“What is the key ingredient to a 100 bagger?”
Ah well, always the big question. In my view, the key ingredient is return on capital. That’s the gin. And the ability to reinvest is the vermouth.
Now, return on capital is a vague term. And this is an area I am still refining. But broadly considered, the key ratios to consider include “return on invested capital,” or “return on capital employed” or “return on assets” or “return on equity” or…
And since the road to 100 baggerdom is a long and twisty road with lots of hills and valleys, you can’t just do it one year. You want a business that can crank out those high returns year after year. That means you have to think about a lot of other things as well, like competition and growth potential and the ability to withstand economic cycles, etc.
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