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Outperformance

April 21, 2024
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In this post, I will summarise a recent study conducted by Dede Eyesan regarding global companies that have returned more than 1000% in 10 years. 

A detailed twitter thread can be found here:

https://twitter.com/dede_eyesan/status/1610274243551297540?t=rnBo0OoLRC324pP2OVez8w&s=19

The study looked at companies over the period 2012-2022. Roughly, 3% of all companies studied returned more than 1000% equating to 446 companies. 

1. Cheap

Most of the companies that outperformed were relatively cheap with about 50% having an EV/EBIT ratio below 10.

2. Profitable 

More than 80% of the companies were already profitable in 2012 which is quite surprising.

3. Size 

The vast majority of companies were small companies with only 3% having a market cap of > $2 Billion. Less than 1% of companies were large caps i.e., > $10 Billion.

4. Geography

India was the best performing country by quite a wide margin. The following countries, excluding the US, also did quite well: Sweden, Japan, China, Israel, Australia, South Korea and Greece.

5. Industries 

Unsurprisingly, the tech sector had the most outperformers while the boring utilities had the fewest outperformers. Industries that did quite well included: industrials and materials. 

6. Themes

Some thematic sectors did really indicating that identifying such trends might be a worthwhile endeavour. These industries include: solar, lithium and cell-based therapy. 

7. In with the new

Winners don't stay winners forerver. Only 23 out of the 300 outperformers from the previous decade i.e., 2002-2012 remained on the list.

My Takeaway:

Buying cheap profitable small companies are probably the best way to become an owner of a '10-Bagger' stock.


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