Sustainable multi-baggers have two characteristics:
Long-term revenue growth
Long-term earnings growth
When you are holding onto a position ask yourself - is this business growing and making more money per share than it did a year ago? Is the company’s business double the size it was a year ago?
If the business is doing really well, I have no problem holding this stock. If the business wasn’t performing, I would sell. Successful investors can differentiate business performance from stock performance and can take advantage of those investors who can’t.
“I don’t want to spend my time trying to earn a lot of little profits. I want very, very big profits that I’m ready to wait for.” – Phil Fisher
“One of the key requirements of staying invested in a big winner is to have (or cultivate) a high boredom threshold. The fact is, most of us will find it difficult to emulate the Connoisseurs because we feel the need to do something when we get to the office (or home trading desk) every day. We look at stock price charts, listen to the latest market news on Bloomberg TV, and fool ourselves into believing we could add value from making a few small trades here and there. It is very hard to do nothing but focus on the same handful of companies every year; only researching new ideas on the side. Many of us, seeing we have made a profit of 40% in one of our stocks, start actively looking for another company to invest the money into – instead of leaving it invested. This is precisely why lots of investors never become very successful.” – Lee Freeman-Shor
Deep down we all know it’s not what we do randomly that will produce long-term returns; it’s what we do consistently. So the education begins to try to turn random luck into consistent skill.
2 more valuable lessons:
1- First, invest in quality because quality always pays you back first. Even before the bottom was put in the bear market, capital started flowing back to quality first. This is something I always remember to this day.
2- Second, invest in the best companies you can find that no one else owns because these companies can do well in any market environment and will soar once they become well known. What does “No one else owns” mean? For me it means zero or very limited institutional ownership.
True conviction can only be obtained by trusting your own research over that of others.
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