Talk to 100 Baggers: Stocks That Return 100-to-1 and How to Find Them like its author wrote you back.
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What it argues
Christopher Mayer built this book on research conducted earlier by Thomas Phelps, whose 1972 book 100 to 1 in the Stock Market studied stocks that returned one hundred times their purchase price. Mayer updated Phelps's work by studying every US-listed stock that returned 100-to-1 between 1962 and 2014 — identifying 365 stocks in total — and asked what they had in common. The answer structures the book.
The common characteristics of 100-baggers cluster around a few themes. First, exceptional business quality: the companies in the study tended to have high returns on equity, strong competitive positions, and the ability to reinvest earnings at high rates of return for extended periods. Second, growth: both in revenue and earnings, over many years. Third, valuation at purchase: while overpaying was possible, most 100-baggers were purchased at reasonable valuations relative to their eventual earnings power. Fourth, and most important, time: holding periods of ten, twenty, or thirty years. The math of compounding requires time, and most investors sell far too early, often at three or five times their purchase price, missing the vast majority of the eventual return.
What it gets right
- 1.
The single most important ingredient in producing 100-baggers is time. Most investors sell long before the compounding has done its work — often at 3x or 5x — forfeiting the next 20x.
- 2.
High returns on equity, reinvested at high rates over long periods, are the mathematical engine behind every 100-bagger. The business quality must be exceptional and durable.
- 3.
Owner-operators — founders or major shareholders who run the business — outperform hired management in the 100-bagger data. Skin in the game aligns incentives over long periods.
What it covers
Who wrote it
Christopher Mayer is an investor and writer who spent over a decade as an analyst and portfolio manager at Agora Financial before founding his own investment advisory. He is the author of several books on investing including Invest Like a Dealmaker and World Right Side Up. His work is primarily focused on identifying high-quality compounding businesses and holding them for long periods. He manages a concentrated investment portfolio and writes publicly about his investment process. His approach to investing was influenced by Benjamin Graham, Warren Buffett, and Thomas Phelps, whose 1972 book on 100-to-1 returns is the direct predecessor of his own.
