Early in the 1970s, I came across a book written by a Boston investment counselor, whose name was Thomas Phelps. And the book he wrote was called 100 to 1 in the Market. You probably know from the history books that Peter Lynch was around Boston in those days, and he was talking about things like "10-Baggers." But here was Thomas Phelps, who was talking about "100 to 1." He documented characteristics of these businesses that caused one to have an experience, where they could make 100 times their investment. The answer is, of course, it's an issue at the rate at which they compounded the shareholders' capital on a per unit of ownership basis and those that compounded the shareholders' equity at a higher rate had higher returns over long period of years. And so that's what comes into play is this issue of compounding compound machines, and we're often identified with this thing in our process that we call the three-legged stool. The legs of the stool have to do with the business models that are likely to compound the shareholders' capital at above-average rates, combined with leg two, people who run the business who are not only killers at running the business but also see to it that what happens at the company level also happens at the per share level--and then number three, where because of the nature of the business and the skill of the manager there is both history as well as an opportunity to reinvest all the excess capital they generate to reinvest that in places where they earn these above-average rates of return.
Of all the books on investing that I've read over the years, this one was at once, the most pleasurable and most challanging to my own beliefs. Mr. Phelps spent over 40 years in and around Wall Street and the world of investing. His activities included being a private investor, columnist, analyst, author and financial advisor. His career spanned from just before the Crash of 1929 to the 70's.In spite of the the rather glamorous title, the book is actually about Buy and Hold investing. Yes, it is true that you could have made a million dollars by buying any of about 350 stocks he mentions if you had invested $10,000 and just sat back and watched it grow over time! Doesn't sound that exciting, does it? However, I hope you didn't miss the point that he mentions AT LEAST 350 opportunities to have done this! Most of the companies' names will be quite familiar to most readers.
I just met this remarkable fellow, full of wisdom on investing, yet hardly known beyond a small group of fans. His name is Thomas Phelps, and he’s had quite a career. He was The Wall Street Journal’s Washington bureau chief, a former editor of Barron’s, a partner at a brokerage firm, the head of the research department at a Fortune 500 company and, finally, a partner at Scudder, Stevens & Clark (since bought out by Deutsche Bank). Phelps retired in Nantucket after a varied 42-year career in markets.Along the way, Phelps figured out a few things about investing. He conducted a fascinating study on stocks that had returned $100 for every $1 invested. Yes, 100-to-1. Phelps found hundreds of such stocks, bunches available in any single year, that you could have bought and enjoyed a 100-to-1 return on — if you had just held on.
According to Mr. Phelps, you look for companies that provide: 1. Inventions that enable us to do things we have always wanted to do but could never do before.2. New methods or new equipment that helps people do commonplace things easier, faster or at less cost than ever before.3. Processes or equipment to improve or maintain the quality of a service while reducing or eliminating the labor required.4. New and cheaper sources of energy.5. New methods of doing essential jobs with less or no ecological damage.6. Improved methods or equipment for recycling the materials used by civilized man instead of making mountains of waste and oceans of sewage.7. New methods for delivering the morning newspaper without carriers or waste.8. New methods or equipment for transporting people and goods on land without wheels.
Its funny you started this thread. I am currently reading the book right now. Its AMAZING!!! Although it repeats itself many times.
I'm curious to know where you found it..?
It's available at 161 US libraries that participate in the interlibrary loan system. Most public libraries give you access to this system for free.
