10 Incredible Lessons from 100-Baggers by Chris Mayer: 🧵
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May 07, 2024
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10 Incredible Lessons from 100-Baggers by Chris Mayer:
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•100-Bagger status takes time
The average time to 100-bagger: 26 years
The variance: 16 - 45 years
Growth + PE expansion + time = High returns
The average time to 100-bagger: 26 years
The variance: 16 - 45 years
Growth + PE expansion + time = High returns
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•Look for superior business models
Not all 100-baggers have high margins
Amazon uses all its excess cash on R&D
This has led to spectacular returns for investors
If you were too adamant about earnings, you would have missed it
Not all 100-baggers have high margins
Amazon uses all its excess cash on R&D
This has led to spectacular returns for investors
If you were too adamant about earnings, you would have missed it
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•100-baggers have high returns on capital
High return on capital + the ability to reinvest into the business provides the compounding needed
If the business pays a dividend, this is capital not reinvested at high returns on capital
High return on capital + the ability to reinvest into the business provides the compounding needed
If the business pays a dividend, this is capital not reinvested at high returns on capital
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•Gross margin measures the value a business adds
100-Baggers revealed that gross margins are surprisingly resilient
High gross margin businesses tended to keep their high margins
These businesses often have a sustainable advantage over competitors
100-Baggers revealed that gross margins are surprisingly resilient
High gross margin businesses tended to keep their high margins
These businesses often have a sustainable advantage over competitors
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•100-Baggers are all around us
There was no specific industry that produced more 100 baggers
The companies were found in different forms and in different industries
However, the recommendation is to stick with stable and resilient industries
There was no specific industry that produced more 100 baggers
The companies were found in different forms and in different industries
However, the recommendation is to stick with stable and resilient industries
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•Share buybacks can create a 100-bagger
As long as buybacks are done when the business is below intrinsic value, share buybacks can be an intelligent way of using excess cash
NVR is an example of a business model that utilizes share buybacks to achieve 100-bagger status:
As long as buybacks are done when the business is below intrinsic value, share buybacks can be an intelligent way of using excess cash
NVR is an example of a business model that utilizes share buybacks to achieve 100-bagger status:
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•Owner-operators vastly outperform
A study by J. Shulman showed that businesses that were founder-led outpaced the index by 7% annually.
Skin in the game creates an alignment with the management team and the shareholders.
Examples: LVMH, Constellation, Berkshire
A study by J. Shulman showed that businesses that were founder-led outpaced the index by 7% annually.
Skin in the game creates an alignment with the management team and the shareholders.
Examples: LVMH, Constellation, Berkshire
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•The Coffee Can approach
Buy right, and sit tight
The approach advocates buying the best companies and holding them through thick and thin
Mayer advocates concentrating on 10-20 good ideas to sufficiently spread your risk
Buy right, and sit tight
The approach advocates buying the best companies and holding them through thick and thin
Mayer advocates concentrating on 10-20 good ideas to sufficiently spread your risk
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•Smaller companies have room to grow
It's no surprise that smaller stocks have the greatest upside potential
Large firms will run into the "law of large numbers" at some point
The median market cap of businesses in the 100-bagger study was $500 million
It's no surprise that smaller stocks have the greatest upside potential
Large firms will run into the "law of large numbers" at some point
The median market cap of businesses in the 100-bagger study was $500 million
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•Multiple expansion and growth are essential
A 100-bagger in most cases will need both
Mayer discusses selling due to lofty PE multiples
The conclusion is that investors should be "Reluctant sellers"
Great businesses will often surprise to the upside
A 100-bagger in most cases will need both
Mayer discusses selling due to lofty PE multiples
The conclusion is that investors should be "Reluctant sellers"
Great businesses will often surprise to the upside
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Sharing my free resources with investors:
1. Valuation Cheat Sheet
investinassets.gumroad.com/l/zxxpc
2. How to identify a compounder
investinassets.gumroad.com/l/wavnmm
1. Valuation Cheat Sheet
investinassets.gumroad.com/l/zxxpc
2. How to identify a compounder
investinassets.gumroad.com/l/wavnmm