Multibagger Stocks in Indian Markets - Chart Of The Day 21 April 2017 - Equitymaster
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Multibagger Stocks in Indian Markets
Apr 21, 2017


There have been several Indian companies that started small but reached dizzying heights on the strength of their businesses. These wealth creators are certainly drool worthy.

But the million-dollar question that arises is how does one discover them early on to capitalise their potential to the fullest?

Chris Mayer's secret to spotting 100 Baggers has a universal appeal and is very much applicable in the Indian markets. There is no rocket science in his process. It is based on simple yet powerful indicators to watch out for to unearth potential multibaggers from small and unknown companies.

According to Chris Mayers, all the 365 100-baggers from his study shared three common characteristics. The first characteristic is the ability to expand into national/international markets. Big returns are forthcoming only if a company has a good potential to grow and expand its operations. If the company becomes big in size such that the market gets saturated, then business growth also slows down.

The second characteristic is that the company should be able generate strong returns on invested capital of 20% or more.

The third and the most important characteristic is the ability to reinvest profits and continue earning high returns. The company should be able to plough back profits into the business and earn a return which is at least equal to the current return on capital. Only then can such a company turn out to be value multiplier in the long run. On the other hand, the companies that mindlessly expand organically or inorganically ultimately end up being wealth destroyers.

Our long-term recommendation service ValuePro follows a similar strategy and has given several multibaggers over the years.

Data Source: Ace Equity

This Chart Of The Day was published in The 5 Minute WrapUp - The Man Who Knows the Secret to Spotting 100 Baggers

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