Investment Notes #22: In search of the next British 100-bagger

Finding stocks that can deliver returns well over 10x is the ultimate goal for any bottom-up fundamental investor. The beauty of owning stocks is that their downside is never more than 100% (unless you use leverage), but the upside can be much more than that, even without any leverage.

In his best-known book, One Up on Wall Street, Peter Lynch talked about 10-baggers in his portfolio (stocks that went up 10x in price). Chris Mayer popularised 100-baggers in his book, the concept which he credits to a much older book (100 to 1 In The Stock Market by Thomas Phelps).

Mayer studied companies from 1962 and has lots of interesting data points. The two tables worth sharing are the companies that delivered the highest total result during 1962-2014 and those that delivered 100x returns in the shortest time span.

The two key drivers of returns are earnings growth and rerating. And while 100x looks astonishing, results in a typical year are rarely extraordinary. A stock can trade at a discounted multiple (12x), grow earnings by 10-15% and add dividends and/or buybacks on top to achieve close to 20% annual growth per share, and if it re-rates to 25x, it would grow 100x in less than 22 years. At 15% total annual shareholder return, achieving a 100x return would require just over 27 years. If the stock trades at the same multiple and grows earnings at 15% annually, you would need to own it for just under 33 years.

Holding one stock that long could be the biggest challenge for most investors.

Interestingly, no single industry stands out in terms of a number of 100-baggers. They come from all sorts of sectors.

However, it is more common to find 100-baggers among small and mid-caps simply because they have more room to grow. The flip side is that their survival rate is much lower. So you are more likely to lose money owning an average small-cap than a large-cap.

With this background knowledge, I was on a mission to find at least one such company at a recent Mello 2025 conference. Luckily, I was accompanied by another investor with a similar mindset. In fact, I was probably inspired by his way of looking at stocks.

During this two-day event, we met 16 companies. Most companies were represented by their CEOs, some of whom were also founders and large shareholders, which made the discussion even more exciting. Apart from the standard 25-minute group presentations with Q&A, there were plenty of opportunities to follow up with management in coffee breaks.

Below is my ranking of the companies we met using the Five Criteria that long-term readers would be familiar with. I have added one extra factor (Growth Potential).

Clearly, all of these parameters are subjective. The first criterion (Business Quality) is particularly so. It includes not only traditional parameters (competitive advantage, high barriers to entry and high switching costs etc.), but also my understanding of that business. For example, Aurrigo seems to have a great product - autonomous vehicles for airport baggage transportation, accompanied by software and other services. This sector is quite competitive, however, and whether the company will succeed in the future is a tough call to make. This is why I gave it only 5 points.

Valuation is more art than science. A 10x P/E stock for a company with no moat may be a rich price, while a 20x stock could turn out to be a bargain if it delivers exceptional growth in the future.

My least qualified assessment was probably that of management. A proper evaluation would require understanding the company’s culture, incentives, decision-making process and many other parameters. However, I tried to take into account how long key executives have been in their roles, how significant their share ownership is and what they have achieved so far, to get at least some rough assessment.

The last caveat I should make about this table is that the rankings are quite likely to change as I do more research on each of the names.

If you are a Premium Subscriber you can continue reading my thoughts about a fast-growing SaaS business with a net cash trading at c. 7.6x EV/EBITDA (based on my 2027 estimates).

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