One Up on Wall Street and Beating the Street. The reference by Peter Lynch was to stocks which can give a return which is several times the investment made how to invest in stocks in india for beginners them.
A stock which gives 10 times the investment is called a 10-bagger. Thomas Phelps referred to stocks which the potential to give 100x the investment made in them. Phelps gave several examples of such stocks and also gave a detailed explanation on the process that should be adopted by investors to find such stocks. Small-Cap stocks Generally, multibagger stocks are to be found in penny, micro and small-cap stocks. The reason for this is simple. These stocks have a smaller market capitalisation and find it easier to double and triple their net worth in a short while.
For, example a stock with a market capitalisation of only Rs. 100 crore can easily grow to a market capitalisation of Rs. In contrast, large-cap companies will find it very difficult, if not impossible to give multibagger returns to their shareholders. Examples of multibagger stocks in India There are several stocks in India which have given 10x and even 100x returns.
Most of these stocks belong to the penny and small-cap space. Caplin Point Laboratories is one example of a stock which has given a 10x return in a short period of time. Caplin Point manufactures pharmaceutical products and exports them to Venezuala and other Latin American countries. Another example of a multibagger stock is Uniply Industries. There are several other examples of stocks which have become multibagger and created huge wealth for investors.
Shreyas Shipping, Page Industries, Hawkins Cooker, PI Industries etc are examples of such stocks. How To Find Multibagger Stocks Generally speaking, one has to hunt for such stocks in the penny, micro and small-cap space. Such stocks have a low market capitalisation which makes it easier for them to grow exponentially. Moat One has to find stocks that enjoy a moat from the competition.
The moat can be in the form of a technological advantage or a marketing advantage. Basically, the company must be able to fend off competitors from laying stake to the market. High RoE Companies It is a common feature of penny and small-cap stocks which are growing fast that they will enjoy high rates of RoE. The high RoE shows that the Company is growing in a profitable manner and that the growth is not coming at the cost of profits.
It is elementary that if a company does not make profit and instead suffers a loss, it will soon run out of capital and will have to go for liquidation and be wound up. In fact, several companies in the e-commerce space have chased high growth at the cost of profits. Such a strategy is not sustainable in the long run and has resulted in the closure of these companies. Examples of such companies are Local Banya, Tiny Owl, Grofers, Hola Chef etc. The Company should have low debt or be debt-free. They have a huge scale of opportunity ahead of them.
These stocks have the potential to give multibagger returns in the future as well. Multibagger Stocks 2016 The following stocks have already given huge returns in 2015 and 2016. However, they are of such good quality of management and have such a dominant command over the market that they can be expected to give excellent returns in the future as well. Experts in multibagger stocks There are a number of experts who have mastered the subject and are able to find stocks that give huge gains.
Rakesh Jhunjhunwala and Radhakishan Damani became billionaires by buying small-cap stocks which became large-cap stocks. The present size of the portfolio of Rakesh Jhunjhunwala and Radhakishan Damani is so great that they can no longer invest in penny or micro-cap stocks. Even small-cap stocks are out of bounds for these investors. They can invest only in large-cap stocks. Dolly Khanna and Rajiv Khanna have made a large number of investments that have become very big success stories.