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If you only have to read one book on investing, make it "100 Baggers" by @chriswmayer. It is direct and completely changed my investment mindset for the better. My takeaways below (some are obvious, but are worth writing down) : 1/
Your biggest advantage is TIME. The time to reach 100x status means you will likely have to hold through 80% drawdowns. Look at how much the time it took each of these companies to reach 100x: 2/
To find a 100-bagger, you likely need both EARNINGS GROWTH and MULTIPLE EXPANSION. However, it is better to buy an expensive, fast grower than a declining, less expensive business. 3/
"All else being equal, a 20 percent grower selling at 20 times earnings (a p/e of 20) is a much better buy than a 10 percent grower selling at 10 times earnings (a p/e of 10). " 4/
Charlie Munger: "It’s hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you’re not going to make much different than a 6% return." 5/
...Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you’ll end up with a fine result." 6/
You need to train your mind to find a company that will solve a societal problem in 10 years - ideally it is something that dominates a niche. For example, Polaris reached 100x and they make snowmobiles. It also helps to focus on companies with the ability to scale globally. 7/
Do not write off companies that are not producing positive income - their R&D investment may pay off. Amazon never produced a profit for ~10 years because it was investing so heavily in R&D. That's not a train you want to miss. 8/
Favor companies that are run by owner/operators that have high insider ownership. Almost all 100x companies are run by managers that are properly incentivized along with their shareholders. 9/
Further on companies with high insider ownership: "The problem is that companies controlled by insiders—thanks to their large stakes—tend not be as liquid as their peers. Thus, the ETFs bypass such companies or give them a low weighting." Use this to your advantage. 10/
There are always investment opportunities regardless of the economic environment. Macro doomsday does nothing for you. 11/
Never sell on a non-investment decision. Ignore economic headlines. 12/
Fin. I was reminded of the book after seeing @DanielSLoeb1's recent reading list. This is one of my favorite investment books along with "You Can Be a Stock Market Genius" by Greenblatt. Hope you enjoyed it. 13/13
