Multi-Bagger Opportunities With Realistic Positive Outcomes

[Cigarbutt]

Another recent example where you can see the thesis develop over time is Cambium Learning Group (ABCD). 

 

First VIC writeup in 2010 at $5/share:  https://www.valueinvestorsclub.com/idea/CAMBIUM_LEARNING_GROUP_INC/1068846465  (extensive comment thread through 2014)

Second VIC writeup in January 2015 at $1.90/share:  https://www.valueinvestorsclub.com/idea/CAMBIUM_LEARNING_GROUP_INC/8176075446 (another extensive comment thread)

CoBF thread started August 2017 at ~$5/share:  https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/abcd-cambium-learning-group/msg307030/#msg307030

Taken out by private equity for $14.50/share in October 2018.

 

Part of the opportunity in Cambium, I think, was that the business transition from print to digital took longer than expected.  There seems to have been exhaustion with the thesis down at the 2015 lows, even though the transition was taking place.

 

Another relatively recent example was Hawaiian Airlines following the bankruptcy of its main Hawaiian competitor.  That massively changed the economics of inter-island flying, which one clever analyst foresaw and turned into a ~10-bagger:  https://quinzedix.blogspot.com/2012/07/hawaiian-holdings-air-transport.html

 

As for a potential multi-bagger right now, I see that potential in IDWM, but the actual economics of its TV business are too unknown at this point to model anything.

A supreme thank you for the above bolded part (I'm not bright enough to start to begin to understand the other names mentioned). In retrospect (potential survivorship bias here), it appears that there was an opportunity. I would say though that the inter-island dominance was (and remains: Island Air went out of business in 2017) an underlying strength and significant moat in a way (if an airline can have a moat) but the main reason for the significant rise in revenues and especially profitability after 2012 was the international expansion (especially to and from Asia) when the cyclical winds were favorable. From 2011 to 2016, interisland flights went from 67405 to 76946 and international flights went from 2567 to 4481, with a disproportionate effects on miles travelled (and associated margin) on long routes. Timing of these cyclical investments is an issue as refraining from an exit in 2016 would have meant that, comparing returns from early 2014 to now, holding Southwest would have resulted in about the same outcome. Looking at the usual metrics (EV/EBITDAR, PE or whatever), HA has become relatively cheap once again and its leverage (even accounting for capitalized operating leases on planes) has remained low (relatively). I think their fleet is 'young' compared to the industry. Cyclicality aside, it seems that the market perceives more competition internationally and even within the inter-island foothold. The airline industry has changed but my opinion about general 'investability' in it has not, although I've put HA on a watchlist to consider buying in a time of maximum pessimism, if there's nothing else lying around.

Disclosure: I really like Hawaii (people, climate), have used HA on many occasions and hope/plan to spend time in Kauai on a +/- yearly basis at some point.

[LC]

Disclosure: I really like Hawaii (people, climate), have used HA on many occasions and hope/plan to spend time in Kauai on a +/- yearly basis at some point.

You and me both. What area of the island are you looking?

[Spekulatius]

Regarding HA, it seems that Southwest will be competing with them more and more going forward. While I take it with a grain of salt a pilot who works for LUV told me that HA would be toast in a couple of years, because they cannot compete with LUV.

https://www.staradvertiser.com/2020/01/19/hawaii-news/southwest-opens-hilo-inter-isle-service/

[Cigarbutt]

^For the inter-island service, history has shown that there is room only for one significant carrier although that won't prevent others from trying. Even when 'tacit collusion' was allowed in the early 2000s, both HA (2003-5) and Aloha (2004-5) failed and Aloha definitely shut down in 2008. Others have come and gone and, mostly, in the last few years, HA held +/- 90% market share (up to 98% in early 2019). It feels like a newspaper business (when those had sustainable business models) in towns of certain sizes giving rise to economies of scale and quasi-monopoly effects. LUV is a strong competitor but HA is also a lean operator with comparable leverage. I would bet there could be a struggle but a one-airline dominance will somehow persist and it is hard to see HA not winning this battle.

