#316: How to Find 100-Bagger Stocks (w/ Neeraj Khemlani and Matthew Ankrom)

0:02The 2026 Chevy Equinox is more than an SUV. It's your Sunday tailgate and your parking lot snack bar. Your lucky jersey, your chairs, and your big cooler fit perfectly in your even bigger cargo space. And when it's go time, your 11.3-inch diagonal touchscreen's got the playbook, the playlist, and the tech to stay a step ahead. It's more than an SUV. It's your Equinox. Chevrolet. Together, let's drive. One of the big surprises that came out of both Phelps and my own study and the like was that every year there was a new 100-bagger that actually came out. So it was kind of surprising when I was looking at this over that 20-year period, there were 50 companies that were 100-bggers that were still outstanding.

0:48There's always new ones. So that's the first thing to kind of keep in mind. Second thing is that we, a lot of times, become very U.S.-centric. We look at a lot of the things and think about it's all technology, it's all that. To your point, a lot of these boring, what I call non-sexy businesses, you know, around the world are emerging as well.

1:16Hi folks, welcome to another episode of Stock Club. I'm joined today by two very special guests. Neeraj Kimlani, the author of The Coffee Can Investor, A Stock Picker's Journey to Build Generational Wealth. With him is Matthew Ankrum. Matt, a portfolio manager from Kansas City. He's the inspiration for the book, who has dedicated his life to finding 100 baggers, aka stocks that return 100 fold, which our listeners will know all about. Lads, welcome to the show. Thank you for coming on today. Thank you for having us. Thanks, Michael. All right, Neeraj, I'm going to start with you now. You're the author of the book.

1:50and I'd love an explainer, or in your view, an explainer of what the coffee can portfolio is and what's the motivation behind it and the thinking. Yeah, sure. I mean, you know, to sum up the book, you know, it's about a father who is trying to build the ultimate lottery ticket for his three daughters. And that's a coffee can full of stocks that he hopes will someday be worth half a billion dollars. And when you hear a story like that, it just grabs a hold of you. And I've known Matt for a very long time. And, you know, we've been talking for probably, Matt, over a quarter century at this point.

2:32And Matt's been a deep background source of mine just to answer the basic questions about corporate America and Wall Street. And a couple of years ago, In one of our catch-up calls, Matt told me the goddamn story about coffee can investing. And he was inspired by an article that he had read by a guy named Robert Kirby, who used to work for capital research in Los Angeles, was part of the Brady Commission for Ronald Reagan after the mid-1980s stock market crash. and Kirby was an interesting guy who was managing money for a lot of people, particularly in California. And he approached a Los Angeles heiress and said, can I manage your money for you?

3:27And she liked him and said, yes, you know, you can. I don't know too much about, you know, managing money. So why don't you deal with my husband on day to day matters? He's a lawyer. And so Kirby said okay and over the years he would call up the husband and say buy this stock for your wife and the husband would dutifully buy the stock you know for his wife but without telling anybody would buy the same stock for himself with his own money um and move on and then over the years kirby would call the husband and say you know sell this stock for your wife and he would dutifully sell it in his wife's account, but he refused to sell anything in his own holdings.

4:14In fact, he took the stock certificates and put them into a coffee can for safekeeping. This goes on for a long time, and the husband passes. The wife discovers the coffee can, has no idea what this is, gives it to Kirby, and in a hot minute, Kirby realizes what's been going on, that the husband has been piggybacking off of all the buy recommendations, but never selling. And guess what? His portfolio far outperformed his wife's. You know, he had been buying$5 ,000 of each stock pick. Some of them trended down to$3 ,000. A whole bunch went to$100 ,000. And one went to$800 ,000, you know, for a greater than 100x return.

5:01And so when Matt told me this story, I was just absolutely fascinated. And at the end of the article, Kirby says, I hope that someday someone somewhere will repeat this experiment. Well, that person turned out to be my good friend, Matt Ancrom. And he was particularly interested in sort of playing this out for his daughters, but seeing if he could fill the can not with short and midterm stock picks, but with the ones that could multiply a hundred times. And he began to study what hundred baggers have in common so that he could find stocks like that to put into his coffee can for his daughters.

