My thoughts on 10-baggers.
Personally I don’t give a hoot if any of my companies ever become a 10-bagger or not. It’s totally irrelevant. The only thing that matters is what my portfolio AS A WHOLE does! If you have 100 stocks and one is a 10-bagger, that only moves your portfolio 10%, even though it sounds great, and you can brag about it. Here are some very relevant comments from the KB, with some current updates:
From 1989 to 2007 I averaged about 32% per year compounded. This produced a rather amazing overall multiplication of my total portfolio, In fact, if you sit down with your calculator and multiply 1 by 1.32 (since I averaged a 32% gain) 19 times, you’ll be amazed too. (It’s the power of compounding). You’ll note that this was not a large multi-bagger on one stock, but on my entire portfolio, the whole works!
When I wrote the KB a few years ago there were 27 years, from 1989 to 2015 inclusive, and that was a lot of time for compounding to accumulate. As of the end of 2015, I had a 286-bagger on my entire portfolio.
As you might guess, now, after the last two years, that total has become more than a 1000-bagger on the entire portfolio (1002-bagger actually). It obviously started small). I don’t think I’ve ever had a single 10-bagger on a stock, and there is no way I could have made my current results if I worried about baggers
I pay no attention to 2-baggers, 5-baggers, 10-baggers or whatever in individual stocks, nor do I care about them. This is relevant because this way it never crosses my mind to think anything like “This stock is slowing down, but it’s a 9-bagger. Maybe I should hold it for another year to try for another 10-bagger.” Going from a 9-bagger to a 10-bagger is only an 11% gain. If I’m no longer in love with the stock, I should be able to put the money into a new stock that will be up 30% in a year, and it will never even cross my mind that this stock was “only” up 30% and I missed having a 10-bagger.
Here’s another way to think about it: If you have an 80-bagger on a stock that grows to an 85-bagger it sounds exciting, but it’s only a 6% gain on your money. If you take the same money and put it into a new stock where you just get a tiny little 2-bagger, you’ve made a 100% gain on the same money, instead of a 6% gain turning it into an 85-bagger. Which is why I don’t pay attention to trying to get multiple baggers. If they happen, fine, but it’s not my focus.
If you were to put a small amount of money in every stock listed on the market, you would eventually pick up every 10-bagger, even every 100-bagger, that occurred. You’d be able to brag “I have fifty 10-baggers now, and three 100-baggers!” But so what? You’d just be doing as well as the markets as a whole, by definition, as you’d be investing in the whole market. And since you just invested about a hundredth of one percent in each stock, your 10-baggers would be meaningless, and even your 100-baggers would only move your totals 1%.
So again, anyone can pick up lots of 10-baggers by just investing in hundreds of stocks, more if your hundreds of stocks are MF picks certainly, but the multi-baggers are irrelevant. What matters is how your total portfolio has done. If you have ten 10-baggers in 25 stocks, that’s darn good. If you have ten 10-baggers in 500 stocks, so what? I pay attention to how my total portfolio is doing. My goal, and my entire focus, is now on averaging good percentage gains on my entire portfolio. As I pointed out above, having a multi bagger on my whole portfolio is what counts, not on individual stocks.
I post my stocks and percentages of my portfolio so you can follow what I’ve done and calculate for yourselves each month approximately how I’ve done, and verify that it’s true.
There’s no question that the Fool method beats the market because they pick better than average stocks. Here’s from their website, as of today:
**Fool 100 S&P 500**
**1 year 30% 19.4%**
**5 years 123% 96.2%**
As you see, they are bragging about beating the S&P by 27% over five years (123 – 96 = 27), or about 5% per year. We are beating it by 200% plus in the last year and 8 months, or about 75% per year. There’s no comparison. Different ballgame.
This is not a criticism of the Fool. They are talking to a totally different audience. As FlixFool just wrote:
The long-term-buy-and-hold thesis, aka “Foolish Investing”, as preached by The Motley Fool, is geared toward those who may not know anything about business, investing, finance, etc. yet but are interested and willing to learn. For these people, beating the market can be as simple as buying the latest Stock Advisor recommendations or Best Buy Now stocks and just letting it ride with little to no effort for a very long time.
(Saul back again)
But no one could attain either the long term results that I have had, or the short term results that the dedicated members of this board are attaining, with a 150-stock, buy-and-hold-forever, look for 10-bagger method. What we are doing requires very active participation and involvement, cooperation, helping one another with ideas and stock criticism, etc . It’s got to be fun for you, like a game you are playing, not “buy it, put it away, and forget it”. As I said above, it’s a different ballgame.
Saul
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