To net that elusive 100-bagger, you need to buy right and sit tight for years. But how does one buy right? That’s the question Mayer attempts to answer. But this book isn’t for those who seek instant multi-bagger success by investing in stocks. After all, such odds are available at wealth-destroying casinos around the world. Mayer himself admits there is no magic formula and it’s not easy to screen potential winners.
But he does share handy tips to identify them: actively look for 100-baggers; don’t be in equity for small game; look for the elephant; look for value-added top-line growth without equity dilution or margin cuts that affect return; spend time understanding what you own; don’t troll stocks for 100-baggers where PE is five or below or price is below book; great ideas aren’t cheap; and look for economic moats that allow the company to consistently earn high return on capital.
Mayer also cites the coffee-can portfolio approach to help investors resist selling early. Explaining the strategy, he advises readers to pick a compelling story, leader or country and be willing to risk everything in their ‘coffee cans’ for it. Mayer illustrates this through the story of how, in 1987, equal amounts were invested in high-tech and bio-tech firms that held great potential. However, nine sunk without a trace; bio-tech firm Amgen, on the other hand, returned 800x by 1994, making up for the losses in the others. Mayer recommends not experimenting with start-ups but focusing on well-established companies with long runways of growth. Mayer insists that great investors do not worry about unknowable or unpredictable things such as the Fed rate or dollar or the overall state of the markets. Instead, they focus on great opportunities.
Drawing from his study of 365 companies that became multi-baggers between 1962 and 2014, Mayer also lists several individual success stories, among which Monster Beverages stands out. The company became a 100-bagger by 2006 and a 700-bagger by 2014. In fact, one could have even bought it in 2004 and landed a 100-bagger. This despite the company being shunned by many well-known analysts, one of whom even recommended a ‘short’ rating in 2005, when the stock was at $6.31; it went on to hit $26 within a year. The company’s rise was due to brilliant marketing, branding and distribution strategies that pushed up the top line and led to increased profitability.
Mayer also backs the rationale of betting on billionaires such as Steve Jobs, Bill Gates or Warren Buffett over agent-operators, explaining how they demonstrate the ability to make deals when others are afraid. If you believe, like I do, that India stands out as a great investment destination in the global economy, act on this conviction after applying the insights from this book. I assure you that you’ll soon be writing your own 100-bagger stories.