Podcast summary created with Snipd AI
Quick takeaways
- Identify 100-baggers focusing on people's importance in business culture and management decisions.
- Strategize with twin engines of growth and valuation, prioritizing company quality over valuation concerns.
- Implement the Coffee Can Approach for long-term investment success, emphasizing patience and disciplined decision-making.
Deep dives
Hundred Baggers Study by Chris Mayer
Chris Mayer, a founder and portfolio manager at Woodlock House Family Capital, discusses his book '100 Baggers.' The book highlights the study of top-performing US stocks that have returned one million dollars for every ten thousand dollars invested. Mayer emphasizes the significance of patience and long-term investment strategies, advocating for holding onto exceptional companies. He shares success stories like Monster Beverage, becoming a hundred-bagger within ten years, illustrating the importance of growth and volatility in achieving high returns.
Identifying Hundred Baggers' Characteristics
Mayer outlines two types of stocks that become hundred-baggers: unpredictable, risky stocks with wild outcomes and stocks with stable financial attributes that analysts can predict and project. He highlights 'twin engines' for fast growth, including significant sales growth and multiple expansion. Mayer emphasizes the importance of growth, margins, and valuation, focusing on the compounding effect and how these factors contribute to a stock's success.
Investor Behavior and Successful Investments
Mayer recommends focusing on company quality over valuation, stating that getting the business right is more crucial than getting the valuation right. He emphasizes the significance of people-centric investing, preferring owner-operators with 'skin in the game' for long-term success. Mayer highlights the importance of culture and employee ownership in businesses, as well as evaluating management's capital allocation decisions for sustainable growth and value creation.
Portfolio Construction and Number of Stocks
When considering portfolio construction, the debate between having a concentrated portfolio with a few stocks versus a diversified one with many stocks arises. While some studies show that higher concentration can lead to better returns, personal preferences and bandwidth play a role. Managing a focused portfolio allows for a deeper understanding of businesses, enabling the weeding out of subpar companies.
The Coffee Can Approach and Investment Strategy
The 'Coffee Can Approach' involves selecting ten long-term investment choices, committing to them, and waiting without interference for potential returns. By focusing on company fundamentals and long-term outlook over stock price fluctuations, investors can safeguard against impulsive decision-making. To improve patience and decision-making, limiting exposure to unnecessary information sources like social media and seeking intellectual pursuits beyond finance can be beneficial.
Chris Mayer is an expert on stocks that return 100 times or more. In a thoughtful conversation with many company examples, we talk about how to identify 100-baggers and their common characteristics. Chris also shares his portfolio strategy and the mindset needed to reach superior investment results.
For more info about the podcast, go to the episode page.
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Episode Chapters
Part I: INTRO
(00:00) Intro to Chris and 100-Baggers
(03:15) A favorite 100-bagger story
(05:23) The two routes to 100-bagger status
(06:50) The twin engines
(08:14) Chris’s investor evolution
Part II: PEOPLE
(13:13) Owner-operators and incentives
(18:58) Capital allocation decisions
(21:12) Business culture
(24:50) The most important question to management (competition)
(26:58) Companies checking all the People’s boxes
Part III: BUSINESS
(29:18) Business models for the next 50 years
(29:55) Growth
(33:09) Moats
(37:00) Size and industry
(38:26) Holding companies/Serial acquirers
Part IV: STRATEGY
(48:33) Where to start looking for 100-baggers
(50:05) Sosnoff’s Law
(50:53) Valuation
(52:11) Portfolio construction
(55:07) Kelly criterion
(56:47) Position size
(58:33) Selling and switching a position
(1:00:47) The Coffee Can approach
(1:05:10) Cash position
Part V: MINDSET
(1:07:21) Personal traits to realize 100-baggers
(1:10:51) How to improve patience
(1:14:27) Most common biases
(1:16:16) Learning from success and failure
(1:20:03) Books to find & hold on to 100-baggers
(1:22:29) Chris’s upcoming book
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Articles & Books Mentioned
- 100-Baggers - Chris Mayer
- Humble on Wall Street - Martin T. Sosnoff (1975)
- Silent Investor, Silent Loser - Martin T. Sosnoff (1987)
- Coffee Can Approach - Robert G. Kirby (1984)
- How Do You Know - Chris Mayer (2018)
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Companies Mentioned (in order of its first appearance)
- Monster Beverage
- McDonald's
- Starbucks
- Brown & Brown
- Domino’s Pizza
- Copart
- Insurance Auto Auctions
- ODFL
- Berkshire Hathaway
- Lifco
- Addtech
- Lagercrantz
- Bergman & Beving
- Danaher
- Constellation Software
- Nibe
- Assa Abloy
- Franklin Resources
- Wix.com
- Xerox
- Kodak
- Nokia
- Valeant
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More on Chris Mayer
Books: https://www.amazon.com/Christopher-W-Mayer/e/B001IGOH5E?ref=sr_ntt_srch_lnk_2&qid=1641899969&sr=1-2
Twitter: https://twitter.com/chriswmayer
Blog: https://www.woodlockhousefamilycapital.com/blog
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What is Investing by the Books?
Investing by the Books was founded by Henrik Andersson, Bo Börtemark, Mats Larsson and Michael Persson. It has published hundreds of book reviews in the past 10 years and operates on a non-profit basis.
Visit the website: http://www.investingbythebooks.com/
Follow on Twitter: https://twitter.com/Investbythebook
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What is Redeye?
Redeye is a research-centered boutique investment bank from Stockholm. Founded in 1999, Redeye cultivates investors through timeless knowledge, a humble attitude, and a strong focus on quality.
Visit the website: https://www.redeye.se/
Follow on Twitter: https://twitter.com/Redeye_
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Disclaimer
Notice that the content in this podcast is not, and shall not be construed as investment advice. This information is meant to be informative and for general purposes only. For full disclaimer, visit Redeye.se
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