Book Review: How To Find Stocks That Return 100-To-1

Heck, even "1,000 baggers" were not that rare. There are 62 of them on the list! Note: a 1,000 bagger turns a $10,000 investment into... $10 million dollars.

Bottom line? Searching for 100 baggers is not a "needle in a haystack", "win the lottery" type of endeavor. They DO exist, and you CAN find them!

Some Hallmarks of a Potential 100 Bagger

Much of Mayer's book is dedicated to outlining the characteristics of potential 100 bagger investments.

I felt he does a very good job keeping these traits both easy to understand, and relatively straightforward to identify.

Here are some of the traits Mayer outlines. These just might sound somewhat familiar...

  1. Revenue Growth. Essentially all of Mayer's 100 baggers delivered substantial revenue growth for long periods of time. Look for companies that have large addressable markets with plenty of room to grow sales for decades.
  2. (Reasonably) Small Starting Size. All markets are limited, and sometimes firms are just too large to be able to grow at rapid rates for long periods of time. A firm valued at $2 trillion like Apple (AAPL) is never going to reach $200 trillion - that's larger than the world's economy ($135 trillion)! Mayer suggests looking in the $1 billion and under market cap range.
  3. (Reasonably) Low Starting Valuation. Mayer calls business growth combined with stock valuation growth the "twin engines" of a 100 bagger. If a company grows 20x but its price-to-sales (P/S) multiple stays flat, you get 20x on your investment. BUT, if a company grows 20x, and its P/S multiple expands from 1 to 5, bingo... a 100 bagger.
  4. Owner/Operator Leadership. A disproportionate number of the 100 baggers in the study were led by founder CEOs with sizable ownership in the company. Mayer felt these firms more reliably made decisions that were long-term oriented and capital efficient.
  5. Economic Moat. In order to defend profit margins and returns on capital against the competition, these firms had to possess some kind of durable competitive advantage or "economic moat"
  6. High Returns On Capital. More than any other factor, the ability to reinvest cash flows at high rates of return was CRITICAL to 100 baggers. Every study and successful manager Mayer interviewed pointed this out as the #1 trait.
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Disclaimer: The content is provided by Alexander Online Properties LLC (AOP LLC) for informational purposes only. The material should not be considered as investment advice or used as the basis ...

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