What You Ought To Know About Finding Tenbaggers

Continuation from yesterday…..(How You Could Have Doubled Your Chipotle’s ROI)

Summary & Conclusion

Throughout the book we have looked at 5 different Multi-Baggers, ranging from 14 Bags to 264 Bags, in order to ascertain what they have had in common.  We have tried to understand what attributes have led to their success and if we would have been able to make an investment before their impressive run ups. Most importantly, we have tried to develop a system that would allow us to identify such “Tenbaggers” today.

During this process we have looked at the Tenbaggers in question from 3 different analytical view points. Fundamental, technical and mathematical/timing.  From the very early on it became evident that a singular analytical framework would not allow us to identify such Tenbaggers with any degree of certainty. Yet, when we proceed to combine them, our chances for success increase dramatically. Giving us the ability to pick out 3 out of 5 Tenbaggers with a high degree of certainty.

Finally, the analytical system above presents us with a number of benchmarks we can use today to pick out the Tenbaggers of tomorrow.

So, what are they?

General Undervaluation:

All but one of our Tenbaggers were severely undervalued at the time of their respective bottoms or prior to their massive run ups. Yet, perhaps “undervaluation” is not a correct term to use here since valuations can be interpreted or misinterpreted in many different ways. As you very well know, something undervalued can become even more undervalued if the business does not work.  Perhaps, “Oversold –or- Selling Below Potential Value” would be a much more appropriate term.

• Keurig Green Mountain (GMCR):  Stock was selling at a 60% discount to its IPO price just a few years prior at the time its run up has initiated.
• Apple, Inc (AAPL): Stock was trading at the same price it was trading 20 years earlier after the Nasdaq had collapsed in 2000-2002.
• Best Buy Inc (BBY): Stock was selling at a 75% discount to its price just two years prior at the time its run up has initiated.
• Bally Technologies Inc (BYI):  Stock fell so far that it was about to be delisted from the Nasdaq.
• Chipotles Mexican Grill (CMG):  Stock was selling at over 60% discount to its price just 10 months prior.

In other words, all of our Tenbaggers were sitting at the bottoms of their respective trading ranges when our original investment in them should have occurred. And that is our clue number one.

Clue #1:  Seek out and research companies whose stock prices are selling at least 50% below their prior years or months values.  From our work above, discounts of 60-80% from prior years tops are optimal. It is highly probable that we will find most of our Tenbaggers there.

To Be Continued Tomorrow