Book Recommendation: 100 Baggers
It has been a while since I last recommended a book but this one has got to be the most thought-provoking read I've had in a little while. The full title of the book is "100 Baggers - Stocks that return 100-to-1 and how to find them" by Christopher Mayer.
What the book is about
The title of the book pretty much says it all, really. The book takes a look at the stocks which have gone up a hundred fold over the last 50 years and what they have in common. Spoiler alert: growth and lots of it!
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." - Warren Buffett
Value versus Growth
When it comes to investing, the two popular schools of thought from the fundamental side are Value and Growth. I've always been more of a value investor - preferring to buy a decent company at a good (cheap) price. Over the years, I've had decent returns but nothing spectacular. A two or three-bagger here and there. No real losses to speak off either. Just plain ordinary.
The above quote from Warren Buffett is really about the paradigm shift he had - from his early days as a pure value investor ala Benjamin Graham, to someone who factors in growth when making his purchases. The tricky part is to make sure you're not overpaying for that growth.
That's why I found this book to be really good. They took a look at the growth numbers as well as the P/E ratios of the stocks before their meteoric rise and it was surprising for me to see that sales growth rates of 25% per year for more than 5 years were not uncommon within this group.
The numbers can only tell you so much
As the book takes pains to point out, the numbers only act as a screening tool. There are companies that fade into oblivion despite having a fantastic growth story for a number of years. This is particularly true in Technology stocks where you could be rendered obsolete with a new innovation.
Ultimately, investing in very much an art, as it is a science. It is important to assess whether the growth can continue, whether new entrants or technological changes will emerge, whether management has been acting in good faith etc.
Free stock-screening tool
Searching for these growth stories on your own is an arduous task. I used to rely on Google Finance's stock screening tool but it seems like it has been discontinued. No big loss as it had a lot of bugs with the numbers. The only good thing was that it covered international markets and had a decent number of metrics to filter by, including growth.
Well, when one door closes, another opens and this has led me to discover FINVIZ. It seems like i've been living under a rock, because i see a lot of recommendations for it and i can see why. Above is a quick screenshot of the site and you can even get information about insider buying. A lot easier than poring through EDGAR.
If you're interested, here's the URL: https://finviz.com/
Lucky you... having time not only to read the books but to review them also :-)
I'm not into stocks so my opinion on it should have a question mark above it, but this book sounds to me like hindsight 20/20. It's easy to look at data and see what worked, but it's a whole different story to take the said data and make a call for the future.
Haha i use it as bedtime reading for the kids..makes them sleep better.
Indeed, there's a lot of hindsight to it. Most money managers don't even beat the index but it's a sweet job if one can get it lol.