Multibagger stocks are stocks that have potential to give multifold returns in coming days.
How to find multibagger stocks is a question that most of people have in mind. Stocks like Infosys have turned 10,000 rs investment into 5 crore plus value corpus in 20 years. If you find two to three multibagger stocks and hold it for a good time, its highly likely you would be financially retired very soon.
What makes a stock Multibagger?
Multibagger stocks are just regular companies that are doing financially well. However what differentiates it from the others is the relative size of the market it is in and compare it with total size of market. In layman terms, a multibagger stock will be a small fish in big pond. Fish also should have potential to grow and if POND is also increasing in size at a fixed rate, the fish will have opportunity to grow at even bigger rate.
Characters of Multibagger Stocks
- Good and Honest Management
- Good sales growth
- Good scope for sector growth as well
- Good return ratios like ROE and ROCE.
- Good operating margins and profit margins
- Shareholder friendly !
Any shortcut to start analysis of such stocks?
A good starting point can be Mutual funds portfolio. We can start to look at Mutual Funds portfolio that cater to Mid cap and small cap segments. We can view portfolio and usually these stocks will be stocks that will be financially good. Taking that as starting point , we can start researching further on such companies like checking its products , Taking to dealers about network and supply chain , taking to consumers about product feedback , checking the product against the competition etc.
What is Fundamental Analysis
To select multibagger stocks or even good stocks for investment, we should know what is fundamental analysis. Fundamental analysis , as the name suggests, explains how to analyse companies based on fundamentals.