Tag: 10 bagger

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Would You Like A Million With That Coffee? (10 Bagger Book. Part 5)

GMCR2Continuation Of Part 4…….With the stock price trending higher in 1999 and 2000 we would have had two opportunities to take a long position in GMCR at the time. One in September of 1999 at $0.31 and one in January of 2000 at $0.35. With the $0.35 entry point in January of 2000 being technically more sound.

The only remaining question at the time would be……Why would we take position?

There was no real reason to do so unless you were closely following the company and all of its fundamental developments. Including the growth in their Keurig/K-Cup line. And while the stock price was already trending higher since October of 1998, appreciating over 100% by the end of 1999, it was still unclear if it was just another range bound rally or something more.

TIMING & MATHEMATICAL ANALYSIS:

After going public in October of 1993 and staying in a relatively tight trading range over the next 5 years, Green Mountain’s stock price did not give us enough time nor volatility to determine its cyclical breakup. Typically, over 20 years of trading data is necessary  in order to be able to determine underlying stocks mathematical, timing or cyclical structure.

While we would not be able to get that information from GMCR chart by the second half of 1999, one thing jumps out immediately.  Green Mountain’s stock price bottomed at $0.14 in October of 1998. Exactly 5 Years after going public. If you are familiar with my other writings you are very well aware that I regard the 5 year cycle as one of the most important cycles in the stock market.

The 5 year cycle tends to represent completed bull or bear phases within the composition of the overall stock market or individual stocks. For example, the 1982-1987, 1994-2000 and 2002-2007 bull cycles all lasted exactly 5 years.  An analyst familiar with this cycle would realize that a 5 year BEAR cycle that started for GMCR’s stock price in October of 1993 had likely terminated in October of 1998. At least the probability was fairly high. Giving more credence to us taking a long position in the late 1999.

GETTING IN AND OUT OF THE STOCK:

As you very well know, taking a trading/investment position in a Tenbagger at the appropriate time is only half the battle.  Staying put, increasing your position and not being forced out to sell at the wrong time is the other side of the coin. After all, it wouldn’t be a good idea to take a 100% profit, only to see your stock go up another 20,000% over the next decade. As human beings we are wired to buy and sell at exactly the wrong time. Hence the inability to outperform the market.  When it comes to Tenbaggers we must have a clearly defined set of trading rules that will help us mitigate the risk of being wrong (Please see the Tenbagger Trading Rules & Maximizing Returns chapter).

In case of Green Mountain, if you were fortunate enough to take a long position in late 1999 or early 2000 it would not be an easy ride up.  The stock had suffered a 60% drop between 2001 and 2002, 50% drop in 2008 and a gut wrenching 84% decline between 2011 and 2012.

Would most investors be able to go through such massive sell offs without liquidating their positions?

Who are we kidding, most mortals would not be able to sustain such massive drops without first getting out.  Most likely at exactly the wrong time.  Well, that is unless you were in a comma during the time or if Green Mountain represented only a small portion of your overall well diversified portfolio. For the rest of us, neither one is likely to be the case. That is why a proper application of set trading rules becomes so important. So much so, that in many cases it can easily double or triple the overall return on the underlying stock.  Easily turning Green Mountain’s 496 bagger into a 1,000 bagger over the same period of time. Once again, please check our Tenbagger Trading Rules & Maximizing Returns chapter for more information.

To Be Continued…….

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Would You Like A Million With That Coffee? (10 Bagger Book. Part 5) Google

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Would You Like A Million With That Coffee? (10 Bagger Book. Part 4)

Continuation of Part 3(below)…...What no one at the time realized is that they were sitting on top of a goldmine that would transform their business.  Through the combination of Keurig’s Premium Coffee System and Green Mountain’s coffee and K-Cups (single cup) technology, the company was about to create something of a “printer & ink” combination in the hot beverage/coffee industry.

So much so that the company went from deriving 95% of their revenue from their low margin wholesale coffee business in 1999 ($65 Million), to deriving 95% of their current revenue base from their high margin sales of Keurig Coffee Systems and K-Cups ($4.3 Billion). In summary, staring in 1998-1999 Green Mountain Started its transformation from a sleepy coffee distributor/roaster into a high-technology coffee company. Hence the growth and the 49,616% return on investment since 1999.

