What is a 100x return stock? It means a stock that allows investors to grow to $100 for every $1 invested.

How can we find such stocks? Christopher W. Mayer, author of the book "How to Find Stocks That Give 100x Returns Based on the Results of 365 Stocks" guides the way.

The author studied 365 100x stocks from 1962-2014, found some distinctive characteristics of such stocks, and summarized some principles to help people find them in the market.

I. 10 Essential Principles for Finding 100x Stocks

The most important principle is that you need to find a business with a high return on investment that can be reinvested to earn high returns year after year.

1. You must look for 100 times stocks

The first rule is that you have to be proactive in finding them, which means you can't be attracted to eighth-sized or quarter-sized hunks.

People often have limited time and limited resources to devote to stock research, so do your best to focus your efforts on the biggest prey.

2. Growth, and higher growth

You need growth, lots of growth, but note that not all growth is helpful for 100x stocks. What you need is growth that makes value increase. You need "good growth".

For example, if a company doubles its sales and doubles the number of shares outstanding, that's not good. In any case, you need to focus on sales and earnings per share growth.

3. Preferring low valuation multiples

The reason why stocks with low valuation multiples are "preferred" is that no strict criteria can be set for this indicator. Sometimes even a P/E multiple of 50x can be relatively cheap.

Time is the friend of great companies. Paying a higher price for a good company is worth doing.

4. A moat is a necessity

A 100x stock requires a high return on capital over time. The "moat" is the barrier that allows the company to earn these high returns. It is beneficial to take the time to think about whether a company has some sort of moat.

5. Preference for smaller companies

The authors recommend focusing on stocks with a market cap of less than $1 billion. This is not necessary (remember just "preferring" small companies), but searching for 100x return stocks in small companies is more rewarding than searching in large companies.

6. Preference for owner-operators

Many of the most successful companies of the last 50 years have had visionary, resilient, and capable owners behind them, such as Sam Walton of Walmart, Steve Jobs of Apple, Jeff Bezos of Amazon, and Warren Buffett of Berkshire Hathaway.

Having an outstanding owner-operator helps investors to be firm in their beliefs. The authors found that knowing that a talented owner-operator holds a significant amount of equity and also runs the company makes us more likely to hold that stock firmly when the company is in trouble.

7. It takes time

Once you've found a stock that can become 100x stock, the next step is to give it plenty of time. In the authors' research, even the fastest 100x stocks take 5 years to achieve, while the more common scenario is 20-25 years.

8. You need a really good filter

The authors advise people not to waste too much energy guessing the future direction of the stock market. All you need to do is keep looking for good ideas. If history can teach us anything, it's that good stocks are always out there.

9. The help of good luck

According to the author, and we have to face this squarely, all investments need a little bit of luck in them.

10. You should be a reluctant seller

The last point is that if you are looking for 100 times stocks, then you must learn to sit tight, buy correctly and hold on to them.

II. Some other selected points

1. Our research proves that there are five factors hidden behind the 100-fold return, which together are SQGLP and the meaning of each letter is as follows:

S - small size;

Q - a company with a good business and high management level;

G - a high growth rate of earnings;

L - both Q and G are sustainable;

P - low price, with the possibility of obtaining high returns.

2. If you want to find evidence about moats in the company's financial statements, one thing is clear: the higher the gross margin relative to the competition, the better.

3. If a company has achieved a high NAV for 4-5 years in a row, and the gains are not from leverage but from high margins, then this is a good starting point.

4. To study the market in-depth, invest in companies or industries that can outperform other companies by a wide margin in the long run, and always hold firmly as long as the reasons for investing in that company have not changed.

5. Look for new methods, materials, and products - invest in products that can improve the quality of life, help solve problems, and provide better, faster, and cheaper services. This requires a long-term perspective.

6. Investors are like fish that cling to stocks that have an upside. They tend to lose patience with the normal fluctuations of the stock and trade frequently but never enjoy the huge returns.

7. The biggest obstacle to reaping a hundredfold gain in stocks, even if it is only a triple gain, lies in your ability to withstand stock price fluctuations and hold firmly.

8. Investors should focus on the company's business, rather than the market price.

9. You do not need to put all the money in the coffee pot portfolio, you only need to take out the part of the money you will not use in ten years.

10. Investors should bring as much patience and common sense as possible to face losses. Investors must accept the fact that stock prices will fluctuate significantly in the long run based on potential value.