Key insights
- The post discusses the characteristics of potential "100-bagger" stocks, emphasizing small market capitalization, high growth, discounted valuation, and high ROIC with reinvestment of free cash flow. While the author struggles to identify specific candidates, the discussion highlights factors that could drive long-term outperformance in US equities, particularly within the small-cap growth segment. The focus on ROIC and reinvestment is a positive signal.
I just read 100 Baggers: Stocks that Return 100-to-1 and How to Find Them by Christopher Mayer, where he basically said that for a stock to deliver 100-bagger returns in 25 years, you need it to CAGR at 21% (17% in 30 years and 26% in 20 years). For that, you need the stock to be: 1. market cap small enough and TAM large enough (the law of large numbers, like 5B USD market cap max)
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The dual engine concept: growing earnings fast enough while also trading at a discount (for compounding + re-rate).
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High ROIC companies that reinvest FCF in the business or buybacks (no dividends)
I have truly tried to find potential companies that can match those (like Swedish serial acquirers like Roko or Teqnion) or GSHD, but I'm not sure even those can deliver such returns. What stocks do you believe can deliver such returns, and if you think the criteria are too rough?