- Chris Mayer, the portfolio manager and cofounder of Woodlock House Family Capital, analyzed decades of financial history in order to uncover the common threads that lived within stocks that had returned over 100-times.
- Today, Mayer has his sights set on an under-the-radar issue: Heico.
- He breaks down the company's sales, free cash flow, and return on equity over the past ten years to demonstrate the stock's attractiveness.
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Chris Mayer, the portfolio manager and cofounder of Woodlock House Family Capital, has been teaching investors how to make 100 times their money for years.
In what may seems like an improbable feat — having a stock return 100 times your money (not to be confused with returning 100%) — Mayer removes the ambiguity, finds, and breaks down a few key concepts that have led to ridiculous stock returns. His book "100 Baggers: Stocks That Return 100-to-1 and How To Find Them," details the exact rates of return, capital investment rates, multiples, size, and leadership to look for. The text also puts an emphasis on discipline and a long-term time horizon.
Today, Mayer has his sights set on a company that he says "checks all my boxes."
That stock is Heico (HEI), a Hollywood, Florida-based company whose products include aircraft replacement parts.
Mayer provides a brief description of the "boxes" he alludes to above. Here's how he describes them.
1. "Strong balance sheet — to survive and be opportunistic during 'bad' times.
2. Good business — one that generates healthy free cash flow, good returns on the capital invested and has reinvestment opportunities. These are the basic building blocks of value creation.
3. Alignment — I like management with skin in the game and proper incentives, ideally a great corporate culture of invested employees, etc.
4. Reasonable starting valuation — no hard and fast rules here, sorry to say"
Mayer provided the following chart to demonstrate the company's growth in sales, free cash flow, and return on equity since 2010. He says "it's not hard to see why" the stock is trading about 10-times higher than it was where it started the decade.