will fall.” “The dollar is going to collapse!” “When interest rates go up, stocks will fall.” I mean, for crying out loud, how much more can you read about this stuff?"
Now all I need to do is identify some interesting companies, put them into a "coffee can" and let's see where I will be in 20 - 30 years!
May 14, 2021
Whilst the inherent nature of progression is to improve on the self inducing factor of money to returned self/capital, it is only that the transformative nature of managing oneself to compound and hold onto the reproducing benefits of patience over a lifetime the end of story.
March 11, 2023
In 1998, Andrew Wakefield and 12 of his colleagues published a case series in the "Lancet", which suggested that the MMR vaccine may cause behavioral regression and developmental disorder in children. The study was done on 12 children. Later evidence emerged of poor selection in picking children - trying to fit cases towards outcome. The study was retracted completely by Lancet by 2010.
You might see where this is going...
The scientific method to do a case study - at a bare minimum - is to pick the examples you want which need to be analyzed (treatment) and then compare them with a control group which has similar behaviors in quite a few other dimensions. Only then can you draw any tangible conclusions.
How to spot the next Amazon? Just spot the next Jeff Bezos if you will go by the philosophy of the book in true sense. And how to spot the next Jeff Bezos?
This book selectively picks stocks which turned to 100 baggers. There are insights into why the companies succeeded. But are we here to study about history of these amazing companies? No. Infact, the book does not pretend to be a biographical book of these companies. And that is the problem. There is no control group to compare these behaviors of the companies that turned 100 baggers.
Hence, you would get nothing out of this book except maybe a paper weight if you bought a hard copy. It is as effective in helping you select stocks as putting 100 stock names on pieces of papers and asking your dog to shit on one of them.
The author admits he does not care about discussing the companies that exhibited this behavior but still failed. Of course he can not. That would require extensive research. Which would require time and effort and brains. It is just a lazy and greedy effort to earn some money by putting a catchy title and having some fluff stuff into this sorry of a book. Stock market will always remain elusive and mystic and hence people will keep turning to books like these, thinking they can spot the next 100 bagger. (Shame on me!)
Don't waste your time. 0/5
You might see where this is going...
The scientific method to do a case study - at a bare minimum - is to pick the examples you want which need to be analyzed (treatment) and then compare them with a control group which has similar behaviors in quite a few other dimensions. Only then can you draw any tangible conclusions.
How to spot the next Amazon? Just spot the next Jeff Bezos if you will go by the philosophy of the book in true sense. And how to spot the next Jeff Bezos?
This book selectively picks stocks which turned to 100 baggers. There are insights into why the companies succeeded. But are we here to study about history of these amazing companies? No. Infact, the book does not pretend to be a biographical book of these companies. And that is the problem. There is no control group to compare these behaviors of the companies that turned 100 baggers.
Hence, you would get nothing out of this book except maybe a paper weight if you bought a hard copy. It is as effective in helping you select stocks as putting 100 stock names on pieces of papers and asking your dog to shit on one of them.
The author admits he does not care about discussing the companies that exhibited this behavior but still failed. Of course he can not. That would require extensive research. Which would require time and effort and brains. It is just a lazy and greedy effort to earn some money by putting a catchy title and having some fluff stuff into this sorry of a book. Stock market will always remain elusive and mystic and hence people will keep turning to books like these, thinking they can spot the next 100 bagger. (Shame on me!)
Don't waste your time. 0/5
March 16, 2023
my dad made me read this - I figured I don’t know anything about stocks and I thought I might learn something but it just convinced me more that this is all pseudoscience/gatekept lol …
Maybe this’d be useful for someone who is really into investing but I just found it extremely vague and contradictory in any of the actual guidance - also ofc no critical lens but maybe that’s not fair given the title 💀
Maybe this’d be useful for someone who is really into investing but I just found it extremely vague and contradictory in any of the actual guidance - also ofc no critical lens but maybe that’s not fair given the title 💀
August 9, 2021
It covers the factors that make a 100 bagger - good business, high return on capital, growth, fair valuation, competent management, etc. The most imp factor being, patience and the stomach to sit through decades. Very basic read, but good for a beginner.
March 4, 2019
Excellent book for micro-cap investors and stock pickers.
