The man who wrote the book on how to make 100 times your money with a single stock outlines the core principles of his investing approach - and shares his 2 top under-the-radar picks
- In an exclusive interview with Business Insider, Chris Mayer - the portfolio manager and co-founder of Woodlock House Family Capital fund - shares timeless advice for investors trying to navigate through the market's twists and turns.
- Mayer, who wrote the book on an investing technique that can lead to 100 times returns, tells us how to spot the next stock that's ready to deliver exponential gains.
- He also breaks down two specific stocks he thinks can be his next "100-bagger."
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It's safe to say that Chris Mayer, portfolio manager and co-founder of Woodlock House Family Capital fund, knows a thing or two about stocks that exponentially reward shareholders. In fact, he wrote the book on it.
For the uninitiated, Mayer is the author of "100 Baggers: Stocks That Return 100-to-1 and How To Find Them." In the book, he details the methodology behind this approach and how it leads to monstrous returns.
Now, in the midst of all the ongoing market turmoil, Mayer sat down with Business Insider to offer his best advice for investors who are participating in this wild ride.
To start, the qualities he's seeking are: a long time frame, a high rate of return around 15% to 20%, low multiples, smaller-sized companies, and firms associated with an entrepreneur in some way.
"I think it's better sometimes to look for the characteristics that a lot those 100-baggers share rather than think of a stock that you're going to make 100 times your money, because sometimes it's obviously hard to imagine," he said.
Mayer added: "Carefully consider what you're buying, and whatever you buy, really ask yourself: 'Is this something you want to own for the next ten years?'" he said. "I think if you do that, you'll screen out a lot of things."
Mayer also notes that while the market looks fully valued, there are still untapped opportunities available for those willing to dig.
"It's sort of late-cycle, and there's this crowded trade to get into stuff that's worked," he said. "There's always pockets of value in things that don't necessarily screen well."
The Howard Hughes Corporation (HHC)
In late June, the Howard Hughs Corporation was trading around $93 dollars per share, down substantially from it's year-to-date high around $116. However, Mayer didn't see that anything had fundamentally changed with the business. As a result, Mayer's interest became piqued - and he started digging.
"Howard Hughes doesn't fit any easy box for ETFs to buy, because it's not a real estate investment trust, and it's just sort of an eclectic collection of different properties," he said.
Since the company is structured differently than traditional REIT's, investors looking for predictable flows of capital may have shunned its issues. This lead to a wide underperformance against the real estate sector.
But this is exactly where Mayer knew there was untapped value - and he scooped up shares.
When the company realized its structure was impeding investment, it decided to explore a sale - and Mayer was handsomely rewarded for his efforts. It's already up 36% from those late-June levels, and the future appears bright: all five Wall Street analysts that cover the stock have a "buy" rating.
EchoStar (SATS)
Another example of Mayer's commitment to uncovering hidden value is his purchase of EchoStar earlier in the year.
"You have a lot of investments that they've made that don't produce cash, so they're kind of hidden," he said.
Mayer continued: "Echostar had kind of the good business - which was Hughes Network Systems - growing nicely, good margins, etc. And then they had kind of 'bad business' - which was this slowly melting ice cube - they had some business with, Dish."
Mayer recognized this hidden fallacy instantly - and trusted management would take action to stop the bleeding.
His inkling turned out to be right. EchoStar made the decision to transfer the flailing Dish portion of its business back to Dish - and the stock popped. It's now up 33% since hitting its year-to-date low in March, and currently sports three "buy" ratings and one "neutral," to go along with no "sells."
All it took was a little digging to reap the rewards.