Forum Topics Capturing multi-baggers
Noddy74
2 years ago

I thought this graph (courtesy of Twitter) was interesting.

80e87a18c5790e28a6b9cb0b4cefde82ab3822.png

A few observations:

  • Multi-baggers are rare. Maybe returns over a different timeframe would be different but I think the heavy left skew towards negative and underperformers versus mean would remain.
  • Conversely picking companies that make life changing returns is really hard. They represent a very small relative number of listed companies.
  • BUT, given the extent to which those few companies contribute to the overall market's performance it would be very hard to meet market returns unless you do have exposure to those companies.
  • This goes some way to explaining why passive strategies are sometimes found to beat active ones i.e. broad based ETFs do capture companies in that far right hand bar. They capture companies in other bars as well but a few big winners can more than offset lots of ordinary ones.


[Disc: Mostly active strategy so do as I say, not as I do]

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GazD
2 years ago

Great graphic and point well made… I also think the fact that a small number of stocks deliver most of the outperformance supports the idea of not selling when you’re on a winner (how do you know of course) but being a reluctant seller makes sense to me. You have to give your winners an opportunity to deliver the outperformance you’re after if you’re going to be active

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Seasoning
2 years ago

Its interesting if you go look at old podcasts and blog posts about companies with massive returns and hear how everyone thinks they are expensive at a few dollars and now they are 50 or 100, it puts things in perspective.

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Seasoning
2 years ago

Here's a list of 100 baggers on the ASX.

620e213e6da61dbe365f665efca060a5b99f42.png

There are 9. 6 that aren't mining, I deliberately put the profit margin to show that it's not necessarily high margin businesses and I deliberately put ROE to show that the 20% + that is talked about in 100 baggers isn't necessarily a strict rule, but is generally probably going to help.

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Bear77
2 years ago

Northern Star Resources (NST) is another 100-bagger - they were trading at between 8c/share and 10c/share in 2007 when Bill Beament took over as MD and they are now $8.61, having peaked at over $15/share in mid-2020. However you could have bought them at 8c/share when Bill took over, or for less than 2c/share in 2009, and they're now over $8/share.

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Seasoning
2 years ago

My screen picked it up as a 65 bagger for some reason (or I'm just incapable of converting percentages to number of baggers which is entirely possible).

It's in the next lot when I make my screen 50+ baggers

cd817662a62794a8c59d8fe66d39823d54b00c.png

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Seasoning
2 years ago

A couple of big return years makes a huge difference, I suspect a tonne of people sell out their shares in a company just after one of these massive return years - then kick themselves a few years later

829e6b981a91ca131a1e20d86fb658f1158014.png

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Bear77
2 years ago

Perhaps NST is only a 65-bagger over 10 years, but over 15 years it's definitely a 100-bagger.

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Seasoning
2 years ago

I think some immediate takeaways from looking at the data is:

  • Even the best quality companies have terrible years.
  • You don't have to join at the point just before the biggest gain to do well on some of these companies, sure it won't 100 bag or 50 bag, but if I had a portfolio of a bunch of 5-10 baggers I wouldn't be complaining.
  • Probably worth looking into what companies people are saying are too expensive year after year but continue to outperform. Pick one of the top-end companies and see what people were saying about them 5 years ago and how 'priced in' they were.

26
Timocracy
2 years ago

@Seasoning you have restored some of my faith in humanity. Or at least, the markets...

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