For the international part, total passengers coming in and out of Hawaii was about 30M in 2009 and went up to about 37M now, with about 70% coming from continental US. There seems to be excess capacity in this space and this would likely hurt if one believes that the cycle is not broken. Fortunately for HA, who bet on Airbus planes, in 2017, LUV based its international foray to Hawaii on the purchase of Boeing 737MAX planes...For the international part, I think that the to-be-revealed-excessive excess capacity is more likely to hurt than new entrants although the latter will not help the former.

 

@LC

In Kauai, I like most places but especially the south shore (Poipu area etc).

[LongHaul]

Good topic, thx for posting

 

This was an interesting book - Even though there is survivorship bias I still learned from it.

100 to 1 in the Stock Market: A Distinguished Security Analyst Tells How to Make More of Your Investment Opportunities Paperback – January 1, 2015

by Thomas William Phelps

 

I think there has be a few things generally:

 

1.  Moat

2.  Nicely growing organic sales increases

3.  Undervaluation

4.  Good mgmt

 

It has to be a real moat - if I can start a competitor and jump in and take share, the profits and unit volume are at risk. 

 

Often times the company is riding a wave and very well run.  Walmart, Nucor, Google, Amazon, Southwest, Netflix, Heico, Gillette, Coke, etc.

 

I think the key is really identifying which companies will have very large revenue and profit increases over the next decade and then figure out the ones where it is not priced in.

 

 

 

 

 

 

 

 

[Jurgis]

I went to read up on Lyft. I ended up in Twilight Zone Comedy Central: https://investor.lyft.com/

 

Was thys lyfted from We corporate docs?  ::)

[chrispy]

Long haul, even if it is priced in and you're righ, it is still big $$

[BG2008]

I went to read up on Lyft. I ended up in Twilight Zone Comedy Central: https://investor.lyft.com/

 

Was thys lyfted from We corporate docs?  ::)

 

What does Lyft has to be with this thread?  I'm designating myself as the official moderator for this thread so that it doesn't morph into something else. 

[spartansaver]

Long haul, even if it is priced in and you're righ, it is still big $$

 

The very tough part is being right. In the new 100 bagger book, the author discusses Monster energy, which was written up as a short on VIC prior to becoming a 100 bagger. In hindsight its much easier to see the path to 100-baggerdom, but how often would we invest in things growing rapidly and turn out to be wrong. If it's priced in and you are wrong, then your investment results can turn out very poor. One thing Greenblatt talks about is that he doesn't swing for the home runs. Is swinging for the multi-bagger opportunities the easiest path to success as an investor? Charlie Munger likes it that way, but how many of us can compete at that level?

[Gregmal]

Long haul, even if it is priced in and you're righ, it is still big $$

 

The very tough part is being right. In the new 100 bagger book, the author discusses Monster energy, which was written up as a short on VIC prior to becoming a 100 bagger. In hindsight its much easier to see the path to 100-baggerdom, but how often would we invest in things growing rapidly and turn out to be wrong. If it's priced in and you are wrong, then your investment results can turn out very poor. One thing Greenblatt talks about is that he doesn't swing for the home runs. Is swinging for the multi-bagger opportunities the easiest path to success as an investor? Charlie Munger likes it that way, but how many of us can compete at that level?

 

Theres balance and you need to approach these things differently based on your strategy. I have several different "areas of allocation" if you want to label it. A certain core is very boring and dry and in principle designed to just compound at reasonable rates with little risk of loss. Then there are moon shots. Then there is other stuff. If your objective is finding 100 baggers, you probably are best suited to take a Motley Fool approach were you own a little bit of basically everything thats interesting but have zero concentration(in terms of allocated cost basis) and then literally never sell. A $1M portfolio might have 250 positions and they all are started with a few thousand bucks. The premise being that you can only lose 100% of an investment but can easily make much more. Its a Wall Street fantasy/selling story that one can take a value approach and then just randomly see the light and put 20% of the portfolio into a future 10 bagger and hold the entire way through. Even Carl Icahn's Netflix bet, which was the closest Ive seen to something like that, in dollar terms, wasn't a huge allocation and he sold it way too soon. I won't mention Cathie Wood because some folks in the investing community dont think the dollars she invests count as much as other dollars or something. But she's on to something as well if you simply want to look at results.

