Tag: 10 bagger

Continuation from Friday...(A Few More Rules For Finding Tenbaggers)

RULE #10: Sit Out or Get Ready To Go Short When the Time Is Right

Finally, at certain times you will find yourself in extreme overvaluation bubbles. Similar to those at 2000 and 2007 tops. It highly probable that you will not be able to find any potential Tenbaggers at general undervaluation levels in such environments. When that happens, it would be an opportune time to get ready for a bear raid on individual stocks or the overall market. If nothing else, it would be prudent to stay out of the way.

Today’s market environment, in August of 2014, presents us with a perfect illustration of that. Due to its overall extreme valuation levels, I am unable to find a single stock issue that would satisfy all of the requirements above. That’s right, not a single stock that I would invest in as a potential Tenbagger as most stocks have been driven to unsustainable valuation levels. This tells me a few things. First, the market is overvalued and in a bubble. Second, if I have any remaining long positions I should consider liquidating them now or as soon as the market breaks down (technical bear confirmation).  Finally, I should consider going short if my investment strategy allows it.

Clue #10: If you are unable to find any potential Tenbaggers at undervalued levels, the overall stock market is likely to be in a bubble. Be prepared to exit your long positions and to go short at a moment’s notice.

Conclusion: If you are to follow the steps above it is highly probable that you will not be able to find more than 10 individual stock issues, at any one time, that satisfy all of your requirements. When you do find them, make it your business to learn everything you possibly can about the underlying business and its stock price. From the fundamental, technical and mathematical perspectives. It will make all the difference between investing in a stock that does well and a stock that goes up 10X or more within a relatively short period of time. When all of your requirements are satisfied and you are confident that the underlying stock will outperform the market by a large margin……..buy as much stock as your diversification strategy allows.

And that’s all there is to it.

This book will now be edited. It should be available over the next 30 days or so. 

The Hunt For Tenbaggers Google

Continuation from yesterday……(Rules For Trading Tenbaggers).

RULE #7: Buy Fast Growing Companies After Market Corrections

If we look at all of the above companies and try to identify one trait that worked 95-100% of the time, this would it. Every one of our stocks sold off during bear market legs of 2000-2002 and 2007-2009. Most of the time at X multiple to the market.  Meaning, their declines were at times more, sometimes a lot more than the overall market. Suggesting that their eventual bounces would be more significant as well.

Further, once the market corrections were over, it was time to buy. Most of our stocks had their largest 500-2,000% run ups during bull legs of 2002-2007 and 2009-2014. Or right after bear market legs terminated at their respective bottoms.   Perhaps Warren Buffett had said it best, “Be fearful when others are greedy and greedy when others are fearful.”  Buy at the bottom.

Clue #7: This strategy is about as foolproof as it can get. By buying at the bottom of a bear cycle, you ensure good entry points and subsequent massive gains in your potential Tenbaggers.

RULE #8: Secular Bull or Bear Markets are Not Very Relevant:

All of the stocks above had their massive run ups during a secular bear market of 2000-2017. Proving, without a shadow of a doubt, that individual stocks can increase in value even in the hardest of times. Assuming their underlying businesses are performing well.  And while it is helpful and more profitable to have a bull market at your back, it is not a requirement.  There will be many stocks that go up 10X or more under all market conditions.

With that said and as was suggested above, all investors must be on a lookout for fast developing bear market legs that tend to appear in secular bear markets. For instance, 2000-2002, 2007-2009 and 2014-2017. It is at this time that most stocks go though their corrections. Giving us an opportunity to 1. Liquidate our long positions.  2. Go short and 3. Load up on multiple Tenbaggers at give away prices at the bottom of the decline.

Clue #8: Don’t pay attention to bull or bear markets. Instead, concentrate on avoiding bear market legs in secular bear markets. Load up on your favorite Tenbagger stocks when selloffs terminate.

RULE #9: At Least Some Diversification is Required.

While the Tenbaggers in this book offer a high rate of return, it comes with a side of extra risk associated with new product introductions, restructurings, growth, etc…. As such, it would be prudent not to bet all of your chips on one or two potential Tenbaggers.  Yet, a wide diversification here is impossible since you will not be able to find many stocks that satisfy all of your Tenbagger requirements. You can go about solving this issue in one of two ways.

