6 Tips for Finding Multibagger Stocks and Creating Generational Wealth: Sovrenn
20.03.2024 - 10:11:51
Business Wire IndiaAll retail investors want to invest in the best multibagger stocks but the process of identifying such best stocks has never been understood well. Let's look at 6 steps which help an investor identify such companies:
Titan was a <1000 Cr company when legendary investor Rakesh Jhunjhunwala invested in it. Similarly, a recent multibagger stock named Aditya Vision also started as a <100 Cr market cap company. Hence, finding and catching stocks early when the market cap low is important in finding multibaggers.
For example, the sectoral PE of clean energy stocks is between 30 – 70. A company with PE less than 50, which is the exact average of the clean energy range, would be considered to be fairly valued in the clean energy sector. Similarly, there are sectoral PE ratios for each sector and an investor must buy stocks which are reasonably priced considering the average PE ratio of the sector.
Similarly, if a company raises funding for future growth through preferential allotment, such a company may post strong numbers in the future and increase its profits which will lead to a stock price increase. Such preferential allotment data is also publicly accessible and is disclosed to exchanges by the companies.
The third type of information, which is crucial, is the capacity expansion data . A company which is doubling its capacity may double its profits as well, if the company is able to sell the extra production in the market. Hence, many companies which operate in high growth sectors and undergo significant capacity expansion, may turn out to be potential multibagger stocks.
A multibagger stock typically follows many of the characteristics mentioned above. A recent multibagger stock named Knowledge Marine Engineering Works became a multibagger after receiving a ~100 Cr order. Once the company received this large order, the company’s profits increased significantly and consequently the stock price of the company also increased significantly. Similarly, many other stocks became multibaggers after receiving large orders, getting preferential funding or after undergoing capacity expansion. Hence, retail investors must understand the 6 points mentioned in the article and try finding multibaggers using this framework.
Steps one should take when deciding to buy a stock
1. Market Capitalization matters
Most 100x multibaggers started as companies with market capitalization of less than 1000 Cr. Market capitalization is the total amount of money required to buy the entire company from its existing shareholders.Titan was a <1000 Cr company when legendary investor Rakesh Jhunjhunwala invested in it. Similarly, a recent multibagger stock named Aditya Vision also started as a <100 Cr market cap company. Hence, finding and catching stocks early when the market cap low is important in finding multibaggers.
2. Profit Uptrend
3. Good Valuation
For example, the sectoral PE of clean energy stocks is between 30 – 70. A company with PE less than 50, which is the exact average of the clean energy range, would be considered to be fairly valued in the clean energy sector. Similarly, there are sectoral PE ratios for each sector and an investor must buy stocks which are reasonably priced considering the average PE ratio of the sector.
4. Information
Similarly, if a company raises funding for future growth through preferential allotment, such a company may post strong numbers in the future and increase its profits which will lead to a stock price increase. Such preferential allotment data is also publicly accessible and is disclosed to exchanges by the companies.
The third type of information, which is crucial, is the capacity expansion data . A company which is doubling its capacity may double its profits as well, if the company is able to sell the extra production in the market. Hence, many companies which operate in high growth sectors and undergo significant capacity expansion, may turn out to be potential multibagger stocks.
5. HNI Buying
6. Great Sector
A multibagger stock typically follows many of the characteristics mentioned above. A recent multibagger stock named Knowledge Marine Engineering Works became a multibagger after receiving a ~100 Cr order. Once the company received this large order, the company’s profits increased significantly and consequently the stock price of the company also increased significantly. Similarly, many other stocks became multibaggers after receiving large orders, getting preferential funding or after undergoing capacity expansion. Hence, retail investors must understand the 6 points mentioned in the article and try finding multibaggers using this framework.
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