Finding 100 Baggers

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“To make money in stocks, you must have the vision to see them, the courage to buy them, and the patience to hold them.” ~ George Baker

The rarest of the three investing virtues is patience, according to Thomas Phelps.

Thomas Phelps was 70 years young when his book “100 to 1 in the Stock Market” was published. Phelps spent over 40 years in the investing world working as a private investor, a columnist, an analyst, and a financial advisor.

Mr. Phelps went back in history and found that from 1932 to 1971, there were over 350 stocks in which you could have turned $1 into more than $100. He said, “The reason that more people don’t make 10,000% on their money is that they don’t set their goals high enough!”

He  shared four things an investor should look for when investing their money in order to increase their wealth 100-fold.

1. Invest in smaller companies that can sustainably grow their earnings at a fast pace for a long time.

2. Invest in relatively unknown businesses. Phelps writes, “Popular growth stocks may keep on growing, but too often one has to pay for expected growth, too many years in advance.”

3. Invest in companies with a strong, progressive, research-minded management team

4. Buy companies that have a unique product that can do a job better, faster, or cheaper than their competitors or provide a new service with prospects of long-continued sales increases in the future.

This often leads investors to microcaps because they meet many of Phelps’ four requirements:

They are generally early-stage small businesses, relatively unknown, and their values are between $50 and $300 million.

One of Phelps’ biggest takeaways from his study was the importance of simply never selling.

To achieve 100X returns, you need to find companies that are compounding capital rapidly and hold them for a very long time.

This eliminates a big wealth killer: capital gains taxes.

Sometime the thing that is holding you back is all in your mind.

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