The 100X Secret: Why Most Investors Will Never Find Their Best Investment
The investment strategy that turned £10,000 into £1,000,000 - and why most investors will never use it
Free 100-Bagger Screening Checklist at the end of this post!
The investment world is filled with stories of stocks that turned £1 into £100 over time.
These "100-baggers" aren't myths.
They exist in every market cycle, across various industries, hiding in plain sight.
I've been studying Chris Mayer's work on these exceptional investments.
His findings challenge conventional wisdom about how wealth is created in the markets.
What strikes me most isn't that these opportunities exist, it's that most investors are structurally unable to capture them.
Time Is the Hidden Variable
Mayer documented that the average 100-bagger takes about 20 years to fully materialize.
Twenty years.
This timeframe alone eliminates most market participants.
In a world obsessed with quarterly performance, who has the patience to hold through multiple market cycles?
As Charlie Munger observed,
"The big money is not in the buying and selling, but in the waiting."
The maths of compounding demands this patience.
A business growing at 20% annually becomes a 100-bagger in about 25 years. At 25% growth, it takes roughly 20 years.
Nothing can accelerate this process except higher growth rates—which are themselves incredibly rare over extended periods.
The Pattern Is Clear
After studying hundreds of these exceptional performers, Mayer identified consistent patterns:
High returns on capital: The business must generate substantial returns on invested capital—typically 20% or higher. This creates the foundation for sustained compounding.
Owner-operators at the helm: Companies where management has significant ownership tend to make better long-term decisions. They think in decades, not quarters.
Substantial reinvestment runway: The business needs the capacity to deploy capital at high rates of return for decades.
Each factor is necessary but not sufficient. The combination is what creates the magic.
Focus on What Doesn't Change
What makes Mayer's work particularly valuable is his focus on timeless principles rather than current trends.
Markets evolve. Technologies change. Industries transform.
But the fundamental characteristics that allow a business to compound capital at exceptional rates remain remarkably consistent across generations.
Howard Marks has emphasized this point repeatedly: successful investing requires identifying what will remain constant while others chase what is temporary.
The Coffee Can Approach
Perhaps Mayer's most valuable insight comes from an old investment concept: the "Coffee Can Portfolio."
The idea is simple.
Select investments with the potential for extraordinary long-term returns, place them in a metaphorical coffee can, and then do something remarkably difficult:
Nothing.
No frequent checking of prices. No overreacting to negative headlines. No second-guessing your thesis after every quarterly report.
Just deliberate, disciplined inaction.
As Mayer notes:
"The biggest impediment to making 100 times your money is not the quality of your ideas... it's the ability to sit with those ideas for a long time."
The Qualities Worth Seeking
When evaluating potential 100-baggers, four qualities stand out:
Capital-light business models: Businesses that can grow without proportional capital investments allow profits to compound more efficiently. Software companies and asset-light service businesses often fit this profile.
Pricing power: The ability to raise prices without losing customers provides a critical buffer against inflation and competition over decades.
Durable competitive advantages: The business must possess mechanisms that protect its economics from competitors. These advantages should strengthen, not weaken, over time.
Optionality: Many 100-baggers evolve beyond their original business. Amazon began with books. Microsoft started with programming languages. The capacity for evolution is invaluable over decades.
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The Volatility Reality
Nearly every 100-bagger Mayer studied experienced multiple 50%+ drawdowns during its journey.
This uncomfortable truth explains why these opportunities persist.
Most investors simply cannot withstand the psychological pressure of holding through such declines.
When markets fall broadly or when company-specific issues arise, the natural instinct is to protect capital.
Selling feels prudent precisely when holding is most valuable.
As Seth Klarman observed,
"The stock market is the story of cycles and of the human behaviour that is responsible for overreactions in both directions."
The 100-Bagger Screening Checklist
Before wrapping up, I want to share a practical tool.
Below is the screening checklist I use when hunting for potential 100-baggers, adapted from Mayer's research.
I've found it invaluable for focusing my analysis on what truly matters:
Criteria - What to Look For
1. Return on Capital: Consistent ROIC/ROE > 20% over 5+ years
2. Revenue Growth: Sustainable 15%+ annual growth with runway
3. Ownership Structure: Founders/management own 10%+ of shares
4. Market Size: Addressable market at least 10x current revenue
5. Capital Allocation: Proven history of intelligent reinvestment
6. Operating Margins: Expanding margins or path to significant profitability
7. Business Complexity: Simple business model with understandable economics
8. Balance Sheet: Low/manageable debt with financial flexibility
9. Customer Concentration: No single customer represents >10% of revenue
10. Competitive Position: Identifiable and strengthening competitive advantages
11. Pricing Power: Ability to raise prices without losing customers
12. Optionality: Multiple paths for future growth beyond core businessA business doesn't need to score perfectly on all criteria—few companies do.
But the more boxes it ticks, the greater the potential for extraordinary long-term returns.
I recommend revisiting this checklist annually for each holding. It serves as a valuable reality check against market noise and short-term volatility.
The Bottom Line
The pursuit of 100-baggers isn't about finding obscure stocks or making speculative bets.
It's about identifying superior businesses with long runways for high-return growth, and then allowing the power of compounding to work without interruption.
Most importantly, it's about having the discipline to hold positions through inevitable periods of doubt, volatility, and market pessimism.
Your greatest investment challenge isn't finding these opportunities.
It's becoming the type of investor who can capture them.
We hope you liked this post and have a great week ahead,
Dom
Founder & Chief Investment Officer
Schwar Capital
Question: What's the longest you've ever held a single investment? Did patience reward you, or do you wish you'd sold sooner? Share your experience below - I read + respond to every comment! 💡
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Disclaimer: The content provided in this newsletter is for informational purposes only and does not constitute financial, investment, or other professional advice. The opinions expressed here are those of the author and do not necessarily reflect the views of Schwar Capital. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The author may or may not hold positions in the stocks or other financial instruments mentioned. Always do your own research or consult with a qualified financial advisor before making any investment decisions.
$SBUX and $AMZN since 1998. I had not much money at that time and invested 3000 DM (ca $1500) in each. For AMZN I sold some in 2000 ($3000) and some along the way, it's my second largest position today (>$300k), for SBUX I sold some along the way and added some in 2008, it's my fourth largest position today ($100k). So you have to hold your winners, to get a 100 bagger. If you add to your winners, it's even better. This lesson I still have to learn.
My longest held investment is also my most profitable - namely Mastercard; held since 2012 and which is up 9x the initial investment.
Mike