The author of 100 Baggers is Christopher Mayer who is an author, newsletter writer, and investor. He has experience in the banking industry and investing. This book tries to distill the wisdom and insights to find stocks that could provide 100-to-1 returns.
Layout of 100 Baggers
100 Baggers contains 15 chapters and an appendix.
The first chapter is the introduction of this book.
Chapter 2 to 12 are the meat of the book, which is about the principles behind 100-baggers from the author’s study.
Chapter 13 and 14 are the author’s opinion on certain topics related to investing.
The last chapter is the summary of this book.
The appendix is 365 stocks that qualifies as 100-baggers from 1962 – 2014.
Highlights
I will start with the principles of getting 100-baggers.
1. A business with a high return on capital with the ability to reinvest and earn that high return on capital on years and years. By implication, these businesses should have a high growth rate.
2. They should have economic moats. But true moats are hard to identify. He recommends using gross margin as the yardstick – the higher it is compared to competition, the better.
3. Let compounding works its magic.
4. Timing the market is a futile effort. Keep looking for great ideas instead.
5. Luck plays a role too.
6. Preferred attributes include lower multiples (such as price-to-earnings ratio and price-to-sales ratio), smaller companies (market capitalization of less than $1 billion), and owner-operators.
The twin engines of 100-baggers are growth in earnings and a higher multiple on those earnings (price-to-earnings ratio). Nonetheless, the author has no qualms buying a high initial multiple stock if he is convinced that the stock has great growth potential.
In short, it is very hard to net a 100-bagger because it requires vision, tenacity and a conviction in an idea that may not yet be obvious in the financials. The author suggests employing coffee-can investing. It entails buying a portfolio of good stocks and leaving them alone for at least 10 years. This would protect us from emotions and volatility that makes investors buy or sell at the wrong times.
An observation in the book that rings true for me is no one creates stock so we can make money. Stock is available only because somebody wanted to sell it. Thus, as investors, we must do our own due diligence when we are planning to buy a stock.
Conclusion
100 Baggers let the readers know how such returns have happened and what investors need to do to get them. By aiming a little closer to that goal, it is bound to improve results. Nonetheless, it is not easy to practice this strategy. The average duration to get 100 times return is 25 years at 21% annual return, so the investors definitely need time. Furthermore, it is important that the companies are able to grow at a high rate during those years.
I am principally a dividend investor but I think this 100-bagger investing style is not that different from value investing. Though it resembles growth investing, we still need to find stocks that offer value for money. The author mentions that there is no magic formula for producing 100-baggers and no easy way to screen for them. The most important thing is to find a great company and hold on to it for a long time unless the premise for purchasing it has been proved wrong.
As usual, let me end with some quotes from the book.
“The biggest hurdle to making 100 times your money in a stock – or even just tripling it – may be the ability to stomach the ups and downs and hold on.”
“A 100-bagger is the product of time and growth.”
“People with their own wealth at risk make better decisions as a group than those who are hired guns.”
“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.”
“In a world of monetary depreciation, the asset-light company wins.”
Recommended book
If you are interested in 100 Baggers, you may get the book through the link below*.
Get the book here from Popular Online