March 31, 2021
A truly great experience if you want to start reading about investing. It describes characteristics of astonishing investments and what they have in common with both anecdotical and empirical research. It manages to keep it simple while laying great value in its lessons.
February 2, 2023
A reminder of the simple but powerful compounding potential of fundamental bottom up investing. The author clearly summarizes what makes the best long term investments, and discusses ways for anyone to apply the principles required to achieve exceptional returns. Highly recommended for anyone interested in investments.
June 14, 2019
This is one of my favorite books this year! It was recommended by Monish Pobrai, one of my favorite investors. It describes stocks that turn $1 into $100. Great soft rules you can look for to help you find these gems. Highly recommend!
April 2, 2016
Not so good
April 9, 2016
Review posted by me on LinkedIn:
https://www.linkedin.com/pulse/book-r...
https://www.linkedin.com/pulse/book-r...
March 6, 2024
Who isn't looking for a 100 bagger...imagine putting 10,000€ into an idea and letting it compound until you hit a staggering million. That's what smart investing is all about.
So, how do you achieve it? I do not want to spoil the book but one thing is obvious: It requires time and a lot of patience.
'100 Baggers and How to Find Them?' is a quick and easy read, summing up some of the most important factors in identifying future 100 Baggers by looking at past stocks that have achieved this.
Does this mean that you simply read this book, buy some stocks and become rich? No, it does not. But, this book is a great read to understand what it is that you must be looking out for. Mayer also discussed some investors' mindsets and how they approach it.
Overall, a simple but really well written book, I wished I read earlier. I enjoyed it!
So, how do you achieve it? I do not want to spoil the book but one thing is obvious: It requires time and a lot of patience.
'100 Baggers and How to Find Them?' is a quick and easy read, summing up some of the most important factors in identifying future 100 Baggers by looking at past stocks that have achieved this.
Does this mean that you simply read this book, buy some stocks and become rich? No, it does not. But, this book is a great read to understand what it is that you must be looking out for. Mayer also discussed some investors' mindsets and how they approach it.
Overall, a simple but really well written book, I wished I read earlier. I enjoyed it!
Read
January 31, 2024Not all chapters are created equal. Prioritize chapters 7, 8, and 11. They touch on the importance of capital allocation, share repurchases, owner operators, and shareholder-oriented management. Chapter 8 is basically a review of Thorndike’s Outsiders, which is an instructive book on these topics, too. The rest of the book is fairly elementary, e.g., go long and hold long, the joys of compounding, etc.
April 3, 2020
This was actually one of the best investment and business books Ive read. The title makes it sound like a corny get-rich-quick attempt. But reading a study of companies that have had phenomenal growth over 10-30 years is precisely how to know what to look for in anything, even if it's not a 100 bagger. Definitely will keep this one on the shelf.
January 6, 2024
The book provides some useful insights into what are the factors to look for to identify a 100 bagger in its making. For anyone who is serious about investing, 100 baggers is one of the books to read to understand how stocks which have performed well historically have shaped in terms of financials and qualitative factors such as management, product mix etc.
June 17, 2021
Hit me up if you have any 100 baggers up your sleeves =)
September 6, 2022
Great summary of characteristics that make up long-term compounders that more than 10x in stock price. Doesn't go too much into the details to bore readers (pros and cons here), but gives sufficient context to outline key traits for investors to look out for.
Chapter 7 (Owner Operators: Skin in the game) stood out for personal reasons (MBP)
- "You can find all the names - a kind of ready-made watch list - by just looking at the fund's holdings, which it disclosed publicly"
- "The most important idea though, is that the people calling the shots have personal capital at risk. That's the unique attribute that runs through all these stories. That's the secret behind the money"
Chapter 7 (Owner Operators: Skin in the game) stood out for personal reasons (MBP)
- "You can find all the names - a kind of ready-made watch list - by just looking at the fund's holdings, which it disclosed publicly"
- "The most important idea though, is that the people calling the shots have personal capital at risk. That's the unique attribute that runs through all these stories. That's the secret behind the money"
This entire review has been hidden because of spoilers.
November 7, 2020
There is not much of original idea here. This book is just a summary of other books. But how the author arrange the content makes this book a good read anyway.
March 27, 2022
Well-researched, short, and concise.
Not all 100-baggers can be predicted nor share the same characteristics, but most of them have some things in common.