[Guest cherzeca]

Taleb talks recently about ergodicity, which in terms of math and physics is a pretty tough chew, but in terms of investing is somewhat easier to understand:  how best to avoid ruin is to compare two $100 bets on a flip of coin, over a non-infinite time series of flips.  investor #1 puts all $100 on the single coin flip...and if wins doubles bet and continues with the single coin flip..and eventually faces certain ruin.  investor #2 gives $1 each to 100 participants, and asks them to make same bet strategy.  at end of a certain equivalent series of flips, investor #2 is much more likely to have better result than investor #1.

 

you can say that this is diversification but it really isn't in the sense that all bets are the same...a coin flip, doubling bet, same payoff odds.  what is different is the effect of the time sequence.  I have been thinking about investing in terms of diversification over time rather than over diversified investment metrics/factors, and the notion of sizing multi-bagger bets over time sequence may be more meaningful than allocating to different exposures in accordance with industry/risk profile etc.

 

put another way, in the case of every multi-bagger opportunity, there will be a reason not to invest...ie the monster beverage short writeup.  think less in terms of the certainty of investment merits (which in the case of a multi-bagger opportunity is always daunting since that is why it is a multi-bagger opportunity) and more in terms of being exposed to a time sequence of acceptable opportunities

 

edit:  I looked over some notes and found this which is a not bad look at the concept in the investment context:  http://squidarth.com/math/2018/11/27/ergodicity.html

[Jurgis]

I went to read up on Lyft. I ended up in Twilight Zone Comedy Central: https://investor.lyft.com/

 

Was thys lyfted from We corporate docs?  ::)

 

What does Lyft has to be with this thread?  I'm designating myself as the official moderator for this thread so that it doesn't morph into something else.

 

I was sincerely wondering if Lyft might be a company that matches this thread's title.

 

It seems that this thread's title should be changed to "Multi-Bagger Opportunities With Realistic Positive Outcomes According to BG2008"

 

Please carry on.

 

I'm not gonna defend Lyft or its possible candidacy into future multibagger club. Some arguments pro and con can be found on Uber thread https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/uber-uber-technologies/ .

[james22]

...ergodicity...

 

For later.

[KJP]

Taleb talks recently about ergodicity, which in terms of math and physics is a pretty tough chew, but in terms of investing is somewhat easier to understand:  how best to avoid ruin is to compare two $100 bets on a flip of coin, over a non-infinite time series of flips.  investor #1 puts all $100 on the single coin flip...and if wins doubles bet and continues with the single coin flip..and eventually faces certain ruin.  investor #2 gives $1 each to 100 participants, and asks them to make same bet strategy.  at end of a certain equivalent series of flips, investor #2 is much more likely to have better result than investor #1.

 

you can say that this is diversification but it really isn't in the sense that all bets are the same...a coin flip, doubling bet, same payoff odds.  what is different is the effect of the time sequence.  I have been thinking about investing in terms of diversification over time rather than over diversified investment metrics/factors, and the notion of sizing multi-bagger bets over time sequence may be more meaningful than allocating to different exposures in accordance with industry/risk profile etc.

 

put another way, in the case of every multi-bagger opportunity, there will be a reason not to invest...ie the monster beverage short writeup.  think less in terms of the certainty of investment merits (which in the case of a multi-bagger opportunity is always daunting since that is why it is a multi-bagger opportunity) and more in terms of being exposed to a time sequence of acceptable opportunities

 

edit:  I looked over some notes and found this which is a not bad look at the concept in the investment context:  http://squidarth.com/math/2018/11/27/ergodicity.html

 

Thanks for the link.  Interesting concept that I had not heard of before.  But have you found it to have any practical application to your personal investing?  (This may be too off-topic for this thread.)

[Guest cherzeca]

@kjp. Still thinking through it. Expected value is the holy grail metric but money management may be more important. Investing is not ergodic. Multiple acceptable mutibagger  plays better than your best few multibagger plays

[Guest oakwood42]

I went to read up on Lyft. I ended up in Twilight Zone Comedy Central: https://investor.lyft.com/

 

Was thys lyfted from We corporate docs?  ::)

 

What does Lyft has to be with this thread?  I'm designating myself as the official moderator for this thread so that it doesn't morph into something else.

 

LOL - the official moderator! I like it.

[sculpin]

Macro Enterprises (TSX - MCR - $4.00)

 

Macro Enterprises is one of the top 5 most attractive stocks out of more than two thousand microcap stocks that we ranked using our quantitative screen.  Moreover, the mid case and high case intrinsic value estimates are far above the current stock price.  As a result, we are “trembling with greed” to buy this stock for the Boole Microcap Fund.

