Some extract from Bullsbook, which will help my readers to select multibagger stock for investment.
Signs of a multibagger......
- Great companies have a very large and untapped market.
- Such stocks are backed by a very high quality business. They need low capital to grow. Their products, business both are predictable & their margins are high.
- Management vision to see the change in consumption patterns, demand of products.
- These stocks are less known. No newspaper, media channel will ever talk about it. No one knows about it. The crowd will jump & buy the stock when it gives a multi year bull run. So the trick is to buy it before anyone else does.
- Buying price is very crucial for such stocks. Only buying opportunity for such stocks is when they are available at irrational prices on the lower side.
- These stocks have very less or no ownership of FII’s, Mutual Funds, institutional shareholders at the beginning.
Walking on a path of legendary investors, we consider six categories before investing in any
stock. There are six types of companies,
- Slow Growers - Companies with very small growth in a slow growing industry.
- Stalwarts (Blue-chip stocks) - Strong companies with steady growth.
- Fast Growers - Small/Mid size companies with very high growth.
- Cyclicals - Companies in cyclical industry. ( commodities, auto etc.)
- Asset Plays - Companies with assets in terms of land, holdings in other co’s, gold etc.
- Turnarounds - Loss making companies who can become profitable again.
Out of these, we focus on finding companies from no 3 category, fast growers. This is where
the markets give stocks that move up by 10 times, 20 times, 50 times and even 100 times.
These stocks are small & aggressive. They can make your career. Their PE expands along with
the earnings. If the company starts growing at rapid pace, the market values it accordingly.
Here is an illustration of how the multibagger charts are made.
Written by :
Chetan Phalke
Alpha Invesco Research Pvt Ltd
www.bullsbook.com
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