5:47That's brilliant. Yeah. And this is what we're all trying to do as stock pickers. But I think particularly on this podcast, we've been almost obsession with 100 baggers. Matt, you've studied them for years. What are the commonalities you found in these mythical businesses everyone's looking for? Yeah, and kind of piggybacking on what Neeraj was talking about. So after reading that article, that was kind of the inspiration. So what do you put in that coffee can? And so that's when we started talking about the 100 baggers. And as you know, one of them, Thomas Feltz, who wrote the book, 100 to 1, back in 1972.

6:22Then, as you mentioned earlier, you had Christopher Mayer, who had actually written The 100 Beggars. And so I had the opportunity to read both of those books. And think about then the next step on what I was then trying to say is building on the foundation that they had was what I'm after reading those books. I looked at it and said, well, is there an opportunity that if I put myself at the point in time that the companies went public, could I actually discover what were some of the real commonalities that would be predictive of the next Hunter Beger? So is, you know, Christopher Mayer had actually talked a lot about his, you know, he identified some things that they went there.

7:04I wanted to go back and look at it and see quantitatively and qualitatively were the things that came out of it. And so to your question, what I went back and did was I put myself in that spot. So I went back and pulled all of the data that we needed. And so to do that, I had to actually define the parameters on what I was looking for. So the first thing that I did was said I wanted to find all companies that increased in value by 100 fold over 30 year time frame. And the reason why I limited it to 30 years is because if you look at that, that would actually be two times what the price improvement over the market would have been over that time frame.

7:44And so I wanted to limit it to that because these are the great companies. These are the ones that are exceptional and getting it done within that 30 years. So that was the first thing I did. The second thing is I went back and I said, well, I want to actually find ones that truly are, you know, businesses, not pure speculation. So I eliminated all of the penny stocks and a number of companies like that. So once I had narrowed that, then I said, all right, of these companies that are now left, I needed to then find the ones that actually had, that were still outstanding. And the reason why I was looking for that is because I wanted to make sure I had all the financial data.

8:21So that was why I eliminated from 1980 to 2000 and looked at all companies that increased in value by 100 fold. Once I had that, then I went back in and said, at that point in time, look at their financials all the way through. And then putting in, going in at that time also and saying, if I was at that time frame of their IPO, looking at all articles written in, you know, in the press and what you might have for two years before and then one year post that time. So once we were able to do that, then I could actually construct all of the qualitative and quantitative factors that kind of played into it.

9:00And so the first one was, you know, not surprisingly, and Christopher and Thomas Fels actually talked about this, is that quality mattered. Said differently, there was no bad company that was able to increase in value by a hundredfold. And this makes sense. And so, but what happened too is that the companies at the time of the IPO were great companies and they only got better with time. The second one from a quantitative standpoint was that growth mattered. So as you guys have talked about a lot on this podcast, it's great to have a great business, but if they're not growing, you can't compound.

9:34And so these companies, 20 years after their IPO, the average growth rate was 20 % compounded over that timeframe. frame. So these were high growth companies and, you know, and doing that for a very long time frame. And what was really evident here was it wasn't just the velocity of the growth, but it was the duration of that growth over time. And then the third was that all of these companies continuously improved. So they weren't, management teams weren't just happy, you know, kind of what the business was. They kept getting better and better with time. And that actually showed up by the median improvement in their operating margin actually increased by 25 basis points over that 20-year period.

10:20So there's 25 basis points per year for 20 years on that. So those were the quantitative ones. On the qualitative ones, it was actually, these were probably by far the most interesting aspects of it. The first one was, and I'll let Neera speak to the really big one that we had on here, but the first one was that, and it was a bit surprising to me as a young analyst is that 82 of the companies in the study actually were very active acquirers. And, you know, before a long time, people think organic growth is the only thing that matters. But the reality is these were companies that were high quality and generated high returns.

11:01So they were throwing off a lot of cash. And by throwing off that cash, they needed to reinvest that back into both their business, but also growing their business. And so these were not the businesses going out like a AOL Time Warner kind of empire building. These are oftentimes going in and making small bolt-on acquisitions to extend their capability, accelerate their roadmap, both their strategic and their R &D roadmap. And so that was the first kind of qualitative one that came up. The second one was 58 % of the companies were owner or company-run operations. And these were long tenured. So it wasn't as if, you know, the average tenure right now for a CEO on the S &P is about five years.

