BAGGERS - csinvesting

100

BAGGERS

STOCKS THAT RETURN 100-TO-1 AND HOW TO FIND THEM

100

BAGGERS

STOCKS THAT RETURN 100-TO-1 AND HOW TO FIND THEM

CHRISTOPHER MAYER

Laissez Faire Books

In memory of Thomas W. Phelps, author of the first book on 100-baggers

Copyright ? Agora Financial, LLC, 2015 All rights reserved.

ISBN: 978-1-6212916-5-7

19 18 17 16 15 1 2 3 4 5 6 7

Published by Laissez Faire Books, 808 St. Paul Street, Baltimore, Maryland

Cover and Layout Design: Andre Cawley

CONTENTS

Chapter 1: Introducing 100-Baggers..............................................................................1 Chapter 2: Anybody Can Do This: True Stories....................................................... 11 Chapter 3: The Coffee-Can Portfolio........................................................................... 15 Chapter 4: 4 Studies of 100-Baggers......................................................................... 31 Chapter 5: The 100-Baggers of the Last 50 Years................................................43 Chapter 6: The Key to 100-Baggers........................................................................... 75 Chapter 7: Owner-Operators: Skin in the Game....................................................83 Chapter 8: The Outsiders: The Best CEOs...............................................................93 Chapter 9: Secrets of an 18,000-Bagger................................................................ 103 Chapter 10: Kelly's Heroes: Bet Big..............................................................................111 Chapter 11: Stock Buybacks: Accelerate Returns..................................................115 Chapter 12: Keep Competitors Out.............................................................................121 Chapter 13: Miscellaneous Mentation on 100-Baggers....................................... 129 Chapter 14: In Case of the Next Great Depression..............................................155 Chapter 15: 100-Baggers Distilled: Essential Principles.................................... 169 Appendix The 100-Baggers (1962?2014)................................................................ 191

CHAPTER 1:

INTRODUCING 100-BAGGERS

This book is about 100-baggers. These are stocks that return $100 for every $1 invested. That means a $10,000 investment turns into $1,000,000. In this book, I want to show you how you can find them.

I know, I know. It sounds like an outrageous quest with a wildly improbable chance of success, like setting out to draw a royal flush in poker. And I would probably have agreed with you not so long ago. But then I started to dig in and study these 100-baggers. Definite patterns emerged.

Let's set out what this book will do for you: ? You will learn the key characteristics of 100-baggers. There are only so many ways up the mountain, and we'll map out these paths in what follows. ? You will learn 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'll need. ? I'll share with you 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, and so there are many stories and anecdotes to help illustrate important points.

2

100-BAGGERS

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 sleepy stocks that go nowhere. If you like investing in utility stocks, with their limited upsides, then this book isn't for you.

This book will change the way you think about investing in stocks. You will never look at the problem in quite the same way again. I hope it will energize and excite you about what's possible.

Before I get to the specifics of how to find 100-baggers, let me give you some context that helps frame the whole effort.

The story of this book begins in 2011. That year, I read remarks investor Chuck Akre made at a conference held that same year. (Akre is a great investor, and we will meet him again in the last chapter.) The title of his talk was "An Investor's Odyssey: The Search for Outstanding Investments."

Here is part of what he said:

In 1972, I read a book that was reviewed in Barron's and this book was called 100 to 1 in the Stock Market by Thomas Phelps. He represented an analysis of investments gaining 100 times one's starting price. Phelps was a Boston investment manager of no particular reputation, as far as I know, but he certainly was on to something, which he outlined in this book. Reading the book really helped me focus on the issue of compounding capital. Also, from Boston, you all know Peter Lynch, who often spoke about ten-baggers. Here was Phelps talking about 100-baggers, so what's the deal? Well Phelps laid out a series of examples where an investor would in fact have made 100 times his money. Further he laid out some of the characteristics, which would compound these investments.

I had never heard of the book. And I've read all the investment classics and many obscure ones. So, I quickly got hold of a copy and began to read.

It became one of my favorite investing books. In December of that year, I sat down and wrote the following story for readers of my newsletter. It serves as an introduction to Phelps and the ideas we'll explore more in this book.

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