Why You Should Own Fewer Stocks

Why You Should Own Fewer Stocks by Bill Bonner

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Editor’s Note: Chris Mayer is one of the best stock pickers in the game. He’s the only analyst Bill has committed to follow with $5 million of his own family money.


This week in the Diary, we talked about three special “100 baggers” (Southwest Airlines, L Brands, and H&R Block). These companies returned more than 100x to investors during a period when the broader market went absolutely nowhere.

And there is something these three companies had in common.

Southwest recorded $6 million in sales in 1972. By 1975, it did $23 million in sales. And by the end of the decade it hit $200 million in sales.

L Brands had sales of $210 million in 1978. It hit $1 billion in sales in 1980. By the end of the 1980s, it hit $5 billion in sales.

H&R Block did just $14 million in sales in 1967. In 1975, it passed the $100 million mark in sales.

See a pattern here?

All three were small companies with lots of room to grow.

For larger companies, the condition of the economy can be a constraint. They depend on broad-based economic growth. It is hard for Coca-Cola or McDonald’s to grow faster than the overall economy. They’re just so big already.

It’s really just a matter of scale.

McDonald’s did about $25 billion in sales last year. So if it wants to double that number, it would need to sell an extra 5 billion Big Macs next year. Granted, this is an oversimplified example, but you get the idea.

But it’s not as hard for a small company to increase its sales by double, triple, or more.

Not all small companies become big companies, of course. But after studying over 360 100 baggers, I have a few basic clues to look for.

The ability to expand into national and/or international markets – Think about the three big winners above. You had a small tax preparer, an airline, and a retailer. All three started as local, or regional, businesses. And all three grew into national brands. To get those big returns, even in lousy economic environments, you need to have room to grow.

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Bonner and Partners

Bill Bonner founded Agora Inc. in 1978. Since then, it has grown into one of the largest independent newsletter publishing companies in the world. Bill also co-wrote two New York Times bestselling books, Financial Reckoning Day and Empire of Debt, In his latest book, Hormegeddon, Bill describes what happens when you get too much of a good thing in the sphere of public policy, economics and business. This new newsletter is unlike anything else published in America today. Now in this industry, Bill Bonner has agreed to share his secrets and insights every month. It’s like having a super-wealthy uncle share his best ideas, insights and wisdom about business, relationships, investments, trends, developments, ideas and more.