First, simple add Tenbaggers to your overall well diversified portfolio. While they will have a net positive impact, they impact might not be as great is if you were concentrating on Tenbaggers alone.  Which brings us to option number two.   In this case you would develop a portfolio of no more than 10 Tenbaggers while concentrating your attention entirely on overseeing their progress.

Clue #9: Do not bet all of your money on 1-2 potential Tenbaggers as such stocks are inherently more risky and unpredictable. Instead, concentrate on developing one of two diversification strategies that appeal to you the most.

To Be Continued On Monday……

A Few More Rules For Finding Tenbaggers  Google

Continuation from yesterday……(Rules For Finding Tenbaggers)

Rule #4: Use All 3 Analytical Frameworks:

As was suggested earlier, it would be incredibly difficult to make an investment in any one of our Tenbaggers through the use of a singular analytical tool.  When fundamental, technical and mathematical analysis tools are used individually, they give very few clues that the underlying stock issue is about to surge higher. However, when we combine them and they all confirm the upcoming rise, our chances of success increase dramatically.

As was the case with Chipotle Mexican Grill in the late 2008. From the fundamental perspective alone the company was doing incredibly well and growing just about as fast as it could. Yet, the company’s stock price kept going lower throughout 2008. Mostly due to its general overvaluation at the time and the financial crisis of 2007-2009. If we were looking at the company from the fundamental perspective alone we wouldn’t be able to tell when the stock would bottom and when it would be an opportune time to go long. Yet, when we bring technical and mathematical analysis into the picture, it clears up. Giving us a number of signs that the stock price was bottoming and the time to take position was at hand.

Clue #4: When fundamental, technical and mathematical analyses confirm each other, the chances of the stock surging higher increase exponentially.  Therefore, companies that have all three analytical frameworks agree on the direction of the underlying stock price are the companies that warrant possible investment. Assuming that all other investment requirements are satisfied.

Rule #5: Wait For a Technical Confirmation:

When we initiate a position in any given stock is about just as important as IF we make an investment at all. A proper entry point can make all the difference between generating substantial gains almost immediately and losing money on the trade.  At its worst, an improper entry point can force us to liquidate a position at a loss and at exactly the wrong time. Right before the stock begins its run up. As such, it is always important to wait for a technical confirmation before taking a position. Typically, the confirmation will come in a form of a higher high after a certain bottom is reached or a break above/below a trend line.  As a matter of fact, all of our entry and exit points in this book were timed in such a way.

Clue #5: Wait for a technical confirmation before taking a position in the underlying stock.

Rule #6: Trade In and Out of Your Positions (Particularly in a secular bear market):

If anything, one proposed “Truth” has been drilled into investor’s psyche over the last 50 or so years.  Buy stocks for the long term and hold them forever.  As nice as this catch phrase might sound, it doesn’t work under all circumstances.  We deal with uncertain and unpredictable world on the daily basis. As a result we must have the ability to shift our opinions and positions at a moment’s notice.  And in doing so, we gain the ability to minimize the risk while maximizing the returns.

Further, it was shown that by trading in and out of our positions at the right times we can easily double or even quadruple our overall Tenbagger performance. Assuming a long enough time frame. All while avoiding soul crushing 50-80% declines and uncertainty associated with such fast growing stocks. In fact, trading in and out becomes the only prudent approach to investing in Tenbaggers over a long period of time. Particularly in bear markets.

Clue #6: Don’t hesitate to trade in and out of the stock when the technical and mathematical analyses call for it.

