What is a Multibagger? Multibagger is one which gives multifold returns not 5-10 times but 50-100-200 or even 1000 times returns.
Finding Multibagger at initial stage is very important as it can change your entire life….even one Multibagger in your life can make u super rich if u have good stake in it.
Now the question arises how to find potential multibaggers…
- QUALITY OF PROMOTERS
First and foremost thing is Quality of Promoters from shareholders point of view….what actually shareholders want? Regular returns in form of Dividend, Bonus….are promoters keen in increasing shareholders value by paying dividend, bonus etc…
- BUSINESS MODEL
Does company have a sound business model? What are the company’s plans? Does company have aggressive plans? What is their execution history?
Compare business model with its peers and try to find out uniqueness….
- FUTURE BUSINESS POTENTIAL
Does their business model having growth in industry level…Does their business have demand in the market…
- EXPANSION PLANS
Does company have expansion plans…if yes how are they going to fund their expansion plans…are promoters infusing money or they raising debt….Promoters infusing stake is always considered good as they are showing confidence and faith in their plans…
- PAST PERFORMANCE
I personally give less importance to companies past performance as past is already been discounted and one should look at future…That doesn’t mean u should completely ignore past…look at companies financial performance….is company making consistent profits…are their revenues and profits showing growth…what is their main source of income…etc
- Valuations…
Look at companies valuations…A PE of 10-15 is considered good for investment. look its simple a company with high growth potential will always trade at exorbitant PE’s. so don’t just judge it from PE. Good companies will always trade at higher PE’s and can be a good candidate for investment. personally I feel one should avoid looking at PE when u r searching at multibaggers as u invest in it for very long…u won’t get anything cheap and if there is Quality u will never get it cheap.
One peculiar thing I have noticed is many people get out of a multibagger stock quite early…look multibagger is not just 10-15 bagger but it is 100-500 bagger. never book profits if fundamentals are very strong. 1 stock is sufficient in your entire life. if u have it never book profits unless fundamentals deteriorate. U will just enjoy by dividend company will pay provided u have good stake. pass on your legacy to next generation…
And last but not the least. Never watch stock price daily. daily watchers will never get multibaggers.
Equity Ways 