For our purposes,  we must ascertain if it would have been possible to predict this meteoric rise and take position in the second half of 1999 from the fundamental perspective alone.

The short answer is NO.

There were very few clues that would allow us to take a position at the time. First, there was nothing special about the company. It was just another regional coffee distributor/roaster. Second, the company was stuck in a tight trading range for over five years. Further, the company’s valuation at the time (with the P/E of 20) would not warrant a value oriented investment. Finally, there was nothing to suggest that the company was about to stage a massive revenue growth spurt.

Even Green Mountain’s own management didn’t not anticipate that their Keurig line would take off as much as it did. The best any fundamental analyst could have done at that stage is thrown this company into a “Big Potential” bin. That is after analyzing Keurig & K-Cups in great detail and realizing that the company MIGHT have a great product line on their hands.  Yet, no one at the time could have predicted that Keurig and Green Mountain would be able to achieve the growth that they have had. This brings us to the technical side of the equation.

TECHNICAL ANALYSIS:

GMCR2

Since the fundamental analysis has failed to give us the ability to take a long position in Green Mountain’s stock in the second half of 1999, we must now concentrate on the technical side of the equation to see if would have had better luck there.

As you can see from the 1994-2000 GMCR chart above, after going public the company’s stock immediately declined over 50%. Thereafter, the stock price remained in a tight trading range of $0.14-0.40 (split adjusted) between  1994 and the second half of 1999. Bottoming at $0.14 in October of 1998.

With the stock price trending higher in 1999 and 2000 we would had two opportunities to take a long position in GMCR at the time. One in September of 1999 at $0.31 and one in January of 2000 at $0.35. With the $0.35 entry point in January of 2000 being technically more sound.

To Be Continued Tomorrow…….

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Would You Like A Million With That Coffee? (10 Bagger Book. Part 4) Google

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Would You Like A Million With That Coffee? (10 Bagger Book. Part 3)

GMCR Chart

Continuation of part 2…..As soon as you look at the data above, one thing becomes evident.  Keurig Green Mountain fundamental growth over the last 15 years has been nearly as impressive as its stock price growth. During this period of time revenue grew by 6,823%, earnings per share increased by 23,757%, book value grew by 28,785% and shareholders equity jumped by 22,464%.  More than justifying the rise in the stock price.

The question is, what had happened on the fundamental level to push the company to grow at such a fast pace?

Well, before the $4.5 Billion in sales, before all of the partnerships, before Keurig brewing system and single portion cups of coffee, Green Mountain Coffee Rosters began operations in 1981 as a small Cafe in Waitsfield, Vermont. By simply roasting and serving coffee. As demand grew, the company expanded its roasting and wholesale operation to attract larger customers.

Over the next decade the company grew large enough to do an IPO by 1993. By 1999, Green Mountain was roasting over 25 high-quality Arabica coffees in order to produce over 60 varieties of coffee which it was selling through a network of wholesale and direct mail partners.  All 6,000 of them.  During the fiscal 1999, 1998 and 1997, approximately 95%, 94% and 93%, respectively, of Green Mountain’s sales from continuing operations were derived from its wholesale operation in the northeastern United States.  All in all, by 1999, Green Mountain was just another local roaster and a wholesale distributor.

Yet, something incredible was brewing.

In 1996, Green Mountain invested in Keurig Inc, buying a 35% interest in the company.  Keurig, the maker of a single cup brewing system started selling its first brewer, the B2000 in 1998. While Keurig initially concentrated on the office use of its products, it later added a number of popular consumer models. By 2003, there were more than 40,000 commercial Keurig brewers in American offices.  In 2003 Green Mountain increased its Keurig ownership to 43% and in 2006 the company decided for acquire the rest of Keurig for $160 Million.

Going back to 1998, Green Mountain began supplying Keurig with 12 coffee varieties in K-Cup portion packs designed for the Keurig Premium Coffee System.  And while the companies did not have an exclusive deal, it could be very well ascertained that Keurig would use Green Mountain as its primary coffee or K-Cup supplier (because of the 35% Green Mountains stake in Keurig at the time).