The book highlights several critiria to look for, I will list the most important ones in my opinion. In summary, you are more likely to find a 100-bagger if you focus on the following criteria:
1-) Small-capitalization: it is easier for a 50 million company to grow to 5 billion than a 50 billion company growing to 5 trillion.
2-) High growth rates: you should look for companies growing revenue at double digits, and preferable to be profitable because it means that they are creating value.
3-) Valuation: pay a fair multiple to cash flows. Avoid companies priced to perfection, it is risky when all the future growth is priced-in.
4-) Management: look for owner-operators or management teams holding a substantial amount of stock of the same company; it means that their interest is aligned with yours.
5-) Patience: if a company fulfills all of the criteria listed above, then you should be patient, sit tight, and avoid the noise of financial news outlets. From time to time you should review your portfolio companies and analyze if they still fulfill your investment case, if not then consider trimming.
Hope this helps, I recommend the book.
Not all 100-baggers can be predicted nor share the same characteristics, but most of them have some things in common.
The book highlights several critiria to look for, I will list the most important ones in my opinion. In summary, you are more likely to find a 100-bagger if you focus on the following criteria:
1-) Small-capitalization: it is easier for a 50 million company to grow to 5 billion than a 50 billion company growing to 5 trillion.
2-) High growth rates: you should look for companies growing revenue at double digits, and preferable to be profitable because it means that they are creating value.
3-) Valuation: pay a fair multiple to cash flows. Avoid companies priced to perfection, it is risky when all the future growth is priced-in.
4-) Management: look for owner-operators or management teams holding a substantial amount of stock of the same company; it means that their interest is aligned with yours.
5-) Patience: if a company fulfills all of the criteria listed above, then you should be patient, sit tight, and avoid the noise of financial news outlets. From time to time you should review your portfolio companies and analyze if they still fulfill your investment case, if not then consider trimming.
Hope this helps, I recommend the book.
January 31, 2021
This book struggles with separating cause and effect. The author admits as much in the beginning. By identifying stocks that were 100 baggers and then explaining how they got there is deeply problematic since there is the problem of silent evidence - things that appeared important at various times in a company’s life but in retrospect were not. These stocks were (largely) not obvious winners at the time. This is my single biggest criticism and why I rated the book as I did.
What the author did make me realize was the importance of identifying companies not just based on their ROIC, but also on their ability to continue exploiting that high figure. If a company can’t reinvest its capital then it high rate is less meaningful for future compounding. I need to be much better in defining the potential market share of a company - and critically as the author mentions, smaller stocks have much more potential.
That said, the book does seem to imply that one should simply target 100 baggers and ignore other potential opportunities. I’m not convinced of this. Buffett waxes lyrical about Sees Candy which I understand had a fantastic return on capital (never requiring much reinvestment to maintain its dominant position), yet did not have room to grow. Is this really a bad thing... being given cash constantly to reinvest in other opportunities? Also, finding and being certain about great companies that could be 100 baggers is exceedingly rare. I think identifying some deeply discounted opportunities and making 2, 3, 4x money in a short period is tiring, yes, but can supplement a more sturdy long-term portfolio which could take many years to build. Knowing the difference between the long term holders and shorter term value plays is obviously key, and then selling the latter with discipline.
I’m personally sometimes lax in requiring management to be large shareholders. This seems a difficult requirement to have when searching for winners... I guess it provides more certainty that a winner is actually been found.
The other good thing about this book is it’s emphasis on paying a fair price for a good company. I struggle with this since I find my decision much easier when there is a large margin of safety. I understand a big discount in these companies is exceedingly rare so I may miss out. I guess until now I’ve been somewhat lazy to really apply my mind to the companies and their moats / potential to reinvest earnings. This needs to change!
What the author did make me realize was the importance of identifying companies not just based on their ROIC, but also on their ability to continue exploiting that high figure. If a company can’t reinvest its capital then it high rate is less meaningful for future compounding. I need to be much better in defining the potential market share of a company - and critically as the author mentions, smaller stocks have much more potential.
