Security analyst Chris Mayer did a study of stocks that returned over 100x from 1962-2014 and wrote a book about it.
After screening out the smallest companies, including our beloved penny mining shares, Mayer was left with 364 "100 bagger" companies, including Berkshire Hathaway, Apple, Netflix and even Valeant, which has since collapsed.
These are the companies that made investors rich beyond their wildest dreams over the past half century. And they weren't necessarily high-flying startups.
Mayer found that no industries dominate the list, and most of the 100 baggers took over 16 years to play out.
At the MicroCap Leadership Summit Sept 22-23, Mayer shared what he learned about finding 100 baggers in a presentation.
Here are seven things you should know about finding 100x investments on the stock market, with full credit to Chris Mayer and the MicroCap Club conference:
- Start with small companies. The median sales figure in his study was $170 million.
- Hold for a long time, which is really hard. Being quoted a price every day by the stock market, and all the crazy stuff that goes on in the world, makes it very hard to hold on. If you just followed the business it would be easier.
- Lower multiples preferred. Earnings and multiple grew over time. But, pay up for growth if you’re right.
- High returns on capital are really important. It has to have a great underlying business.
- Owner operated businesses are preferred.
- Reinvestment is the most critical ingredient in success, once you have identified an outstanding business.
- It’s a roller coaster and it can be incredibly boring to hold these stocks.
Mayer’s 30 minute presentation is available here:
Chris Mayer on Twitter: https://twitter.com/chriswmayer
Chris's book: 100 Baggers: Stocks That Return 100-to-1 and How To Find Them https://www.amazon.com/100-Baggers-Stocks-100-1/dp/1621291650