Even thought the company was sitting on a major growth engine in 1998-1999, the company’s annual report at the time does not indicate that neither the management (nor the stock market) has yet realized the opportunity that was right in front of them.  In fact, the management continued to concentrate about 95% of their attention on growing their wholesale distribution business and increasing their market share.

1999 Annual Report: Green Mountain Coffee is focused on building the brand and profitably growing its business. At present, management believes that it can continue to grow sales internally over the next few years at a rate similar to its historical five-year average growth rate (in the range of 25 to 30 percent).

What they didn’t realize is that…..to be continued tomorrow. 

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Would You Like A Million With That Coffee? (10 Bagger Book. Part 2)

Carmax

FUNDAMENTAL ANALYSIS:

Investors in GMCR had a fairly long time window to initiate their original long position. To be exact, between the years of 1994 and 2000.  Yet, the best entry point was in the second half of 1999. It was the last chance and the best time for investors to load up on the stock before its massive rally would ensue.  People taking a position thereafter would see their returns in this stock diminish rather quickly. Luckily for you, you could have bought the stock as late as 2009 and still have a Tenbagger on your hands.

To establish a clear picture of what happened over the last 15 year we must first study the fundamental growth of the company between 1999 and today.

Key Statistics 1999(September 10, 1999) 2014 (June 30th,2014)
Price Per Share $0.28 $124.45
Market Cap $45.6 Million $20.25 Billion
Earnings Per Share $0.014 $3.34
P/E Ratio 20 35
Price/Sales Ratio 0.70 4.53
Price/Book Ratio 3.89 6.19
Revenue $64.9 Million $ 4.50 Billion
Net Income $2.3 Million $543.5 Million
Annual Earnings Growth 16% (revenue) 39% (fiscal 2013)
Total Cash $415,000 $1.11 Billion
Total Debt $4.9 Million $274 Billion
Book Value Per Share $0.07 $20.22
Shares Outstanding 162.74 Million (split adjusted) 162.74 Million
Total Assets $23.8 Million $3.76 Billion
Shareholder Equity $11.7 Million $2.64 Billion

To Be Continued……    

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Would You Like A Million With That Coffee? (10 Bagger Book. Part 2) Google

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Would You Like A Million With That Coffee? (10 Bagger Book)

GMCR Chart

Company Name:  Keurig Green Mountain Inc Stock Symbol:  GMCR Industry:  Consumer Goods
Percent Appreciation:  49,616% Number of Bags:  496 Holding Period:  15 Years
Entry Date & Price:  Aug, 1999 @$0.25 share Exit Date & Price: Current Original Investment($10,000): $4.96 Million

Company Description:  Keurig Green Mountain, Inc. is engaged in the specialty coffee and coffeemaker businesses in the United States and Canada. The company operates through two segments, Domestic and Canada. The company sources, produces, and sells approximately 290 varieties of coffee, hot cocoa, teas, and other beverages in K-Cup and Vue portion packs; and coffee in traditional packaging, including whole bean and ground coffee selections in bags, and ground coffee in fractional packs.  The company was formerly known as Green Mountain Coffee Roasters, Inc. and changed its name to Keurig Green Mountain, Inc. in March 2014. Keurig Green Mountain, Inc. was founded in 1981 and is based in Waterbury, Vermont

Quick Trading Overview & Objective: The company went public in September of 1993 at around $0.50 a share (split adjusted).  Shortly after its IPO, the company’s stock declined by over 50%. It then proceeded to trade in a relatively tight trading range of $0.15-0.40 per share between 1994 and the second half of 1999. It was at that juncture that the stock broke out of its trading range to initiate a massive multi-year rally of 49,616% (as of 6/27/2014 @ $124.29)

We will now go back in time and take an in depth look at the company in order to determine if we could have taken a long position in early 1999. More importantly, we will look at Keurig fundamental/trading patterns over the last 15 years to ascertain if we would have been able to maintain our position over such an extended period of time in order to walk away with such massive gains.

