Picking a 10-bagger is what all investors dream of. How good would it be if you can turn $10 into $100?
It's like you won the lottery. And some people achieve this with ASX shares over many years of playing the long game.
But one punter managed to do even better, turning $156,000 into $12 million in just 3 years on the ASX. That's a 77-bagger!
Marcus Today director Marcus Padley told his podcast listeners that one of his subscribers wrote to him this month.
The investor recalled that he had met Padley at an investment seminar in 2018, where they talked about lithium stocks.
"You said there's a lot to be said for focusing on ONE company alone and know everything there is to know," the email to Padley said.
"I did that."
That strategy has worked out pretty well for the investor.
He initially bought $156,000 of Kidman Resources Limited. The mining company is no longer listed after it was acquired by Wesfarmers Ltd (ASX: WES) in late 2019.
The investor sold out for $800,000, which was a nice 413% return.
"I was supposed to pay off debt… but put into Liontown Resources Limited (ASX: LTR) instead," the investor wrote.
"That investment hit $12 million yesterday."
Indeed Liontown shares have gone from 4 cents in May 2019 to now 64 cents. That's a 1500% gain.
The 'one stock portfolio' method
Putting massive amounts of money into just one stock would frighten most investors. But Padley has long been an advocate of the "one stock portfolio".
He believes knowing nothing about 20 companies is much worse than getting to know one business intimately.
"If you were to buy one stock, you're going to watch every move. You'll go to every company presentation, get to know the CEO, get to know the other shareholders… You're going to watch the drivers and pick up on anything that's relevant to that stock."
Padley reckons with so much at stake, the investor will be more risk-averse, not less.
"You're going to be sensitive to bad news, you're going to be in touch with it everyday," he said.
"So with one stock it's not necessarily more risky at all, or more short-term. It's actually less risky because you've got your head in the game and you've only got one stock to focus on after all."
As for the punter, he sent Padley a photo of him posing with the chief executive of his money maker.
"I can tell you his licence plate number is 'LTR' — Liontown," said Padley.
"I don't think I'd ever get excited enough to have 'the NAB' on my licence plate, I have to say."
According to Padley, diversification is a false idol that's been proselytised by "lazy" financial advisors.
"In the remote wilderness of portfolio construction, we have a lot of gurus — but there is one religion: it's called diversification," he said.
"It underperforms in the good times, outperforms in the bad times, but it still doesn't perform anyway."
