In 2018, finance professor Hendrik Bessembinder ran the numbers on every single stock that had ever existed on US exchanges between 1926 and 2016. More than 25,000 companies.
His conclusion is brutal:
Four out of every seven common stocks that have appeared in the CRSP database since 1926 have lifetime buy-and-hold returns less than one-month Treasuries.
When stated in terms of lifetime dollar wealth creation, the best-performing four percent of listed companies explain the net gain for the entire U.S. stock market since 1926.
Read that again. Slowly.
4% of all stocks created 100% of the wealth. The other 96% collectively matched T-bills.
The median stock actually posted a negative lifetime return of around –3.7%.
Think about what this means.
If you pick stocks randomly, the math is stacked against you. The “average” stock isn’t really average — it’s a loser.
The market goes up because a tiny minority of companies pull the entire index along with them.
So when people tell you “just buy a diversified portfolio of stocks and you’ll do fine” — they’re not lying, but they’re not giving you the full picture either.
The full picture is: either you own the index, or you learn to hunt the 4%.
There is no third path. Owning 30 mediocre stocks “for diversification” is the worst of both worlds — you carry the risk of single names without the asymmetric upside of catching real winners.
This edition is about hunting the 4%.
About building a portfolio where every single position has a real shot at being one of the next multibaggers — those rare stocks that go up 5x, 10x, sometimes 100x.
And it’s about doing it with a method. A framework. Not luck. Not vibes. A repeatable process I’ve spent years building, refining, and using every single day.
Why I built this framework (and why I’m sharing it now)
For years I went through the classic investor evolution.
I started as a pure value guy.
Buying cheap stuff, holding forever, waiting for the market to “realize.” It worked sometimes. But I also bought a lot of value traps. Cheap companies that stayed cheap. Or got cheaper.
Then I swung to momentum and growth. Buying what was working, riding the trend. That worked too — until it didn’t. Until you get caught in a brutal drawdown holding stocks that were “ripping” three weeks earlier.
Neither approach explained the actual winners I kept seeing in hindsight. The Constellation Softwares. The Monster Beverages. The Nvidias of 2015. The European small caps that quietly 20x’d while everyone was looking at FAANG.
So I started doing what should have been obvious from the start: I studied the winners.
Not the theory. Not what some guru wrote in a book in 1972. The actual companies, in the actual last 15 years, that turned $10k into $100k or more. I read every serious academic study I could find. Bessembinder. The Alta Fox 645-page deep dive. Chris Mayer’s 100 Baggers. Motilal Oswal’s work. And most importantly, a stunning 2025 paper by Anna Yartseva at Birmingham City University that ran rigorous statistical tests on 464 ten-baggers over 15 years.
Here’s what I learned: most of what you’ve been told about finding winners is wrong.
That sounds clickbaity. It isn’t. Wait until you see the data.
What the data actually says (and why it contradicts most of what you read on Twitter)
Yartseva’s study is the most rigorous piece of work ever done on multibaggers. She analyzed 464 multibagger stocks on major American stock exchanges and built a dynamic panel data model to find which factors actually predict future multibagger returns.
Her findings should be required reading for every investor. Let me give you the highlights, because they’ll shake you up.
What conventional wisdom says vs. what the data says:
“Buy companies with strong earnings growth.” Sales growth, gross profit growth, operating profit growth, net profit growth, and free cash flow growth all failed to predict which stocks would become multibaggers. Earnings growth, in all its forms, was statistically insignificant.
That one floored me. Every investing book I’ve read for 20 years tells you to chase earnings growth. The data says: not predictive.
“Buy stocks breaking out to new highs — ride the momentum.” Multibagger stocks load negatively on both 3-month and 6-month momentum, and stocks trading close to their 12-month highs tend to underperform. The best entry points are typically when prices are near their 12-month lows after a significant prior decline.
Read that one twice. The best multibagger entries are near 52-week LOWS, not breakouts. The price action of future giants is choppy, not smooth.
“R&D spending signals innovation and future winners.” R&D expense relative to free cash flow showed no correlation with becoming a multibagger.
