Stock markets are never devoid of multibaggers. These tricky ways to identify and pick multibagger stocks can change your fortunes.
Investors are always hunting for good multibaggers for their investments. Why not? Multibagger stocks have tremendous potential to generate multi-fold returns within few years of time. But, the process of spotting a true multibagger in its early stage is not an easy task.
It is much complicated task as compared to identifying large & reliable equities. Additionally, most of the paid stock recommendations or tips might not workout to discover multibaggers.
You need to discover multibaggers by your own efforts. You should perform a thorough analysis of some key features of potential multibaggers.
Based on your finding, you have to identify & shortlist some multibaggers for your stock portfolio. Finally, you should start parking your funds gradually in them.
According to the views of Thomas Phelps, a distinguished security analyst, one can make money in stocks only through his/her vision to see, courage to buy and patience to hold.
However, it is still possible that some of your selected multibaggers might underperform, and some might not perform at all. But, if even a single multibagger stock performs as per your expectations then it can perhaps change your fortunes in the long run.
Here are 16 tricky ways to identify and pick multibagger stocks from stock markets of your country:
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(1) Quality Of Promoters Or Company Management
It is one of the most critical ways to identify and pick multibagger stocks. Stock investment is equivalent to partnering in a business. One should be extremely careful about whom he/she is partnering with while making investment in stocks.
Promoters are the individuals or organizations that are fully responsible for the management of day-to-day activities of the company. If the company management is visionary & ethical then there are huge chances that they will take the business to new heights.
This could definitely make your investment a multibagger in the long run. Therefore, it gains significance to analyze the quality of promoters or company management when finding multibaggers.
Some of the best ways to analyze quality of promoters include:
(a) Paying special attention towards their background integrity.
(b) Checking their past performance to run a company.
(c) Studying their asset allocation strategies (like paying dividends, bonus, etc. to shareholders).
(d) Looking for any history of past frauds/scams, etc.
(e) High or consistently increasing stake of promoters in the underlying company which in turn reflects high confidence in company’s growth.
(f) Having caliber, vision & foresight to take the company ahead of others.
(g) Practicing good corporate governance e.g. uniform disclosure to all shareholders.
(h) Trend of management compensation during good & bad times, and hikes.
(i) Absence of accounting manipulations in quarterly results.
(J) Management succession plans.
(k) Project execution skills.
(l) Looking through company’s annual reports & conference call transcripts following a particularly poor result.
(m) Presence of reputed auditors for the purpose of auditing.
(n) Good interaction with different stakeholders of business such as suppliers, dealers, employees, etc. can also provide great insight of quality of promoters.
Remember, you can get long term sustainable return from a potential multibagger stock only if promoters are of above average quality or at least average quality. You can’t gain manifold returns from a stock with dishonest & poor quality promoters.
However, promoters are humans & due to human nature can migrate from one group to another over time. You should always be ready to review the latest happenings of the company of your choice on quarterly basis.
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