Having that one magic ASX stock in your portfolio that becomes a 20-bagger is what we all aspire to.
Such a huge return could wipe out all your losses from other shares and give you some cream on top.
So would you believe that one shrewd investor bagged a 371-fold return from a single stock?
That's right, he threw diversification out the window and put all his money into one company.
And it paid off big time.
Image source: Getty Images
Lithium, the mineral of the future
Investment expert and Marcus Today boss Marcus Padley recalled that back in 2018, he was doing a series of face-to-face seminars to retail investors.
In one of those sessions, one punter asked Padley for his opinion on the future of lithium.
Padley indicated he was positive on the sector, and also told the investor that there's much to be said about focusing on one company and getting to know it inside out.
That man took the advice and literally carried it out, initially using all his $156,000 savings into buying shares in just Kidman Resources.
When that lithium miner was acquired by Wesfarmers Ltd (ASX: WES) a short time later, he was rewarded with a handsome exit.
"$800,000 came out, which I was supposed to pay off debt with," the investor said in an email to Padley.
"But [I] put into Liontown Resources Ltd (ASX: LTR) instead."
Most people, after making a 413% return in just one year, would protect their gains out of fear of losing it all.
Conventional financial wisdom dictates that when you hit a massive jackpot, you immediately take your chips off the table. Whether a punter is visiting the VIP tables in Macau, logging into the legjobb online casino from Budapest, or trading speculative micro-caps on the ASX, the standard psychological response to a sudden windfall is capital preservation.
But this investor completely ignored that instinct, stuck to his aggressive one-stock strategy, and bought into Liontown when the share price was around 4 cents.
But this investor stuck to his one-stock strategy and bought into Liontown when the share price was around 4 cents.
This is where it gets interesting.
371-bagger, thank you very much
Liontown has been the subject of takeover proposals for the best part of a year now.
But this week saw a major milestone. US giant Albemarle Corporation (NYSE: ALB) was granted exclusive due diligence access to its books in response to an offer of $3 for each Liontown share.
Do you know what this means for our one-stock punter?
His initial $156,000 investment five years ago has now become $58 million.
"Due diligence clearly pays," said Padley in a blog post.
"And it may just work for you too."
Back in 2010, Padley wrote about the one-stock strategy in major newspapers. He remembered his then-employer reacted with horror.
"Patersons — the broker I worked with at the time — [approached] me the following Monday and [told] me to put a disclaimer on every article I wrote from now on, saying 'The opinions in this article are those of Marcus Padley and do not represent the views of Patersons Securities'.
"Chickens."