To Be Continued Tomorrow……

Rules For Trading Tenbaggers Google

Continuation from yesterday…..What You Ought To Know About Finding Tenbaggers

Rule #2: Operational Improvements:

Again, just because the stock is undervalued or just because it had lost 80% of its value over the last 24 months, doesn’t mean the stock will turn around and go higher. If anything, it is highly probable that the stock in question will remain at the bottom of its trading range for the foreseeable future. Worst, it might go on to lose another 80% before the bottom is reached. Some sort of a catalyst is needed before the position is taken. Typically, necessary changes come from the following areas…

• Restructurings, Asset Divestitures, Mergers and Spin Offs
• New Products or Services with a Huge Growth Potential
• Management Changes

In essence, the company in question must have something that would allow it to grow faster over the next few years. Without such a clear catalyst, an investment in the company would not make sense as it underlying stock has no chance of appreciating. As was the case in our analysis above.

• Keurig Green Mountain (GMCR):  Introduced a line of Keurig’s coffee system and K-Cups right before the stock price began to surge.
• Apple, Inc (AAPL):  Introduced a line of extremely popular iPods before its stock price began to surge ever higher. Followed by  iTunes, iPhone, iPod, etc….
• Best Buy Inc (BBY): Was working diligently on improving margins, restructuring its growth trajectory and trying out new store concepts that would outperform the competition.
• Bally Technologies Inc (BYI):  Began a divestiture and restructuring process to simplify its balance sheet and to infuse capital into its otherwise dying business.
• Chipotles Mexican Grill (CMG):  Was already firing on all cylinders and no change or catalyst was needed.

Clue #2: Some sort of a catalyst must be present. Otherwise the underlying business warrants no investments. The company’s management must be introducing new products, restructuring or doing something that has the potential to send the company’s growth trajectory higher.

Rule #3: Bet on Management:

While we paid very little attention to company’s management in our research throughout this book, it is not an accurate representation of how this issue should be approached.  Company’s management and its CEO in particular are incredibly important. A CEO with an excellent track record, a strong drive for success and a high ownership percentage will oftentimes work miracles for the underlying business. As was the case with Steve Jobs and Apple Inc.  Likewise, a management team with no previous successful track record and/or without a stake in the company is unlikely to do anything worthwhile.

Clue #3: Successful management team with a clearly defined and executable plan of action. A high ownership percentage in the company by the management team is always a big plus.

To Be Continued Tomorrow…..

Rules For Finding Tenbaggers Google

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

Continuation From Friday……(How You Could Have Squeezed An Additional 1,100% ROI From Apple Inc)

As per our earlier analysis, we would have initiated our original long position in Chipotle’s stock in November of 2008 at $42.20. A bear market of 2007-2009 was coming to an end and any potential investor in the stock should have been watching for a trend reversal and a possible entry point. A down trending resistance line was broken to the upside in November of 2008 and a long position should have been initiated at that time.

CMG Trade #1:   Buy CMG at $42.20 in November of 2008.

From its 2008 bottom, Chipotle’s stock pushed higher unabated until reaching its interim top of $440 in April of 2012. Thereafter, the stock price proceeded to collapse 45% in 6 months. As with our Apple analysis above, there was no way to anticipate this particular collapse. Outside of a few fundamental and technical warning signs, there was nothing to suggest that Chipotle’s stock was about to go through a substantial decline. Nevertheless, any investor in the stock at the time should have been concerned with technical development between April and June of 2012.

The actual breakdown in Chipotle’s stock had occurred in early July of 2012 at around $380 a share. A trader should have liquidated his long position at the time and gone short.

CMG Trade #2: Sell CMG at $380 and go short at the same time/price. Net realized gain from the previous entry point…..$338 or 800%.

The stock price proceeded to quickly collapse to $242 by October of 2012. Throughout this collapse an analyst following the stock should have been watching for signs of a bottom.  Since the overall bull market of 2009-2014 was still intact, it was prudent to assume that the stock would bounce as soon as the bottom was reached. And that is exactly what happened in December of 2012 when the technical picture reversed and the stock price pushed above higher high at $270 a share. A short position should have been covered at the time and a long position should have been re-entered.

CMG Trade #2: Cover our CMG short position at $270 in December of 2012 and go long at the same time. Net realized gain from the previous entry point…..$110 or 29%. Overall gain $448 or 1,061%.

Subsequently, Chipotle’s stock price quickly recovered to around $675, where it remains today. Yielding a total gain of $853 or 2,021% vs. our original gain of 1,465%. Proving, once again, the validity of the strategy.