That said, the book does seem to imply that one should simply target 100 baggers and ignore other potential opportunities. I’m not convinced of this. Buffett waxes lyrical about Sees Candy which I understand had a fantastic return on capital (never requiring much reinvestment to maintain its dominant position), yet did not have room to grow. Is this really a bad thing... being given cash constantly to reinvest in other opportunities? Also, finding and being certain about great companies that could be 100 baggers is exceedingly rare. I think identifying some deeply discounted opportunities and making 2, 3, 4x money in a short period is tiring, yes, but can supplement a more sturdy long-term portfolio which could take many years to build. Knowing the difference between the long term holders and shorter term value plays is obviously key, and then selling the latter with discipline.
I’m personally sometimes lax in requiring management to be large shareholders. This seems a difficult requirement to have when searching for winners... I guess it provides more certainty that a winner is actually been found.
The other good thing about this book is it’s emphasis on paying a fair price for a good company. I struggle with this since I find my decision much easier when there is a large margin of safety. I understand a big discount in these companies is exceedingly rare so I may miss out. I guess until now I’ve been somewhat lazy to really apply my mind to the companies and their moats / potential to reinvest earnings. This needs to change!
February 16, 2021
The book emphasizes on how to identify 100 baggers to invest. Some of the main factors includes size, quality of management, longevity, growth potential and understanding of the business.
Size - Inorder for a stock to become a 100 bagger it should be relatively small so that it can turn out to be big
Quality of management - We should look for good management which boosts shareholder value. It is ideal to look for management with more 'skin in the game' as they tend be more responsible in allocating capital.
Longevity - We should be patient and allow time to be our friend. More the time, better for compounding to do its miracles.
Growth potential - We should understand the growth potential of any business in a realistic manner. More the growth potential, the better. Also it is better if management can reinvest the profits in its underlying business and generate consistent growth.
Understanding of business - Never invest on things you do not understand. With the amount of disruptions happening in the technological era, More time should be dedicated to identify the moat of each business. The bigger the moat, the business is more likely to survive.
The last and most important takeaway of the book is patience. I personally liked the ideology of 'Never break your investment for an investment purpose'. Identify good stocks in a fair price and put them in a coffee can and forget about it. Let compounding do its miracle and one day you might get a 100 bagger.
Size - Inorder for a stock to become a 100 bagger it should be relatively small so that it can turn out to be big
Quality of management - We should look for good management which boosts shareholder value. It is ideal to look for management with more 'skin in the game' as they tend be more responsible in allocating capital.
Longevity - We should be patient and allow time to be our friend. More the time, better for compounding to do its miracles.
Growth potential - We should understand the growth potential of any business in a realistic manner. More the growth potential, the better. Also it is better if management can reinvest the profits in its underlying business and generate consistent growth.
Understanding of business - Never invest on things you do not understand. With the amount of disruptions happening in the technological era, More time should be dedicated to identify the moat of each business. The bigger the moat, the business is more likely to survive.
The last and most important takeaway of the book is patience. I personally liked the ideology of 'Never break your investment for an investment purpose'. Identify good stocks in a fair price and put them in a coffee can and forget about it. Let compounding do its miracle and one day you might get a 100 bagger.
April 4, 2022
Its an interesting take on (the overcrowded field of) value investing advice. Most people I've known who have made serious wealth in the market have done with one/few 100-baggers than a consistent hit on all stocks in their portfolio.
I guess the lesson is to go big when your research/gut tells you you have a good thing going.
I guess the lesson is to go big when your research/gut tells you you have a good thing going.
December 6, 2016
It was inspired by the classic 100-to-1 book that I bought for myself and some of my friends last year. Not bad, easy and fast read. Advocate for long-term holding and coffee-can method (don't sell at all).
February 7, 2020
Words can not express how good this book is!
August 1, 2019
Learn to buy right & hold on. 10K TO 100X in 30 years. This reading is the stuff legacy are created from.
