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100 Baggers: Stocks That Return 100-to-1 and How to Find Them

by Christopher Mayer (2015)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

100 Baggers: Stocks That Return 100-to-1 and How to Find Them

by Christopher Mayer

Overview

Published in 2015 by Laissez Faire Books, 100 Baggers builds on Thomas Phelps' pioneering 1972 study 100 to 1 in the Stock Market. Mayer, an investment newsletter writer and fund manager, commissioned a comprehensive database of every stock that returned 100-fold from 1962 through 2014 (requiring a starting market cap above $50 million in today's dollars). The resulting analysis identifies the common characteristics and patterns behind these extraordinary returns.

The Mathematics of 100-Baggers

Mayer presents the compounding arithmetic: achieving a 100-fold return requires either very high growth rates for moderate periods (36% annually for 15 years) or moderate growth rates sustained for very long periods (14% annually for 35 years). The average 100-bagger takes about 26 years, though outliers like Monster Beverage achieved it in just 10 years (requiring ~50% annual growth).

Key Characteristics

The study identifies several recurring features:

  • The Twin Engines: Revenue growth and expanding profit margins (or P/E expansion) are the two drivers. The most powerful 100-baggers combine both.
  • Owner-Operators: Companies run by founders or executives with significant personal ownership stakes dramatically outperform. Skin in the game aligns management incentives with shareholders.
  • Small Starting Size: Most 100-baggers started small, giving them more room to grow. Smaller companies can double and redouble more easily than large ones.
  • High Returns on Capital: Companies that earn high returns on invested capital and reinvest those profits at similarly high rates create a compounding flywheel.
  • Moats: Sustainable competitive advantages (brands, network effects, switching costs, regulatory barriers) allow companies to maintain high returns over long periods.

The Coffee-Can Portfolio

Mayer advocates a "coffee-can portfolio" approach: select high-quality companies, buy them, and literally put the certificates away for a decade or more. This forces the investor to avoid the destructive activity of trading in and out. Historical analysis shows that the biggest gains come from gritting your teeth and holding through volatility.

Buybacks and Kelly Criterion

The book discusses stock buybacks as an accelerator of returns (shrinking the share count magnifies per-share value creation) and the Kelly Criterion for position sizing (betting more when you have a larger edge).

Practical Lessons

Mayer distills the essential principles: (1) look for companies that can deploy capital at high rates of return for a long time, (2) prefer smaller companies with room to grow, (3) favor owner-operators, (4) don't overpay but don't obsess over valuation, (5) once you find a great company, hold on with determination, and (6) build a portfolio that you rarely trade.