Finally caught up with the book 100 baggers by Christopher Mayer (pdf here).
Lots of online commentary about the book, with a follow up by the author here.
The book found 365 100-baggers in the States between 1962 and 2014. The general conclusion to find a US 100-bagger was to look for smaller companies preferably with low multiples and owner-management and, crucially, the ability to reinvest earnings at high rates of return. Oh, and you had to hold onto the shares for a decade or two and withstand substantial share-price fluctuations.
The author commendably admitted the study was not perfect due to survivorship bias. We will never know how many companies that exhibited the early winning traits of actual 100-baggers never made it to 100-bagger (or even 10-bagger) status.
So what chances do we have of buying a UK 100-bagger? I have employed SharePad to scan through the last 25 years to find out:
| TIDM | Name | Mkt Cap (£m) | Price (p) | 25 y high | 25 y low | Max bagger | Price % of 25 y high |
|---|---|---|---|---|---|---|---|
| GBG | GB Group PLC | 1,802 | 915 | 954 | 5 | 182 | 96% |
| AHT | Ashtead Group PLC | 26,185 | 5,862 | 6,162 | 2 | 2,672 | 95% |
| DPH | Dechra Pharmaceuticals PLC | 5,517 | 5,095 | 5,405 | 43 | 126 | 94% |
| DPLM | Diploma PLC | 3,652 | 2,932 | 3,166 | 23 | 137 | 93% |
| JD. | JD Sports Fashion PLC | 10,925 | 1,059 | 1,151 | 2 | 517 | 92% |
| RNWH | Renew Holdings PLC | 607 | 772 | 850 | 8 | 110 | 91% |
| GHE | Gresham House PLC | 327 | 860 | 955 | 9 | 106 | 90% |
| DOM | Domino’s Pizza Group PLC | 1,705 | 375 | 432 | 3 | 124 | 87% |
| JDG | Judges Scientific PLC | 472 | 7,480 | 8,640 | 60 | 145 | 87% |
| GAW | Games Workshop Group PLC | 3,462 | 10,560 | 12,220 | 101 | 122 | 86% |
| IPX | IMPAX Asset Management Group PLC | 1,440 | 1,086 | 1,314 | 3 | 389 | 83% |
| FOUR | 4imprint Group PLC | 798 | 2,840 | 3,500 | 33 | 108 | 81% |
| RWS | RWS Holdings PLC | 2,397 | 616 | 805 | 5 | 161 | 77% |
| HCM | Hutchmed (China) Ltd | 4,067 | 471 | 624 | 4 | 177 | 75% |
| SAR | Sareum Holdings PLC | 226 | 7 | 9 | 0 | 166 | 73% |
| CRL | Creightons PLC | 65 | 96 | 134 | 1 | 213 | 71% |
| IWG | IWG PLC | 3,022 | 300 | 469 | 3 | 144 | 64% |
| PPH | PPHE Hotel Group Ltd | 574 | 1,350 | 2,140 | 13 | 171 | 63% |
| JET2 | Jet2 PLC | 2,545 | 1,186 | 1,943 | 13 | 155 | 61% |
| GGP | Greatland Gold PLC | 686 | 17 | 37 | 0 | 623 | 46% |
| FDP | FD Technologies PLC | 577 | 2,075 | 4,680 | 28 | 170 | 44% |
| AVON | Avon Protection PLC | 635 | 2,046 | 4,625 | 25 | 185 | 44% |
| ARB | Argo Blockchain PLC | 579 | 124 | 284 | 3 | 105 | 44% |
| ASC | ASOS PLC | 2,769 | 2,773 | 7,730 | 3 | 2,379 | 36% |
| PPS | Proton Motor Power Systems PLC | 318 | 41 | 125 | 1 | 111 | 33% |
| IOM | Iomart Group PLC | 163 | 149 | 475 | 4 | 112 | 31% |
| FUTR | Future PLC | 4,229 | 3,506 | 11,816 | 75 | 158 | 30% |
| ACSO | Accesso Technology Group PLC | 355 | 860 | 2,975 | 3 | 992 | 29% |
| CWR | Ceres Power Holdings PLC | 2,134 | 1,120 | 3,900 | 12 | 336 | 29% |
| MBO | MobilityOne Ltd | 13 | 12 | 45 | 0 | 120 | 27% |
| NCYT | Novacyt SA | 202 | 285 | 1,194 | 7 | 184 | 24% |
| BOTB | Best of the Best PLC | 61 | 645 | 3,440 | 15 | 229 | 19% |
| MUL | Mulberry Group PLC | 177 | 295 | 2,472 | 25 | 101 | 12% |
All told I reckon the table holds 33 genuine 100-baggers from 1996. Note that survivorship bias will affect these results, too, with 100-baggers that have since disappeared from the market not shown.
Within the table, ‘Max bagger’ is the 25-year price high divided by the 25-year price low and reflects the maximum bagger opportunity – assuming you bought at the low and sold at the high!
‘Price %…’ is the proportion of the current price versus the 25-year-high. This proportion helps eliminate all the shares that have 100-sagged. I have eliminated all the 100-saggers, although a few (e.g. RWS, Future and Ceres Power) 100-sagged before 100-bagging!
A few shares on the list are familiar to me. I have written SharePad articles on JD Sports, Domino’s Pizza, Games Workshop, Impax Asset Management, Avon Protection, Argo Blockchain, ASOS and Best of the Best.
But is buying a UK 100-bagger realistic? My only experience of potentially enjoying a 100-bagger is Games Workshop (GAW). I owned the shares between 1998 and 2007, and among my various buys and sells I bought around 125p during 2000.
GAW then was not quite the £100-a-share ‘quality’ company we know today. This sales warning during 2000 admitted the ‘moat’ had been breached by Pokemon…
"In the post Christmas period there has been a deterioration in the performance of our UK retail operations, as a consequence of which we now expect the results for the current year to be below market expectations.
We believe this deterioration in UK retail is primarily due to the launch and success of the Pokemon trading card game. This has drained an element of the discretionary ‘pocket money’ spend which, we believe, would otherwise have been spent on Games Workshop products."
… and presumably sales were now at risk of other gaming fads and trends.
GAW’s 100p low during 2000 put the shares on a P/E of 5 based on (heavily) adjusted earnings.
Back then I could not imagine GAW becoming a 5-bagger or 10-bagger let alone a 100-bagger, which is what ‘hindsight’ studies always overlook. I am convinced nobody buying at the lows for any of the 100-baggers above had an inkling of the mega returns ahead.
No doubt many of 100-baggers I have listed above were smaller companies with low multiples and owner-management… but I suspect their ability to reinvest earnings at high rates of return was extremely unclear at the time.
I think to have a realistic chance of enjoying a UK 100-bagger, the holding period has to be extended beyond 30 years (and SharePad’s data). The longer time horizon means you could pick up a smaller, but well-run business and have greater time for the share-price compounding. Halma (HLMA) for instance had a c£100m market cap during the 1980s after c15 years of above-average growth…
…and its market cap is now 100x at £11b!
The alternative to UK 100-baggers perhaps is to start fishing for ‘the next Amazon’ in the States.
I’d welcome any stories of 100-baggers – actual(!), what-could-have-beens… or potentially future!
Maynard
), however achieving ‘The Full 15’% p.a. on average over the longer term for my portfolio overall may not be?