11:50Well, for a lot of companies, that's really hard to kind of not only build the right strategy, but then to execute against it. These are companies that were founder run or family run that actually would do this over decades. And then the third was that 76 % of their revenue was either repeatable or recurring. And why this is so important is that if you have a company that you're running and their customers are committing to you for a long period of time, you then have the ability to actually reinvest in the business and to run that business and make these strategic decisions, not only that are important today for your customers and the company, but also important over the next 5, 10, 20 years.

12:32And so those are the really big qualitative factors we had. And then the last one was actually another big surprise was that every one of these companies were in GDP plus type industries. And why this is important is that most people look at and say, these 100 beggars must all be in these really fast growing businesses. The industries are exploding. And so they're just benefiting from that growth. And what we found with these companies, it just wasn't true. These were businesses that, you know, were in construction. They were in retail. They were in business services like uniform rentals. And so what happened was that they just had a massive total addressable market and they were bringing in innovative new product and they were able to take share and grow that not just, you know, for a short period of time, but for an extended period time and kind of build and create value that way yeah and look it's funny that the same the same metrics come up every time we talk about these enduring business models is skin in the game revenue growth returns on capital if you have any combination of those three you're going to do really well and it's not surprising to hear that they're not in sexy industries either because you're talking about a time frame of over 30 years you know not three years not we're looking at the current market, you know, not one year and we see, you know, a 40-bagger and Sandisk in the space of less than a year after its spinoff.

14:01It's really the businesses that can endure because of the timeframe you give it. And the concept of the timeframe, I think, is really important here, because even if you've done all that research, which you have, Matt, it's still, it might be simple, but it's not easy to go and hold that business for 30 years. And that's, I think, where the real struggle for the average retail investor comes in is the mentality and the effort and the temperament to hold through periods of periods of nothingness, periods of down, like as in red days. Through 30 years, you're going to see a lot of different economic cycles.

14:35There's going to be a lot of people on the TV telling you to sell, sell, sell or whatever else. And just that fortitude to hold through that entire period is probably the most important thing to eventually owning a hundred baggers. So how have you dealt with that? Do you, do you address that in the book, Neeraj? And, um, and yeah, what, what's the advice really for someone who is trying to go out and find their own hundred baggers? Because it's tough to be reminded, you know, once, don't mind 30 years in advance of, of how to develop this kind of mentality. Yeah. You, you have hit on the most important point, um, when investing for the longterm, It is that having that intestinal fortitude to withstand the drawdowns that you have, withstanding all the pundits and all the other things.

15:22I think the most important part is you are owning a business. And we talk about that a lot in the business. And I think Neeraj did an exceptionally great job trying to really highlight this. when you are looking for a hundred beggar, you really have to be a kind of, um, uh, writing, uh, shotgun with the management team for this business. These are these, you're owning actually a piece of the business. You're not renting a piece of paper. So you guys have probably heard, you know, back in the 1950s and 1960s, the average holding period was eight years. Today it's about five and a half months. And the challenge with that is that if you're only holding things for five and a half months, you're not really even thinking about what the business is or how to do that.

16:07And so you have to, you know, kind of change that mentality and to move beyond that and look towards the things that really matter, which is building that value from that the company can do. So you would ask, what are some of the things that you do? So what I try to do is set up that the barriers to entry for any company to get into the coffee can are very high. But I also then turn around and say, but the barriers to exit are even higher. So one of the examples that we use in the book is Fastenal. And that was as a young analyst for the fund that I was working on, we actually own that as an 8 % position in the fund.

16:47We had done all of the work. It was an exceptionally great management team. We knew what their competitive advantage was. We knew that this was sustainable, that they had a high growth opportunity in front of them. and yet when I had gone out I had learned as the analyst said I that they weren't going to make their numbers and so I'd gone to the portfolio manager and said we're not going to make the numbers I think we have to sell the stock and we did and it turned out in the short term to be a you know a very pressing call the stock went down 55 percent um now the during that time the market also went down 15 but it was you know a terrific decision at that point but here's where is the a really bad decision, is that if we had actually just held that stock and gone through that 55 % drawdown, we would have, the value of this stock actually increased 19-fold from there.

17:40And now that was compared to a four-fold increase in the market. So we would, with that one stock, we would have, you know, dramatically outperformed and created, you know, put us in the top quartile, easily the top quartile for that fund. So how do you go about as an investor trying to, you know, work through and get through those challenges and those drawdowns? Well, the first thing you have to recognize is these drawdowns, it's not a bug. It's actually a feature of the process. I went back and looked in this study and said, you know, what was the maximum drawdown from peak to trough? It was about 70 % average for the companies in the study.

