100 Bagers by Chris Mayer was one of the most popular books among ValueWalk readers and it is not hard to see why – the book is excellent and a recommended read. Below is a brief excerpt from the book on small cap investing.
Smaller Companies Preferred
Earlier this month, value investor Mohnish Pabrai took part in a Q&A session with William & Mary College students. Q3 2021 hedge fund letters, conferences and more Throughout the discussion, the hedge fund manager covered a range of topics, talking about his thoughts on valuation models, the key lessons every investor should know, and how Read More
Start with acorns, wind up with oak trees. Start with oak trees, and you wont have quite the same dramatic growth. It may seem obvious, but it is important.
Apple, as great as it has been and is, won’t become a 100-bagger from its current levels. The market values the stock at $750 billion. A hundredfold return from here would take it to $75 trillion. That’s more than four times the size of the US economy. It could be a good stock for some time yet, but the law of large numbers starts to work against you at some point.
On the other hand, you shouldn’t assume you need to dive into micro-caps and buy 25-cent stocks. The median sales figure of the 365 names in the study was about $170 million. This is unadjusted for inflation. It simply Shows you that 100-baggers can start off as sizable companies. Sales of $170 million makes for a substantial business in any era.
As a general rule, I suggest focusing on companies with market caps of less than $1 billion. Not a necessity (remember, smaller companies “preferred”), but staying below such a deck will make for a more fruitful search than staying above it.
Below is more on the book from the flap:
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 million. Chris Mayer can help you find them.
It sounds like an outrageous quest with a wildly improbable chance of success. But when Mayer studied 100-baggers of the past, definite patterns emerged.
In 100-Baggers, you will learn:
-The key characteristics of 100-baggers
-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 need.)
-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, so there are many stories and anecdotes to help illustrate important points.
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 losers and sleepy stocks that go nowhere.
After reading 100-Baggers, you will never look at investing the same way again. It will energize and excite you about what is possible.