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A Review Of 100 Baggers: Stocks


That Return 100-To-1 And How To Find
Them
By Ankur Shah on February 4, 2016 11:25 am in Value Investing

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A Review Of 100 Baggers: Stocks That Return 100-To-1 And How To Find Them by Ankur Shah,
Value Investing India Report
Chris Mayer the editor of Mayers 100x investment newsletter is the author of 100 Baggers. The
purpose of the book is to help you identify stocks that return $100 for every $1 invested. To be clear,
a 100-bagger equates to a 9,900% return on your capital. Logically, you may be asking over what time
frame. Ill get to that point later. However, I want to rst emphasize that Mayer was able to identify

365 stocks that achieved 100-bagger status, assuming reinvestment of dividends, from 1962-2014 in
the US equity market. Certainly, its not a huge number but the list is big enough to make you feel
condent that maybe you could have identied one or two of these stocks before they made their
ascent to 100-bagger status. After reading the book, you even come away with the feeling that
youve been limiting yourself and your portfolio. If for no other reason, you should, at least, read the
book to get a sense of what is possible with the combination of the right business and the power of
compounding. Mayer was originally inspired to write the book after reading 100 to 1 in the Stock
Market by Thomas Phelps. My Indian readers will probably recognize the book title. Its the same
book that Professor Sanjay Bakshi made a Strong Buy recommendation on back in February 2015.

Sanjay Bakshi
@Sanjay__Bakshi

Follow

Strong Buy Recommendation: amzn.to/1AIaqt8. This great book


introduced to me by @oraunak is in stock now. What are you
waiting for?
9:51 PM - 18 Feb 2015
16

43

Why is 100 Baggers different?


Unlike many books on investing that deal primarily with theory, 100 Baggers focuses on practical
techniques that you can use in your own portfolio. Obviously, not every investment you make can
turn into a 100-bagger. However, by seeing what is possible, you can adjust your goals higher. Even if
you make slight adjustments such as increasing your investment time-frame or looking for high
return on capital stocks, youll undoubtedly experience better results. The author of the book doesnt
provide you with a set of statistical inferences. Instead, he provides a set of principles that you can
use to identify stocks that will have the potential to compound your wealth over the long-run. There
is an interesting table in the early part of the book that displays how much and for how long a stock
must compound to multiply a hundredfold. At a 20% annualized rate of return, it would take 25 years.
With holding periods for most stocks now measured in weeks and months, its probably
unfathomable to most investors to hold a stock for that long. However, thats exactly the point. Huge
returns are available to you as a private investor if you just have the patience to hold on to the right
company.
In the book, Mayer cites George F. Baker who stated the following:
To make money in stocks you must have the vision to see them, the courage to buy them and the

patience to hold them.


Of the three qualities mentioned by Baker, patience is probably the hardest to maintain. I think the
majority of investors could signicantly improve their results simply by expanding their investment
time-frame. In a sense, the entire book is a treatise on taking the long view when it comes to
investing. In fact, its not only good advice for your portfolio but also your life in general.

What are the three most important ideas?


In order to identify 100-baggers, you need to spend your valuable research time looking for them. Its
the same idea that Charlie Munger conveyed to Buffett. Dont waste precious time looking for cigar
butt companies that will only provide a one-time pop as market value nally catches up with
intrinsic value. Following a traditional net-net value investing approach as popularized by Ben
Graham, results in constant churn in your portfolio. You must constantly replace stocks that have
reached or are near their intrinsic value with stocks that are trading at a greater discount. By
focusing solely on stocks that are cheap based on short-term accounting metrics such as price-tobook or price-to-earnings, youll be prone to overlook stocks that have the potential to become 100baggers. Real wealth is generated by identifying the companies that will compound your capital over
the long-run.
Unlike traditional value investing, where cheap valuation takes precedence over the quality of the
business, you cant become overly xated on paying low multiples. The likely outcome will be that
you pass up on a number of highly protable opportunities because you were adamant about paying
a cheap price. In the book, Chris Mayer states the following: Great stocks have a ready fan club, and
many will spend most of their time near their 52-week highs as youd expect. It is rare to get a truly
great business at dirt-cheap prices. If you spend your time trolling stocks with price-earnings ratios
of ve or trading at deep discounts to book value or the like, youre hunting in the wrong elds at
least as far as 100-baggers go. You may get lucky there, of course, but the targets are richer in less
austere settings.
If order to nd a 100-bagger you must look for businesses with economic moats. You need to nd
businesses with structural advantages that make it extremely difcult for competitors to take market
share and virtually impossible for new companies to enter the industry. Essentially, you need to nd
companies that can earn high returns on invested capital for long periods of time. Generally,
businesses that have high returns on capital tend to focus on a specic niche that makes direct
competition difcult. However, there is usually a trade-off between having a niche focus and growth
opportunities. The ideal company will have ample growth opportunities within its core business or
related markets.

Is the book worth reading?


In my view, 100 Baggers captures the essence of the current investment methodology pursued by
Charlie Munger and Warren Buffett. Although the book is not explicitly about either investor, youll
nd core concepts held by both expounded upon throughout the book. For example, the importance
of nding businesses with economic moats or that achieve high returns on invested capital. This
serves to further support my belief that the core principles of successful investing are immutable
and timeless. Whether youre actively searching for 100-baggers or just want to improve your
investing results, I think Chris Mayers book will help you achieve both goals. In many ways, 100
Baggers is much more accessible and lucid than its predecessor 100 to 1 in the Stock Market.
Ultimately, I think it deserves a prominent spot on your investing bookshelf.

'LEGAL
'

LEARNING
TO FLAMB

100 Baggers: Stocks That Return 100-to-1 and How To Find Them by Christopher W. Mayer

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100 to 1 in the stock market

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52-week highs

charlie munger

Chris Mayer

Warren Buffett

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Written by Ankur Shah


Ankur Shah is the founder of the Value Investing India Report, a leading independent, value oriented
journal of the Indian nancial markets. Ankur has more than eight years of equity research
experience covering emerging markets, with a focus on India and South East Asia. He has worked as
both a buy-side investment analyst for a global long/short equity hedge fund and a sell-side analyst
for an emerging markets investment bank. Ankur is a graduate of Harvard Business School. You can
learn more about his latest views on global markets at the Value Investing India Report and follow
him on twitter at https://twitter.com/AnkurShah47

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