18:19Now, remember, these are some of the best performing companies in the market over that time for a minute yet they average was a 70 drawdown and they had at least eight on average eight 20 to 25 drawdowns over that 30-year period as well so it is just part of that so you have to recognize that second is that you as you go through it focus on the fundamentals focus on the things that the company can control and kind of where the business is growing. So if they continue to sustain their competitive advantage, then that's kind of my key to continue to own the stock. Don't try to get, you know, stock has had a nice run.

19:00It looks a little bit expensive. You know, great companies can stay expensive for a very long time. You just want to, you know, kind of ride those out. The key is if they lose that advantage, that competitive advantage, that's my trigger for re-evaluating the companies and potentially exiting them. You know, the competitive advantage piece from someone who was chronicling Matt's story really hit home with me. And particularly when Matt would talk about, are these companies creating things that are essential? Just absolutely essential. And I think that goes to, Michael, your question on whether or not you want to stay with a company for a long time.

19:47Because essentiality grows and compounds over time. And if you can understand that, then you can break through the wall of temptation to sell. Obviously, when facts change, you know, you have to draw down stocks or make some moves. But being invested in it as a company was critical. And it was a very big connection Matt and I made in the course of discovery here, which was one of the findings that Matt had in his study was 68 % of the previous 100 baggers were B2B companies, business-to-business companies, not B2C or business-to-consumer companies, right? So we all know the Nikes and, you know, the Apples, but Fastenal, which Matt brought up, they make fasteners, nuts and bolts, right?

20:47You know, and sell to construction companies and put vending machines on their sites so they don't have to go far to get these pieces of equipment. And that really hit with me because I was at Hearst for 12 years, which started as a newspaper company and then a magazine company and then a television company. You know, in my tenure there, I watched the CEO make more and more investments in business to business media companies in addition to the B2C companies. And I was overseeing the cable networks, you know, the partnership with Disney on ESPN and A &E networks, and they were the biggest contributors or profits to Hearst, a private company.

21:35But two years ago, the largest contributor, or more and more profits come from the B2B investments than the B2C investments. And the single largest contributor to Hearst profits is a company called Fitch, which you're familiar with, you know, the bond rating agency. And so the B2B component is really a ballast to hold on to psychologically. Now, all kinds of things are happening right now, you know, in that space. And there's technology changes and all the rest. but I think being a part of those business understanding the essentiality of what they do and for their customers is is really a strong finding from app study very much so and it's funny you're talking about businesses that I love because one of the the elements of a stock I really search for is kind of being a small but very valuable cog in a very big machine because Because I feel there's such an enduring ability to keep customers in that sense.

22:41Because who's going to risk the cost of an entire project because you found cheaper fasteners over here? But I know fastener works for the last 10 years. Why would we ever change that? And that goes across any amount of industries, but especially in this B2B space, especially in finding these little niches. And it's not surprising that it's such a core component of this 100-bagger study. You know, I would just add, Michael, you're probably too young to remember this. And I hate when people say that to me. But there was a movie, a Tom Cruise movie called Cocktail. Yes. This is where I was going.

23:15Oh, OK, perfect. Go, go. The Flugelbinders. Yeah. Yeah. So young Tom Cruise, desperate to become an entrepreneur and a businessman and to, you know, no longer have to be a bartender, is sitting there sharing his inner thoughts with the girl, his true love, and, you know, comments on the little plastic tip of his shoelaces and calls them flugel binders and says, somebody invented this. They're completely essential to, you know, everyone who makes sneakers. Like, I want to invent something like that. And so one of the companies that Matt identifies for the coffee can for his three daughters, who, by the way, are all named after Irish castles, okay, you know, is a company called Diploma.

24:13And they make seals and gaskets and wires. Nobody is talking about this at cocktail parties, okay, literally. It's like the non-sexy of non-sexy. But take a look at their stock chart. So it's really amazing to watch Matt at work discovering these types of companies. And I'm sure he'll tell you more about Diploma and what makes them tick. But that's not what most people wake up in the morning saying they need to find to put into their basket. And yet it's there growing, you know, quietly in the background with seals and gaskets. 100 it's it's the rooters and gooders it really is and and you look at across these all these industries where it'd be like aerospace construction engineering industrials it's crazy the amount of value there these multi multi-billion dollar companies that you've never heard of they're not really going to be on the tv they're not mentioned but they're there creating value and i think it is that element of just being this mission critical part of a much wider project or a much wider machine.