“It’s all about tech.” Extreme winners appear across many industries. Technology is important, but it does not dominate. Healthcare, industrials, and consumer businesses all contribute a large share of the multibagger population.
So what DOES predict multibagger returns? Three things keep coming back across every serious study:
Small size — small caps, ideally under $2B market cap at entry
Sustainable profitability — high ROA, high EBITDA margins, strong free cash flow yield. Not growth. Profitability that lasts.
A low starting valuation — the multiple has to have room to expand
And on top of these quantitative factors, two qualitative patterns dominate the winners:
A real competitive moat. The Alta Fox study found that 91% of 350%+ returners had competitive advantages and 80% had barriers to entry.
A founder or owner-operator at the helm. Bain’s research found that since 2015, founder-led companies outperformed their non-founder-led counterparts by 2.1 times in terms of total shareholder returns.
This is the empirical foundation. Now let me show you how I turned it into something I can actually use every single morning.
The framework: 5 pillars
I built my entire stock selection process around five pillars. They map directly to what the data shows actually matters.
Every company I look at gets evaluated against all five. If a company doesn’t check all five boxes, it doesn’t go in the portfolio. Period.
Here they are. In the premium edition I break each one down with the exact metrics I use, the thresholds I require, the red flags that disqualify a stock, and the scoring system I apply. For now, here’s the architecture.
Pillar 1 — Cycle & Tailwind
The macro current that carries the company.
Even the best company struggles against a structural headwind. The best companies in dying industries still die. So I start macro, not micro. This is my Macro Notes DNA — and frankly it’s what most multibagger frameworks completely miss.
I’m looking for secular tailwinds, not cyclical bounces. Demographics. Technology adoption curves. Regulatory shifts. Deglobalization. Re-industrialization. Energy transition. Defense. AI infrastructure. GLP-1 and the rewiring of healthcare. Aging populations. The list of real, multi-decade tailwinds right now is unusually long — and that’s exactly why this decade will produce a wave of multibaggers.
The question I ask: will this industry be meaningfully bigger in 10 years, and is that growth structural rather than cyclical?
Pillar 2 — Owner & Operator
The captain matters as much as the ship.
This is where I diverge from quant-only approaches. I want a founder. Or a family. Or a CEO with real, painful skin in the game — meaning a meaningful portion of their personal net worth is in the stock.
A recent study by Credit Suisse found that family-owned companies have significantly outperformed since 2006. Other than in Japan, on a regional level basis, share price outperformance is similar at between 300 and 360 basis points on average per year.
Bain’s research on what they call the “founder’s mentality” is even more striking. Companies that maintain the founder’s mentality as they age are four to five times more likely to be top quartile performers.
When the person running the company thinks like an owner — because they ARE an owner — capital allocation gets better. Risk-taking gets smarter. Long-term thinking actually happens.
Pillar 3 — Advantage
The moat. The structural reason why no one can kill this business.
I am not interested in commodity businesses. I’m not interested in “first mover advantage” without a defensible reason it will last. I want a business where I can articulate, in one paragraph, why a smart competitor with $100M can’t crush it.
The Alta Fox numbers are stunning: 91% of 350%+ winners had a moat. That’s not a coincidence. The market eventually pays up for sustained profitability — but a business can only sustain profitability if competition can’t erode it.
In the premium edition, I give you my exact moat taxonomy and the questions I ask to stress-test each type.
Pillar 4 — Size & Stage
Where the company is in its life cycle.
Bessembinder, Mayer, Yartseva, Alta Fox — every single study converges on this: size is the single biggest factor in finding multibaggers. You cannot make 100% a year on Apple. You can on a $400M small cap that becomes a $4B mid cap.
This is also where the inefficiency lives. Small caps have fewer analysts watching them. Fewer institutional buyers. More mispricing. Alta Fox specifically noted that overrepresented countries among multibaggers had less initial coverage of smaller stocks, potentially due to lower populations of small-cap-focused analysts and investors.