Yet, just as with the Apple Inc example above, investors in Chipotle’s stock today (8/20/2014) should be on a heightened state of alert. Based on the stock’s extreme overvaluation levels and the upcoming bear market of 2014-2017. In essence, investors in Chipotle’s stock should be watching the stock very carefully for any signs of a technical breakdown. Ready to reverse position and go short at a moment’s notice. Buying the stock back later on and at a bear market bottom.

To Be Continued Tomorrow……

How You Could Have Doubled Your Chipotle’s ROI Google

Continuation from yesterday……Turning our original 75 bagger into an 86 bagger. While not a significant increase, still, it is a substantial improvement from our original investment.  Particularly, when you realize that the Nasdaq remains in the negative territory since its March of 2000 top. It is also important to note that much better entry and exit points are possible when an analyst or an investor is working closely with the underlying stock. Most of the entry and exit points above were based on higher highs or lower lows on the long-term chart to illustrate the validity of the concept. When actual trades are executed it is possible to be just a few points or a few days away from the actual tops/bottoms. Supercharging our performance even more.

Finally, while it is likely capital gains taxes will minimize the overall impact of the additional 1,100% ROI, this remains a strategy worth perusing. Particularly in today’s secular bear market. For instance, right now (August 2014) would be an excellent time to start thinking about liquidating a long Apple position in preparation for an upcoming bear market of 2014-2017. If nothing else, any investor in Apple’s stock should be on a heightened state of alert. Ready to sell his long position and go short at a moment’s notice.

As the upcoming bear market leg develops, it is highly probable that Apple’s stock will decline significantly due to its general overvaluation and a substantial bubble in the overall stock market. Triggering a decline similar, in both magnitude and duration, to the one sustained between 2007 top and 2009 bottom. Any investor executing the strategy above should be able to protect his gains, profit on the downside and re-enter his position at a much lower price when the foresaid bear market ends.  Pushing his or her overall returns even higher.

To Be Continued On Monday…….

How You Could Have Squeezed An Additional 1,100% ROI From Apple Inc Google

Continuation from yesterday……AAPL Trade #1: Buy Apple at $1.25 a share in May of 2003.

AAPL Trade #2: Sell Apple in January of 2008 at $22.50 a share. Net realized gain from the previous entry point in 2003….$21.25 or 1,700%.

AAPL Trade #3: Trading in and out of the stock in April and September of 2008 at around $22.5 a share. At net zero capital gain/loss.

AAPL Trade #4: Going short at $22.50 in September of 2008.

As was mentioned earlier, an analyst familiar with the overall composition of the stock market would have been aware that the market was likely to bottom in the first quarter of 2009. Any investor with access to such information should have been watching Apple’s stock price for signs of a reversal into the subsequent bull market. Ready to cover his short position and go long at a moment’s notice. This instance occurred in March of 2009 when the company’s share price broke above $15 a share and pushed higher.

AAPL Trade #5: Cover our short position at $15 in March of 2009 and go long at the same time/price. Net realized gain from the previous short entry point…… $7.50 or 33%. Overall profit…..$28.75 or 2,200%.

Following 2009 bottom, Apple’s stock price continued to rally unabated until reaching $100 a share price by September of 2012. This action was followed by a quick reversal and a subsequent 45% decline into its April of 2013 bottom.  Unfortunately, it would have been hard to anticipate this quick decline. Outside a few fundamental reasons (management, slowing sales, guidance, etc..) very few people could have predicted this particular decline. Even with the help of our mathematical and timing work. If anything, our mathematical and timing work would have suggested that Apple’s stock price would continue to appreciate until the bull market terminates in 2014.

Nevertheless, a position trader should have traded in and out of the stock at around $70 a share. At a net zero gain/loss. Bringing us to today.

AAPL Trade #6:  Considering trading in and out of the stock at $70 and today’s price of $95, net realized gain from the previous entry point…..$80 or 533%. With the overall profit at…..$108.75 or 8,600%.

To Be Continued Tomorrow…….

How You Could Have Made A Fortune With Apple Google