Things my ear picked up on:
Leave your stocks on the vine let them ripen on the vines don't pick them too early
Start with acrons wind up with oak trees start with oak trees and you won't have the same dramatic growth
Dividends are an expensive luxury for an investor seeking maximum growth
When you buy a cow to milk don't expect to race her against your neighbors race horse
Time is the great friend of a business
I talk about books read and lessons learned
Great investors concentrate on their best ideas
Good comes from evil as evil comes from good
Stocks dropped like birds shot out of the sky
Investors need to take losses with as much equanimity and patience as possible
Let the magic of compounding do it's thing
NAV = Net asset value
Investing is completely independent of the economy
Asset heavy businesses generally earn low rates of return
There is salesmanship and then there is fraud
Who's bread I eat is who's song I sing
People often do dumb things with their portfolio just because they're bored
The best investors often lag the market
Companies that are more durable are more valuable
Incentive metrics
Wealth begets wealth
Clue me into your thinking
40% of companies are microcap
16k publicly traded companies in us roughly
It's easy to write off the market as nutty when it doesn't agree with you
That statement was completely true right up to the day it was completely false
What you need to learn is to buy right and hold on
I'm aware of these issues and others
Take care please
Experience is the name we give our mistakes
If I listened to him I'd have an MBA and a better golf swing
The greatest fortunes come from gritting your teeth and holding on
Enduring fortunes are not built that way
B
Things my ear picked up on:
Leave your stocks on the vine let them ripen on the vines don't pick them too early
Start with acrons wind up with oak trees start with oak trees and you won't have the same dramatic growth
Dividends are an expensive luxury for an investor seeking maximum growth
When you buy a cow to milk don't expect to race her against your neighbors race horse
Time is the great friend of a business
I talk about books read and lessons learned
Great investors concentrate on their best ideas
Good comes from evil as evil comes from good
Stocks dropped like birds shot out of the sky
Investors need to take losses with as much equanimity and patience as possible
Let the magic of compounding do it's thing
NAV = Net asset value
Investing is completely independent of the economy
Asset heavy businesses generally earn low rates of return
There is salesmanship and then there is fraud
Who's bread I eat is who's song I sing
People often do dumb things with their portfolio just because they're bored
The best investors often lag the market
Companies that are more durable are more valuable
Incentive metrics
Wealth begets wealth
Clue me into your thinking
40% of companies are microcap
16k publicly traded companies in us roughly
It's easy to write off the market as nutty when it doesn't agree with you
That statement was completely true right up to the day it was completely false
What you need to learn is to buy right and hold on
I'm aware of these issues and others
Take care please
Experience is the name we give our mistakes
If I listened to him I'd have an MBA and a better golf swing
The greatest fortunes come from gritting your teeth and holding on
Enduring fortunes are not built that way
B
November 11, 2021
At the start of the book, the author writes, "There are severe limitations or problems with a study like this. For one thing, I'm only looking at these extreme successes. There is hindsight bias, in that things can look obvious now. And there is survivorship bias, in that other companies may have looked similar at one point but failed to deliver a hundredfold gain. I am aware of these issues and others. They are hard to correct."
I agree. Which basically makes the rest of the book a moot point, doesn't it? Way too much time is spent in this book on anecdotes about stocks which would generate massive returns for you, if only you had a time-machine, which as far as I know doesn't exist. Not nearly enough time is spent warning about the risks of chasing returns like this in the future, which are high.
Here is some math to consider before you go chasing returns like this: Imagine two different investors. Investor A makes 5% returns each and every year. Investor B loses 50% of their money in their first year (which is easier to do than you perhaps might imagine - just check out the users on Wall Street Bets on Reddit), but for every year after that they get a 10% return, or double what investor A makes annually. It will still take investor B more than 16 years with this 10% return just to break even with investor A, despite making double investor A's returns for all these years, because of that 50% loss suffered in the first year.
Slow and steady usually wins the race. My advice is to stick to the advice you can find inside Benjamin Graham's The Intelligent Investor.
I agree. Which basically makes the rest of the book a moot point, doesn't it? Way too much time is spent in this book on anecdotes about stocks which would generate massive returns for you, if only you had a time-machine, which as far as I know doesn't exist. Not nearly enough time is spent warning about the risks of chasing returns like this in the future, which are high.
Here is some math to consider before you go chasing returns like this: Imagine two different investors. Investor A makes 5% returns each and every year. Investor B loses 50% of their money in their first year (which is easier to do than you perhaps might imagine - just check out the users on Wall Street Bets on Reddit), but for every year after that they get a 10% return, or double what investor A makes annually. It will still take investor B more than 16 years with this 10% return just to break even with investor A, despite making double investor A's returns for all these years, because of that 50% loss suffered in the first year.
Slow and steady usually wins the race. My advice is to stick to the advice you can find inside Benjamin Graham's The Intelligent Investor.
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