The sweet spot I target: market caps usually between $100M and $2B, with a strong preference for the lower end when the other pillars are intact.
Pillar 5 — Twin Engines
Earnings growth × multiple expansion. The math of a 100-bagger.
Chris Mayer calls these the “twin engines” of any 100-bagger: growth in the underlying business AND expansion of the multiple investors are willing to pay. Investors in one of his examples went from paying roughly 3.5x earnings when it was left for dead to a more optimistic 26x earnings ten years later.
That’s how you go from a 10x business to a 100x stock. The business grew ~12x. The multiple grew ~7x. Both engines firing.
But here’s the nuance I add — and where I think most people get it wrong: the data shows raw growth isn’t what predicts the re-rating. Sustainable profitability and free cash flow generation are what trigger the re-rating. The market wakes up not when a company is growing fast, but when it proves the growth is profitable, durable, and self-funding.
This is why pillar 5 isn’t “growth” — it’s the combination of growth, profitability, and a starting multiple cheap enough to expand. All three.
How I use this every single day
Having a framework on paper means nothing if you don’t have a workflow.
Here’s the rhythm I’ve settled into. The same one I’ll detail step-by-step in the premium edition, including the exact screens I run and the templates I use.
Mornings — macro scan. I start every day with the macro picture. Where are we in the cycle? What tailwinds are accelerating? What got priced in yesterday? This sets the lens through which I look at everything else. The macro is not separate from stock picking. The macro tells me which baskets to fish in.
Weekly — quantitative screens. Once a week, I run a tight set of screens designed around pillars 4 and 5. Small cap, high profitability, low starting multiple, positive free cash flow yield, near 52-week lows or in a long consolidation. The screen typically spits out 30 to 80 names depending on the market.
Bi-weekly — qualitative filter. From the screen output, I run a fast qualitative pass on each name. Is there a founder or owner-operator? Is there a real moat? Is the company in a sector with a secular tailwind? Most names die here. I usually end up with 5 to 10 names worth a deep dive.
Deep dive. A multi-hour exercise on each remaining name. Read the annual report. Read the conference call transcripts going back 2 years. Score the company against all 5 pillars on a 1-10 scale. If the total isn’t compelling, I move on.
Watchlist & triggers. The names that pass go on a watchlist with predetermined entry triggers. I don’t chase. I wait for the right price. Often, the best entry points for future giants don’t look like typical breakouts at all. Their price paths are typically choppy, full of reversals and long consolidations, reflecting a gap between improving fundamentals and skeptical markets.
This patience is everything. Most retail investors fail not because they can’t find good companies — but because they buy them at the wrong price, in the wrong size, at the wrong moment in the company’s life.
What you get in the premium edition
This free piece gives you the architecture. The premium edition is where the framework becomes operational. If you’re going to subscribe to Macro Notes Premium, this is the edition to read first. Everything else I publish builds on what’s inside it.
In the premium version you get:
The full breakdown of all 5 pillars with exact metrics, thresholds, and red flags for each
My complete scoring system — how I rank companies on a 1-10 scale per pillar, and what total score I require before buying
The anti-checklist — the disqualifiers that make me drop a stock instantly, no matter how good it looks
My exact screens — the parameters I plug into my screener every Monday morning
Position sizing & portfolio construction — how I weight names by conviction, when I add, when I trim
Multiple detailed case studies of past multibaggers that scored 10/10 on the framework BEFORE they ran — and how you could have spotted them
Live current ideas — names from my current watchlist that I believe check all five pillars right now
My daily workflow templates so you can replicate the process
This is the edition I wish I’d been able to read 15 years ago. It would have saved me a lot of bad trades and even more wasted time.
If you’re serious about building a portfolio of only winners — and aiming for the kind of returns that actually change your financial life — this is your starting point.
If you’re not yet subscribed to Macro Notes Premium, now is the time. This edition alone is worth far more than the annual subscription price, which starts at $180 for the first year only. The subscription price increases once a month, and the next update is coming soon. If you subscribe today, your price will be locked in.