Table of contents
Unearthing hidden treasure: How multibagger stocks can supercharge your portfolio.
Who would not want to invest in a stock and watch it grow many times over? Initially, people spoke about “10-baggers”, which meant a stock that grew your money ten times.
But now, we are aiming for even bigger, looking for “100-baggers” stock. This is where the term “multibagger” comes in, first coined by Peter Lynch.
What are multibagger stocks?
Multibagger stocks are those that yield returns many times their initial cost. These stocks are typically undervalued with robust fundamentals, presenting attractive investment prospects.
Companies associated with multibagger stocks often exhibit sound corporate governance and possess the capacity for rapid business expansion.
Multibagger stocks in India
Multibagger stocks typically have a market cap of above ₹ 1000 crore, indicating that they are established companies with a sizable presence in the market.
They have shown a history of significant gains, with their prices rising by more than 100% in just three years.
| Company Name | 10 years Return (%) |
| Avanti Feeds Ltd. | 35111 |
| Bajaj Finance Ltd. | 13,123 |
| PI Industries Ltd. | 8063 |
| Relaxo Footwears Ltd. | 6311 |
| Atul Ltd. | 4296 |
Some more examples of multibagger Indian stocks are:
Tata Motors: Tata Motors’ stock price surged by over 200% in the past year. If you had invested ₹ 10,000 in Tata Motors 10 years ago, it could be worth ₹ 30,000 now!
India’s top private sector bank – HDFC Bank is a great example of a multibagger stock. The banking stock has jumped nearly 30000% since its listing in 1999 to 2023, marking it as one of the top multibaggers in our country.
Source: Google Finance
Investing in multibagger stocks typically involves holding onto them for a longer period to maximise profits when selling them later.
Benefits of multibagger stocks
- Financial safety net: Profits from multibagger stocks can act like a safety cushion for unexpected expenses or help you reach financial goals.
- Wealth building: Keeping multibagger stocks for a long time can help you gather more money over the years.
- Beating rising prices: Multibagger stocks often grow faster than the prices of everyday things.
- Significant earning potential: Multibagger stocks can grow in value many times over.
Risks involved with multibagger stocks
- Price hype risk: If people get too excited about a stock, its price might go too high.
- Wild price swings: Some stocks with the potential for significant gains can also have huge losses.
- Outside forces matter: Factors like the economy, market changes, or unexpected events can affect the company’s performance.
- Uncertain future: It is hard to tell which stocks will become profitable.
Difference between multibagger stocks and blue-chip stocks
Blue-chip stocks are like reliable elder statesmen of the financial market, since they come from well-established, trustworthy companies with a long history of success, whereas investing in multibagger stocks is like placing a bet on a fast and exciting racehorse.
| Multibagger Stocks | Blue-chip Stocks |
| Multibagger shares are like exciting newcomers. They have the potential to grow fast, but they are riskier. | These stocks have been around for a longer duration in the market and usually grow steadily. |
| These aren’t well-known, but they have the potential to bring profits if they do well.Hence, they are also termed as Hidden gems. | These might not give you super high returns, but they are less likely to suddenly drop since they are known as successful and stable. |
| Multibagger stocks are riskier because they’re often from newer or smaller companies. | These stocks are considered safe since they’re from well-established companies. |
| These stocks do not pay dividends as they’re reinvesting their profits to grow faster. | Whereas these stocks often pay dividends, like getting a small bonus from the company. |
| These are often seen as short-term investments for potential significant gains, as they go up fast, but they can come down as quickly. More like a financial roller-coaster. | These stocks are often held for a longer duration considering their stability. Often considered a reliable friend in the financial markets. |
How to identify multibagger stocks?
Generally, companies with massive potential growth issue multi bagger stocks. However, in some cases, these stocks tend to have adverse impacts on the economy.
Below are a few pointers for identifying potential multibagger stocks:
- Strong company performance
- Unique products or services
- Strong management team
- Reasonable valuation
- Growing market
Bottomline
Deciding whether to invest in multibagger stocks boils down to how comfortable you are with risk and what you want to achieve with your investments. While they offer the chance for big profits, they can also be quite unpredictable.
FAQs
A stock is termed a multibagger in India when it has returned several times its original investment value. Identifying such stocks involves looking for companies with strong fundamentals, innovative business models, and significant growth potential within emerging or rapidly growing industries.
Finding the next multibagger stock in India involves researching companies with solid financials, low debt, and high earnings growth potential. Look for businesses with scalable models in fast-growing sectors. It’s also crucial to assess the management’s track record and the company’s market position to ensure it has a sustainable competitive advantage.
A stock becomes a multibagger by delivering sustained, above-average earnings growth. Key factors include a strong economic moat, innovative products or services, and efficient management. These companies often have a significant market share and are usually well-positioned to capitalise on industry trends and consumer demands.
Penny stocks are typically low-priced shares of small-cap companies and are known for their high risk and volatility. Multibagger stocks, in contrast, have already provided substantial returns and are often associated with companies that have strong performance records and solid growth prospects.
Blue chip stocks are shares of large, well-established companies known for their stability and consistent dividends. Growth stocks represent smaller, fast-growing companies with higher potential returns but also greater risk. While blue chips offer steady growth, growth stocks aim for rapid expansion and significant capital appreciation.