25:19But I want to touch on the element of this book and this message, I suppose, that I really love is it kind of comes down to the retail investor's advantage over institutional investors. And that what it really boils down to is not interrupting compounding. And we've already touched on it on the fact that, you know, Matt, you gave the example of the fastener there and you told to sell and you were allotted or whatever. If you put your foot down and you're like we're going to hold fast enough, you would have taken a lot, a lot of flack over that 55 % downturn. You could have lost your job. You know what I mean?

25:52But if you're a retail investor, you're not answering to your investing team or your management team or whoever else. It's just you. And if you are sure of yourself, you're able to fully appreciate the art of compounding. So Nir, what have you taken from writing this book about the magic of compounding, like the eighth wonder of the world as Einstein calls it. Yeah, I think one of the things that Matt and I talked a lot about was the difficulty in understanding and seeing exponential behaviors. It's really easy to see linear growth, but exponential growth is actually hard to see. And one of the examples we use is there's the old Indian king playing chess with the inventor of the game.

26:47And the king asks the inventor, what can I give you for creating the most spectacular game I've ever played? And the inventor says, well, I would like a grain of rice and I would like you to double it for every square on the chess board for 64 squares on the board. And the king thinks about it very quickly and says, sure. Well, one of the things I did was to equate the value of a grain of rice to the cost of the grain of the rice, okay? And it takes like a whole bunch of squares for it to even be worth a penny but as it keeps doubling over time you know you get to a place where suddenly the amount of rice is now worth more than the net worth of elon musk and warren buffett combined and by the end of the 64 squares is worth more than the value of the entire US GDP.

27:51You would never expect that. You cannot see that type of exponential growth. And, you know, when Matt talks about a stock multiplying 100 times over 30 years, compounding at 16.5 % every year, year over year, most of that growth happens at the end of the curve, right? It bumps along for a long time and then the slope rapidly grows. And so, Matt, do you remember for Warren Buffett, most of his net worth came when? Yeah. So for Warren Buffett, I think a lot of people look at it, but 98 % of his net worth actually came after the age of 65. So that's the power of compounding. Right. And so what Neeraj is really getting at is if you think about, even if you're growing at the you know 16.5 every year you know when you start out say at a hundred thousand you know you have that but in you know in 15 years you're up tenfold and so that 16.6 on a much much larger base and so as you kind of work it through it's a doubling about every five years so you know if you think about it when you're 25 years into it you're only halfway to the total value creation in that in that opportunity and that's that's the hardest part for i think us as humans just to think about that power of that compounding that um can can happen with a stock like um you know some of these and so you just and i know you guys have professed this for a long time is that the the value is in the waiting the value is in just the holding it's not the you know, activity of the buying and the selling.

29:34And it's really finding a high quality, essential, you know, company that has that enduring competitive advantage that you can hold for a long, long time. And Michael, you were bringing this up in 100 % agree that the greatest opportunity retail investors have is that we don't have the institutional mandate to win, not only every year or every quarter, but some of these feel like they have to win every week, or every even every day. And the problem that you have with that is if you're trying to do that, you will always be chasing the next hot thing. So I like to use the example of if you were trying to run a marathon and your whole goal is to win that marathon.

30:18But somebody came to you and said, but what I want you to do is I want you to win the time split every single mile. Because if you do that, you're going to win the marathon. But the problem that you have is if you go out there and try to win, you know, be the fastest person at every single mile marker, you're going to burn out. And that's what happens in the institutional space is that given the mandate that they have to win all the time and, you know, every day, they just can't own a lot of these great companies and allow the compounding to happen. Yeah, well, it's a great segue to talking about the current market we're in now, because there's probably a lot of obstacles to finding hundred baggers these days, not least of which is that so many stocks do all their growing in private markets and not public markets anymore.

31:07But with that being said, there might be these kind of unsexy rooters and gooders, you know, they mightn't be as attractive to these venture capitalists. So maybe I'm talking against myself, but what are your thoughts on the current market as it is now? And do you feel like it would be more difficult for someone starting out to say, I want to find 100 beggars? Hey, it's Emmett. You know me from this podcast. Today, I want to tell you about something I'm genuinely very excited about, which is Investicon. And it's coming to Dublin on the 27th of August this year. It's a very exclusive one day live event.