FUNDAMENTAL ANALYSIS:

Investors in GMCR had a fairly long time window to initiate their original long position. To be exact, between the years of 1994 and 2000.  Yet, the best entry point was in the second half of 1999. It was the last chance and the best time for investors to load up on the stock before its massive rally would ensue.  People taking a position thereafter would see their returns in this stock diminish rather quickly. Luckily for you, you could have bought the stock as late as 2009 and still have a Tenbagger on your hands.

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Would You Like A Million With That Coffee? (10 Bagger Book) Google

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Kicking The Tires. The Story Of CarMax (10 Bagger Book)

Carmax

Company Name:  CarMax, Inc Stock Symbol:  KMX Industry:  Auto Retail
Percent Appreciation:  6,652% Number of Bags:  66.5 Holding Period:  14.5 Years
Entry Date & Price: Jan of 2000 Exit Date & Price: Current Date Of Analysis: June, 2014

Company Description: CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles in the United States. It operates in two segments, CarMax Sales Operations and CarMax Auto Finance. It sells vehicles that do not meet its retail standards to licensed dealers through on-site wholesale auctions, as well as sells new vehicles under franchise agreements. The company also provides customers financing alternatives through its finance operation, CarMax Auto Finance, as well as through its third-party financing providers.

Quick Trading Overview & Objective: The company went public in February of 1997 at $10. By January of 2000, the stock price proceeded to collapse to $0.75 or over 90%. It is from this January of 2000 bottom that the company has staged an impressive multiyear rally of 6,652% (as of 6/26/2014 @ $50.64).

We will now go back in time and take an in depth look at the company in order to determine if we could have taken a long position in early 2000. More importantly, we will look at CarMax’s fundamental/trading patterns over the last 14 years to ascertain if we would have been able to maintain our position over such an extended period of time in order to walk away with such massive gains.

FUNDAMENTAL ANALYSIS:

What strikes one immediately is how short of a window investors had to purchase this stock at the bottom. After hitting a bottom in January of 2000, investors only had 16 months to purchase this stock below $5. In fact, anyone who purchased this stock after May of 2001 would not be holding a Tenbagger today.  Making 1999-2001 period crucial in CarMax’s turnaround story and an important period for us to study.

To Be Continued……    

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Kicking The Tires. The Story Of CarMax (10 Bagger Book) Google

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The Hunt For 10 Baggers (Book…Introduction…Part 3)

the hunt for the next 10 bagger

Continuation of part 2 

What will we find and will we be able to identify future Tenbaggers based on the analysis above?

That is the purpose of this book. To look at such companies in greater detail and to identify traits that were common  to all of them.  By combining fundamental, technical and timing/mathematical analysis we will be able to determine what factors were important and what might have triggered these Tenbaggers to initiate their massive multiyear stock market rallies. Most importantly, we will attempt to build an early trigger system that would allow us to take appropriate positions in future Tenbaggers. All while holding their stocks through the duration of their rallies.

Which companies will we study?

Company Name Stock Symbol % Appreciation Number Of Bags Original Investment($10,000) Industry Duration
Franklin Resources BEN 81,328% 813 $8.1 Million Financial 22 Years
Danaher Corp DHR 56,478% 564 $5.6 Million Industrial 24 Years
Apple Inc AAPL 4,185% 41 $410,000 Technology 14 Years (*Since 2000)
The GAP, Inc GAP 69,100% 691 $6.9 Million Retail 24 Years
CarMax, Inc KMX 5,878% 58 $580,000 Auto 15 Years(*Since 1999)
Southwestern Energy Co SWN 6,288% 63 $630,000 Utilities 15 Years (*Since 1998)
Bally Technologies BYI 12,213% 122 $1.2 Million Technology 14 Years (*Since 2000)
Keurig Green Mountain GMCR 60,675% 607 $6.1 Million Consumer 20 Years (*Since 1994)
Best Buy Inc BBY 42,500% 425 $4.25 Million Retail 29 Years (*Since 1985)
Medifast Inc MED 15,605% 156 $1.56 Million Weight Loss 13 Years(*Since 2001)

*Data as of June 2014.

