If you’re looking to find one stock that can multiply your net worth in the long-term, we have to caution you.
This is an extremely difficult task.
Most investors who go looking for multibaggers, end up chasing the hottest stock in the market. They may even find some success for a while. But when the tide turns they wish they had sold the stock sooner.
However, trying to find one stock to hold for 10 years requires a lot of careful searching.
You will need to focus of companies with rock solid fundamentals and a long runway of growth ahead of them.
So where do you begin?
A good place to start would be what we call Consistent Compounders. These are steady growth stocks that are very likely to do well in the long term.
Check out Consistent Compounding Stocks in Equitymaster’s Stock Screener.
You can also look at the fastest growing stocks of 2022.
Another option is to look into the past. Stocks which have delivered the highest returns in the past might be a good place to begin your search. Check out Multibagger Stocks in Equitymaster’s Stock Screener.
You can also checkout our playlist on Multibagger Stocks on Equitymaster's YouTube channel.
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Given the sector's critical role in India's burgeoning economy, the potential for exponential gains makes these penny stocks worth the attention.
As per Equitymaster's Stock Screener, these are the stocks which have given multibagger returns to shareholders -
These companies have been ranked as per the returns they have delivered to shareholders in the last three years on a compounded annual growth rate (CAGR) basis.
Remember, it's not easy to identify future multibagger stocks, but if you do it carefully and with due diligence, you can find high growth companies which can turn out to become future multibaggers.
Multibagger stocks are not restricted to any sector. A sector can be re-rated and see a sharp rally at one time while it may underperform when the tide turns.
For instance, the paper sector was shunned by investors during the Covid-19 pandemic when demand was weak. Additionally, the prospects looked to be in danger with digitization taking over.
But when demand picked up as states lifted lockdowns and re-opened schools, paper stocks were big beneficiaries.
With changing market dynamics, one should invest in sectors that have scope for good long-term growth.
There isn't any standard thumb rule for when to sell a stock. However, you can follow a few guidelines.
You can sell the stock if the company's fundamentals take a turn for the worse. You could also sell if the stock has achieved the predetermined target price.
Other reasons for selling could be if the business has entered a mature or a declining phase in the growth cycle, and for rebalancing your portfolio.
Fundamentally strong stocks that have a long runway for growth and are trading at reasonable valuations have the potential to become multibaggers in the long run.
Apart from the above, another way to look for future multibaggers is to look into the past. Stocks which have delivered the highest returns in the past might be a good place to begin y