Finding Multi-Baggers, page-2

The Marcus Padley article reminds us that there is a way to make life-changing amounts on the share market without getting involved in short term trading.

Just "Buy right, and hold on".

But how do you select the right stock?

A while back I came across a book by a US security analyst, journalist, and financial advisor, Thomas W Phelps, who retired back in 1970. His "100 to 1 in stock market" tells of his research into those companies  at the time of his retirement which had gained the status of 100 baggers at that point. (the book has been recently reprinted, and is available online - I found the "Book Depository" the best source)

There were more than 360 of those 100 baggers. Now, while his experience was with the US market, and while many of the companies he writes about were before our time, the same principles apply today on local markets.

Mr Padley has mentioned some of the Aussie multi-bag performers. Add examples like Sirius (SIR), and PLS in recent times. (I, just like Marcus, bought into PLS at 3c, sold at 16c !, saw potential elsewhere)

The secret that Thomas Phelps outlines in "100 to 1 in the Stock Market" is the key indicators you need to look for to find that elusive multi bagger.

He tells the story of a financial editor of the old New York Evening Post, a Mr Paul Garrett, who after a stint with General Motors, at the age of 64, retired and set out to make his last years his best.

His goal was to increase his capital so he could help others.

He decided the best way he could increase his saving quickly (taking into account his age), was to invest in one fast-growing company - but it had to be the right one. He began his search for one that met four key criteria.

1. It must be small. Sheer size works against great further growth.

2. It must be relatively unknown. Growth stocks that are already popular may keep growing, but often you have to pay the price for expected growth too many years ahead.

3. It must have a unique product that would do an essential job better, cheaper, and/or faster than previously, with prospects of great and long-continued sales increases over time.

4. It must have a strong, progressive, research-minded management.

Now to cut a story short, Paul Garrett finally whittled his list down to one stock, called Haloid. That company is now called Xerox. He bought 63,000 shares at $1. In 1971 the SP was $125.

Three years ago, when I started my search among those listed on the ASX, there were a few possibilities, but as I reduced the prospects down to a few, one company seemed to be a first mover into a new materials revolution that will disrupt many industries.

That's why I did some thorough research and confirmed that FGR will be my "100 bagger".

But I am no investment advisor, so please do your own thorough research.

More detail on those four key indicators in following posts.