In conclusion,  this book will attempt to become a definitive guide on how to identify, analyze and take appropriate position in future Tenbaggers. In a wide range of diversified industries. By studying the past and identifying clearly defined metrics, we should be able to parlay such knowledge well into the future. It is my sincere hope that this book helps you identify future Tenbaggers, take position at the appropriate time and hold it through thick and thin. Well, at least until it is time to take profit at 10X, 20X or 50X your original purchase price. If done properly and successfully, the grandkids of your grandkids will never have to work.

To Be Continued……

z33

The Hunt For 10 Baggers (Book…Introduction…Part 3) Google

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The Hunt For 10 Baggers (Book…Introduction…Part 1)

It was Tuesday, January 11th, 1898. I was running up and down the trading floor, like a crazed animal. Bumping into people, jumping into trading pits, grabbing the latest stock quotes and rushing back to a giant blackboard right next to the main entree way.  I would then jump on and scale what must have been a 60 foot ladder in order to update the bid/ask/price stats for at least three stocks at a time.  Jump down, rinse and repeat.  I was exhausted.  I distinctly remember that my body was beaten up from bumping into thousands of people as I was running all over the floor collecting the latest stock prices. No wonder I woke up tired.

My boss, fat Joe, was yelling at me throughout the entire ordeal.  He would repeatedly shout “Faster you lazy SOB, I don’t have all day for this” as I jumped into the next trading pit.  Yet, after a few round trips I have noticed something strange. Every time I would update the stock price it would go up exactly 10 times. The crowd on the trading floor below was starting to go wild. I was becoming the most popular runner. Just within a few trading hours General Electric went from $8.50 to $85 a share, Colgate-Palmolive Co. went from $17 to $170 and Union Pacific Corporation went from $11.35 to $113.50. Someone was making a lot of money.

As the “melt-up” panic spread throughout the trading floor most of the stock enthusiast below turned into blood thirsty animals.  Pushing, screaming, trampling each other, yelling BUY, BUY, BUY…..whatever it took to get a piece of the action.  A few minutes later the mob proceeded to push my ladder over, forcing me to fall into a swarm of money hungry sharks. Waking up in a cold sweat of excitement, I had a great idea and I knew what I had to do next.

I had to find an answer if it was possible to identify “Tenbaggers” through a combination of fundamental, technical and timing analysis.  To determine what, if any, traits they had in common before starting their historic runs. Most importantly, to identify metrics that would allows us to identify the same opportunities in today’s market. Giving us the ability to take position and profit from high probability Tenbaggers of the next decade.

That is what this book is all about.

Tenbagger, a stock that goes up at least 10X its original purchase price, is the term first coined by a legendary investor Peter Lynch.  Lynch was considered to be one of the best money managers in the nations in the 1970-1990’s through his management of  Fidelity Magellan Fund.  Mr. Lynch had a particular knock for identifying companies in the early stages of their stock run ups. Companies like Body Shop, Lawrence Savings Bank, Pier 1, Supercuts, etc…. Buying them in early stages of growth (when no one else was paying attention) and holding them for many years as they continued to appreciate 5X, 10X, 100X and even more.

To be continued…….. 

z32

The Hunt For 10 Baggers (Book…Introduction…Part 1)  Google

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The Hunt For 10 Baggers

10 Bagger

Just a quick announcement for my loyal readers. While my current investment book “Timed Value” is being edited for publication over the next two weeks, I have decided to start working on my next book. The title of the book will be….

The Hunt For 10 Baggers

If you are not familiar with the term “Tenbagger”, it is the term that was first used by a legendary investor Peter Lynch. Tenbagger is a stock that has appreciated over 1,000% or 10x over a certain period time, providing investors with a massive return. 

In my new book, I will go back in history and take a detailed analytical look at such outperforming stocks. By looking through historic data, as well as annual and quarterly reports I will try to analyze and understand what had made the companies and stocks in question so successful. I will also look and try to identify proper entry and exist points to maximize potential returns. I will then attempt to identify common threads within such stocks to help us identify and pick future winners. I am incredibly excited about this project as I believe the analysis in the book will open up the window into picking huge winners while avoiding losers.  

Best of all, I will publish the entire book on this blog as I continue to write it on the daily basis. Wait for the introduction tomorrow. 

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