 

http://boolefund.com/macro-enterprises-mcr-v/

 

First we screen for cheapness based on five metrics.  Here are the numbers for Macro Enterprises:

 

EV/EBITDA = 1.37

P/E = 3.72

P/B = 1.08

P/CF = 3.51

P/S = 0.26

 

These figures—especially EV/EBITDA, P/E, and P/S—make Macro Enterprises one of the top ten cheapest companies out of over two thousand that we ranked.

 

Macro has built a record backlog of $870+ million in net revenue over the next few years.  That is more than 7x the company’s current market cap.  Presently the company has at least a 16% EBITDA margin.  This translates into a net profit margin of at least 11%.  That means the company will earn at least 80% of its current market cap over the next few years.  (Peak net profit margins were around 15%—at these levels, the company would earn more than 100% of its market cap over the next few years.)

 

Intrinsic value scenarios:

 

Low case: Macro is probably not worth less than book value, which is $3.61 per share.  That’s about 7% lower than today’s share price of $3.89.

 

Mid case: The company is probably worth at least EV/EBITDA of 5.0.  That translates into a share price of $10.39, which is 167% higher than today’s $3.89.

 

High case: Macro may easily be worth at least EV/EBITDA of 8.0.  That translates into a share price of $16.17, which is about 316% higher than today’s $3.89.

[BG2008]

I went to read up on Lyft. I ended up in Twilight Zone Comedy Central: https://investor.lyft.com/

 

Was thys lyfted from We corporate docs?  ::)

 

What does Lyft has to be with this thread?  I'm designating myself as the official moderator for this thread so that it doesn't morph into something else.

 

I was sincerely wondering if Lyft might be a company that matches this thread's title.

 

It seems that this thread's title should be changed to "Multi-Bagger Opportunities With Realistic Positive Outcomes According to BG2008"

 

Please carry on.

 

I'm not gonna defend Lyft or its possible candidacy into future multibagger club. Some arguments pro and con can be found on Uber thread https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/uber-uber-technologies/ .

 

I'm getting T-Shirts Made As We speak

[Jurgis]

I went to read up on Lyft. I ended up in Twilight Zone Comedy Central: https://investor.lyft.com/

 

Was thys lyfted from We corporate docs?  ::)

 

What does Lyft has to be with this thread?  I'm designating myself as the official moderator for this thread so that it doesn't morph into something else.

 

I was sincerely wondering if Lyft might be a company that matches this thread's title.

 

It seems that this thread's title should be changed to "Multi-Bagger Opportunities With Realistic Positive Outcomes According to BG2008"

 

Please carry on.

 

I'm not gonna defend Lyft or its possible candidacy into future multibagger club. Some arguments pro and con can be found on Uber thread https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/uber-uber-technologies/ .

 

I'm getting T-Shirts Made As We speak

 

I'm happy that my post has suggested multi-bagger opportunity for your business.

 

Although for environmental reasons, please send multiple T-Shirts in a single bag.

 

You can thank me later.  ;D

[BG2008]

I went to read up on Lyft. I ended up in Twilight Zone Comedy Central: https://investor.lyft.com/

 

Was thys lyfted from We corporate docs?  ::)

 

What does Lyft has to be with this thread?  I'm designating myself as the official moderator for this thread so that it doesn't morph into something else.

 

I was sincerely wondering if Lyft might be a company that matches this thread's title.

 

It seems that this thread's title should be changed to "Multi-Bagger Opportunities With Realistic Positive Outcomes According to BG2008"

 

Please carry on.

 

I'm not gonna defend Lyft or its possible candidacy into future multibagger club. Some arguments pro and con can be found on Uber thread https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/uber-uber-technologies/ .

 

I'm getting T-Shirts Made As We speak

 

I'm happy that my post has suggested multi-bagger opportunity for your business.

 

Although for environmental reasons, please send multiple T-Shirts in a single bag.

 

You can thank me later.  ;D

 

I will tie it neatly with hemp twine that will naturally decompose

[Pedro]

Long time listener, first time caller. The topic of this thread made me bite the bullet and pay the entry fee.  For the first time in 6 years, I feel that I may  have something of value to contribute to this beautiful forum.

