The 100 Baggers checklist
Six conditions that show up in almost every stock that returned 100 times its value, from Chris Mayer's study of 365 companies.
Our work on every company starts from one lens: Chris Mayer's book 100 Baggers. Mayer studied every stock that returned at least 100 times its value between 1962 and 2014: 365 companies across insurance, railroads, retail, tobacco, technology and consumer goods. He did not publish a numbered checklist, but six conditions show up in almost every company that made it.
His philosophy, in two words: buy right, hold on.
The maths first
To turn $10,000 into $1 million you need a 100-to-1 return. The arithmetic is less dramatic than it sounds:
| Annual return | Years to 100x |
|---|---|
| 14% | 35 |
| 20% | 25 |
| 36% | 15 |
The median company in Mayer's study took 16 years to get there. This is a conviction holding, not a trade.
The six conditions
1. High growth
The only generalisation Mayer could make about all 365 companies: they grew fast, for a long time. A company growing earnings at 20% a year doubles its earnings roughly every four years, and after 20 years it earns about 38 times what it did when you bought it. You are not looking for a good year. You are looking for a growth engine that keeps working.
2. Reinvestment at high returns
Growth is not enough. What matters is what the company does with its profits. The best 100-baggers reinvested profits at high returns instead of paying them out. Amazon showed almost no profit for years because it put everything back into warehouses, servers and new lines of business.
We measure this with return on capital employed (ROCE), excluding excess cash:
ROCE = EBIT ÷ (Net working capital + Net fixed assets)
The key judgement is why ROCE moves. A dip caused by heavy reinvestment is acceptable. A decline caused by competitors eroding returns is the danger. See [Return on capital, explained](return-on-capital.html).
3. Competitive advantage
A business can grow fast and earn high returns, but if a competitor can copy it, those returns get competed away. What protects them is what Mayer calls the moat: Gillette's patents, Electronic Arts' exclusive NFL licence for Madden, Comcast's cable network. Without a moat, compounding breaks down. With one, it keeps going. For how this changes when AI makes most skills cheap, see [The five moats AI can't reach](five-moats-ai-cant-reach.html).
4. Owner-operator
Mayer separates hired managers, who optimise for pay and think in three-year cycles, from owner-operators: founders or large shareholders running the business with their own wealth at stake. He quotes investor Martin Sosnoff: 'If management and the board have no meaningful stake in the company, at least 10 to 20% of the stock, throw away the proxy and look elsewhere.' Sam Walton ran Walmart for decades. Jeff Bezos was Amazon's largest individual shareholder through its growth phase.
5. Small enough to grow
The median company in the study was worth around $500 million when its 100x run began. A $500 million company needs to reach $50 billion to 100x, which has happened many times. A $50 billion company would need $5 trillion. There has to be room to grow.
6. Patience
The last condition is about the investor. A stock compounding at 20% a year for 26 years gets close to 100x. Sell in year 20 and you have about 38 times your money, leaving the rest on the table. The biggest returns come from finding the right business and then getting out of your own way.
Why all six work together
High growth creates the earnings trajectory. Reinvestment at high returns turns it into compounding. A moat protects those returns. An owner-operator keeps decisions focused on the long term. A small starting size makes 100x mathematically possible. Patience captures the whole journey. Remove any one and the system breaks: growth without a moat gets competed away, a moat without growth just sits there, and a great business already worth $500 billion has no room left to 100x.
How we apply it
Every company we cover goes through the six conditions, plus three house rules:
- Surface the mispricing. If the market is not wrong about something specific, there is no opportunity.
- Always show the ROCE signal, and say whether a decline is reinvestment or decay.
- Be honest about the risks. Credibility comes from not sugar-coating.
We also tag each idea by type: Type A (high growth, a new paradigm) or Type B (a stable compounder). The two are judged on different evidence.