What is meant by multibagger stocks and how to identify them ?

Posted by epicresearchindore on February 13th, 2018

Different investors have their own goals which they want to accomplish by investing in stock market. Some of them who wants to earn high returns from short term trading are the ones who looks for multibagger stocks. Though these stocks do not perform well at present but they have good potential to perform in future. Financial advisory services providers can be consulted to get recommendations on such stocks. Multibagger stocks are those which can offer returns which is several times their costs. They have strong fundamentals and thus they attracts investors.

It is not an easy task to identify multibagger stocks. Following are some guidelines which can be referred to identify them :

1) Understand all basics related to stock market as you need to have really good familiarity with different terminologies used in market to find multibagger stocks.

2) Generally these stocks belongs to small cap companies which have strong fundamentals and likely to perform exceptionally well in future.

3) Check for companies debt level. Although there is no benchmark for this using which an investor can compare as it varies from different industries. But it should be assured that it is not more than 30 percent of the total equity value.

4) Look for companies sources of earnings. Such information will help in understanding whether their primary revenue segment is likely to grow at macro level? If is it so , then you can say its stocks are multibaggers.

After studying different stocks you may find that many stocks have good potential to become multibagger stocks. But the truth is among 8-10 potential stocks present in your portfolio only 1-2 stocks will meet your expectations.

These stocks are not meant for every investor. Before investors decide to invest in these stocks they should ascertain some factors like :

1) No need of cash in 1-2 years

2) Risk bearing capability is high

3) Steady cash flow from investment is not expected

All multibagger stocks have to face tough market conditions before they rise. Some of the top performing companies have also faced 50-70% crash from their peak in adverse market conditions. Therefore if you have some really good risk bearing capability and you do not have to worry of invested cash for long period of time then only you are suitable for making an investment here.

Not all good companies are capable for generating multibagger returns. Timing plays a vital role here. Investor needs to buy stocks at the right time and also sell them at the right time. Investors can make use of experts views like trading tips, mcx tips and more while making an investment in different segments of market to ensure their good earnings and manage risk in a better way. Multibagger stocks demands for good patience. Investors who are new to market should never prefer to invest in them.