Studying 100-Baggers is important because most were microcaps when they started their ascent. We’ve actually had ten 100-Baggers that made this incredible journey in just five years. In 1972, Thomas Phelps wrote “100 to 1 in the Stock Market”. Phelps studied the 365 stocks that returned 100 to 1 (aka 100-Baggers) between 1932 and 1971. You can find some great nuggets of wisdom in his book.
Chris Mayer picks up where Phelps left off analyzing all 100-Bagger stocks from 1962-2014. Chris Mayer’s “100-Baggers: Stocks That Return 100-To-1 And How To Find Them” is a very easy (<200 pages) and enjoyable read (c’mon how can’t you enjoy reading about 100-Baggers?). It’s great to read about 100-Baggers, but we want to find them early. Chris does a great job outlining the attributes of great businesses, from high ROE to owner-operator intelligent fanatics. Mayer and his analysts offer 100-Bagger case studies on Monster Beverage (700-Bagger), Amazon (146-Bagger), Electronic Arts (104-Bagger), Comcast (200-Bagger), and others. In the book, Mayer also mentions investor and MicroCapClub member Chip Maloney’s case study: MTY Food Group – A Case Study of a 100-Bagger.
Finding great companies early is only half the battle. We then have to learn how to hold them. The book packs a punch of wisdom by providing modern day analysis and discussion on “buying right and sitting tight”. Most investors crave action instead of lethargy and sloth. I highly recommend investors read this book. You can also meet author Chris Mayer at our MicroCap Leadership Summit 2016.
I think one of the biggest assets of this book is the list of 100-Bagger stocks in the back. I love reading about the intelligent fanatics that started these businesses. If you want a fun exercise, go through the list of 100-Bagger stocks, Google their founders, and read articles-books that have been written on them.
Let me give you an example how fun this is.
Polaris Industries (PII) went public in 1988, took 22.5 years to be a 100-Bagger, on its way to being a 500-Bagger today. Polaris was founded by Edgar Hetteen. What is also interesting is Edgar later founded a competitor Arctic Cat (ACAT), another public snowmobile/ATV company. Edgar has been long considered the father of the snowmobile industry.
Here is the quick story from Edgar Hetteen’s obituary.
By 1954, Johnson and Allan Hetteen (Edgar’s brothers) had cobbled together their first prototype of a snowmobile, using a 10-horse Briggs and Stratton engine from the local hardware store mounted in back, a track made from a steel binder chain — “the kind used on manure spreaders,” Johnson said — and a seat of steel in the middle of a “tunnel” of sheet metal.
“The first one only went 10 mph,” Johnson said.
Edgar was a skeptic, figuring it would never work or never sell.
But there was a market ready for it. The lumber man across the street bought it for $425, Johnson remembers: “he used it to hunt rabbits, fox and wolves.”
Sales rose in the late 1950s, but the board of directors of Hetteen Hoist and Derrick kept pressuring him to nix the unknown new snowmobile product for the steadier farm implement business, which they had done for a decade or more.
Edgar Hetteen decided to show everyone: in a long-celebrated long journey in 1960, he and three others took the Sno-Travelers on a 1,200-mile trek in Alaska, from Bethel to Fairbanks, in three weeks. It proved snowmobiles were reliable enough to replace dog sleds, Johnson said.
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