What is a Multi-bagger? How to find one?

Six (6) Important Qualities of a Multibagger Company:


Why do we invest? For money? For return? Well, what kind of returns? What is your expectation? How much return will satisfy you? These are some real questions that you and I should ask and seek answers to.

Because, if you don’t know what kind of returns you are seeking. Then you don’t know what type of risk you must take.. Right?

Everyone wants a multi-bagger. But what is a multi-bagger? And, how to find one? 

I’m here to give you all some clarity regarding what we must seek in Stock Market Investing.

What is a Multibagger?

If you invest 100 Rs. and that 100 turns into 200, then you have a bagger? Something like that…

Basically, a 10-bagger means you have made 10 times your money and a 100-bagger means you’ve made 100 times your investment. So, multi-bagger is when your investment gives you exponential return.

To put it simply, a multi-bagger stock is an equity investment that provides a return of greater than 100%. A Baseball gameplay’s success is measured by how many “bags” or “bases” a runner moves. This is what led Mr. Peter Lynch to come up with the word “multi-bagger” in his 1988 book, One Up on Wall Street. 

Magic Formula Investing – Meaning Features & Benefits Explained:

How to Find Multibagger?

To be honest. If I knew exactly how to find a multi-bagger. I would have had many in my portfolio. To date, I’ve had 3 of my investments give a 100% return. So, they just doubled my money. I don’t have any higher returns. And, for us to call a multi-bagger, we need hefty returns. Maybe I have one in my portfolio which is yet to perform. 

Anyways, I can give you some idea regarding how to find one. And if you think you have learned something from this. Then you must like, share and subscribe to the channel. Check the video at the ed of this article.

Six (6) Important Qualities of a Multibagger Company:

Monopolistic Market share 

These companies must be the market leaders. They must have sheer market dominance to become a multi-bagger. Just because a company has already become a giant in its market doesn’t mean it cannot be a multi-bagger in your portfolio. 

So, own companies that have monopolistic features. They will make you money in the future. For example Pidilite Industries, ITC, IRCTC, etc.

Promoter Holding

No matter what, promoters of a company will know more than us right? So, if the promoters themself don’t wanna own the company. Why are you doing it? Instead, invest in those companies where there is strong promoter backing. Eg: Reliance Industries, TCS, DMart, etc. 

Increasing Cash Flow 

The company’s cash flow is the most reliable indicator of its performance. To what extent a corporation may increase its profits in the future is shown in the cash flow statement. If the organization is unable to produce sufficient cash flow from operations, it will be forced to constantly obtain debt or equity capital from the markets in order to fund its expansion.

Multibagger organizations are able to develop rapidly year after year because they regularly compound both their earnings and their cash flows (cash profit minus additional working capital). Investors may not benefit from the ownership of a company that has solid profitability and cash flow but shows no signs of expanding its business.

Discounted Cash Flow model – DCF & its importance!

Financial Stability 

I’ve seen people invest in mid and small-cap companies hoping for a multi-bagger. Not necessary that a multi-bagger must come from a small cap company. Hindustan Unilever, an MNC company has given over 450% return for the past 10 years. This return may seem small to you. 

But, out of 7500 odd companies listed on the Indian stock exchange, hardly 10% are even worth looking at. And out of these 750 companies, if you deep dive into the financials, after all the filtering, if you are left with 100+ companies then you are doing something wrong. So, to invest in small & mid-cap companies without looking at their financials and hoping for a multi-bagger is like watering a tomato plant and waiting for it to fruit mango.

Return on Investment

A stock can become a multi-bagger if its earnings expand rapidly and steadily over time without lowering returns on invested capital. Companies whose earnings grow by double digits per year on average tend to do much better than the market as a whole.

When selecting firms with a high return on equity and return on capital employed, be sure to check for at least the past 5 years of records. And, such records must be satisfactory in order to be selected for future multi-baggers. 

One such way to compare is to check the results with the company’s peers. Competitors tell us whether our company is efficient enough to be a multi-bagger.

Capital Expenditure 

Investing wisely is the last topic we’ll cover. Making money work for you over time through compounding profits and cash flows is the key to building wealth.

The way that cash is used is what makes the biggest difference between a good company and a great stock that will make you a lot of money since companies that meet the first two requirements tend to make a lot of cash and capital.

Build Investment Portfolio from Scratch:


Remember, There are good companies, no doubt about that. But, in order to find one and own them till they give us multi-bagger kind returns, it takes time.  

Finding good stocks, much less multi-baggers, is extremely difficult. It’s quite challenging to focus more on research and evaluation as a business major.

If you want to make smart stock investments, signing up with a stock advisory service and taking their advice is your best chance. Most importantly, it will improve your opportunities for growth by several orders of magnitude.

I’ll conclude this by saying one last thing. If you are investing in the stock market. And, If you are able to generate over 10% return annually, then you are for sure in the top 10% of the population. So, aim for 10 12, or even 15% return each year. Let that be your goal. 

Because, if you wish for a multi-bagger return in all of your investments. Then, that exaggerated goals may make you take unnecessary risks like investing based on tips and suggestions, investing in “undervalued” small or micro-cap companies, and such.

For More Information, Check this Video:

Disclaimer: All the information on this website is published in good faith and for general information purposes only.

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