 

I’ve read all I can on the topic of 100 baggers; my attached notes are compilation of all the important points I’ve taken away from the readings.  Nothing here is my original ideas, I’m not smart enough so I take no credit other than jotting down what I deem as important.  I hope some find useful.

 

FIH.TO & TRU.TO are my only two potential multi bagger holdings. Sadly some others I've invested in are no longer publicly traded.

 

Thanks for some of your ideas on this thread. I'm deep down the rabbit hole on some of them.

 

Happy Hunting. 

bagger_notes.docx

[Spekulatius]

Long time listener, first time caller. The topic of this thread made me bite the bullet and pay the entry fee.  For the first time in 6 years, I feel that I may  have something of value to contribute to this beautiful forum.

 

I’ve read all I can on the topic of 100 baggers; my attached notes are compilation of all the important points I’ve taken away from the readings.  Nothing here is my original ideas, I’m not smart enough so I take no credit other than jotting down what I deem as important.  I hope some find useful.

 

FIH.TO & TRU.TO are my only two potential multi bagger holdings. Sadly some others I've invested in are no longer publicly traded.

 

Thanks for some of your ideas on this thread. I'm deep down the rabbit hole on some of them.

 

Happy Hunting.

 

Thanks for sharing and welcome to the board. Your notes look great.

 

My best ideas “where the fish are”:

 

Equity stubs - if the business is stable or growing even slowly, they should work out, especially in today’s low interest and low spread environment

 

Motley fools rule breaker portfolio seems to have a lot of multibaggers. I don’t know their hit rate, but they are defining onto something, imo.

[bskptkl]

I have seen/owned several multi-baggers in distressed equity, low price, low market cap names.

 

SIGA - traded $0.25 in 2015 while in bankruptcy (I bought 10k 12/24/15 - I think I low ticked it, but I was severely underwater at the time). Trades $5 now, peaked at $8 in 2018. Still a large position.

PRXIQ - traded $0.20 6/15/16 day after filing Chapter 11. Traded as high as $8 within a year. I managed to buy at $0.20 and sell at $8, and yet still lost money on the total position! I blame the equity committee.

MYH.UN - buy $0.10 to $0.12 late 2014, MHY.UN paid $0.70 distribution in 2 parts in 2015, stub still trading $0.15 (shout out to Sculpin for idea)

SEMIQ - purchased between 2007-2009 average cost of $0.12, before delisting completely, paid $5.68 litigation payout in 2016. Still out there suing other capacitor companies. Thanks to Alex Shaw for this one.

I'll try to think of more.

 

Shared characteristics - low entry price in real terms - I mean pennies, catalyst is mandated by bk court or liquidation plan, and forced selling. Buying bankrupt equity is kind of like buying long dated options, sometimes with years and years of life. The lower the share price, the lower the premium decay.

 

I have many misses and donuts for the few big hits of course.

 

 

[james22]

...ergodicity...

 

Focuses on position sizing rather than time diversification, but good:

 

https://www.dropbox.com/s/m2nu1ymugzi48vi/Non-Ergodicity%20and%20its%20Implications%20for%20Businesses%20and%20Investors.pdf?dl=0

 

Taleb speaks of dynamic hedging leading to higher returns:

 

https://www.fool.com/investing/2018/04/03/motley-fool-interview-nassim-nicholas-taleb.aspx

[BG2008]

Long time listener, first time caller. The topic of this thread made me bite the bullet and pay the entry fee.  For the first time in 6 years, I feel that I may  have something of value to contribute to this beautiful forum.

 

I’ve read all I can on the topic of 100 baggers; my attached notes are compilation of all the important points I’ve taken away from the readings.  Nothing here is my original ideas, I’m not smart enough so I take no credit other than jotting down what I deem as important.  I hope some find useful.

 

FIH.TO & TRU.TO are my only two potential multi bagger holdings. Sadly some others I've invested in are no longer publicly traded.

 

Thanks for some of your ideas on this thread. I'm deep down the rabbit hole on some of them.

 

Happy Hunting.

 

Pedro,

 

Great notes and this is exactly the kind of discussion that I was hoping for! As the official moderator, I declare this thread officially a success because it convinced a long time listener to pluck down the dollars to become a member!