100 Baggers: Stocks That Return 100-To-1 and How to Find Them

by Christopher W. Mayer

“If a company has a high ROE for four or five years in a row—and earned it not with leverage but from high profit margins—that’s a great place to start,” he said.

“If you have a company with tons of cash flow but top-line [sales] growth is 5% or less, the stock doesn’t go anywhere,”

It’s important to have a company that can reinvest its profits at a high rate (20 percent or better). ROE is a good starting point and decent proxy. I wouldn’t be a slave to it or any number, but the concept is important.

Use leverage to acquire more properties. Improve operations. Pay down debt. And repeat.

AutoZone’s share count has declined 75 percent over the past 13 years or so.