Do you want to find stocks that can make you a lot of money instead of playing it safe in the stock market? This article will show you how to identify potential multibagger stocks that have the potential to grow your wealth significantly.
Several potential multi-baggers are proper under your nose, and they do not often look like multi-baggers. That’s why we will share 6 expert tips to help you find these stocks and change your financial future. Whether you are experienced in investing or new to it, these strategies will give you the knowledge and tools to spot these valuable stocks before they become popular. Get ready to learn and start your journey towards financial success!
6 Steps one should take when deciding to buy a Multibagger Stocks
1. Market Capitalization matters
Most 100x multibaggers started as companies with market capitalization of less than 1000 Cr. Market capitalization is the total amount of money required to buy the entire company from its existing shareholders.
Titan was a <1000 Cr company when legendary investor Rakesh Jhunjhunwala invested in it. Similarly, a recent multibagger stock named Aditya Vision also started as a <100 Cr market cap company. Hence, finding and catching stocks early when the market cap low is important in finding multibaggers.
2. Profit Uptrend
The job of a company is to constantly increase the profits and hence the most important logic behind identifying multibaggers is finding stocks which have a strong Profit uptrend. Profit uptrend means that the company should have been continuously increasing profits in the past 2-3 years. A company’s strong profit growth shows that its management is doing well and making more money. You can spot this early by checking a company’s quarterly results.
3. Good Valuation
A small investor should buy a stock that has the potential to grow a lot and is priced well. The price is decided by a metric called the PE ratio. The investor should buy stocks at reasonable prices, which means the PE ratio should be low compared to other similar stocks.
For example, the sectoral PE of clean energy stocks is between 30 – 70. A company with PE less than 50, which is the exact average of the clean energy range, would be considered to be fairly valued in the clean energy sector. Similarly, there are sectoral PE ratios for each sector and an investor must buy stocks which are reasonably priced considering the average PE ratio of the sector.
4. Information
Information helps investors predict a company’s future. For instance, if a company gets a big order, it’s likely to make more profit in the future. So, investors should look at big order data. All companies are mandated to disclose large orders to the exchanges and such order data can easily be discovered on Sovrenn Large Order Receipts, a platform which specializes in providing curated filtered information about fundamentally strong micro cap stocks and smallcaps.
Similarly, if a company raises funding for future growth through preferential allotment, such a company may post strong numbers in the future and increase its profits which will lead to a stock price increase. Such preferential allotment data is also publicly accessible and is disclosed to exchanges by the companies.
The third type of information, which is crucial, is the capacity expansion data. If a company increases its production capacity, it can also increase its profits by selling more products. Companies in growing industries that expand their capacity may become good investment opportunities.
5. HNI Buying
Many HNI investors also keep hunting for such multibagger stocks and studying their buys can help retail investors spot such hidden gems. This data is also available through bulk deals and shareholding patterns. For example, a recent multibagger stock named Taylormade Renewables witnessed HNI buying by investor Rajesh Joseph. The stock also received many large orders and raised funding through preferential equity allotment.
6. Great Sector
Different sectors help companies make more money. For instance, clean energy is growing fast, and companies in this sector can become big. The same goes for defence, electric vehicles, and financial technology companies. So, retail investors should study companies in these sectors and look for ones with strong leadership. Companies operating in such high growth sectors can again be found at Sovrenn discovery.
A multibagger stock typically follows many of the characteristics mentioned above. A recent multibagger stock named Knowledge Marine Engineering Works became a multibagger after receiving a ~100 Cr order. After getting a big order, the company made a lot more money, and its stock price went up a lot. It happened to many other stocks, too, when they got big orders, special funding, or expanded their capacity. So, small investors should learn the 6 points in the article and use them to find stocks that can make them a lot of money.
Conclusion
How to identify future multi-bagger stocks and create generational wealth requires great knowledge. By conducting thorough research, diversifying your portfolio, and staying informed about market trends, investors can increase their chances of identifying high-potential stocks. Investing carries risks, so carefully consider your financial goals and risk tolerance before making decisions. With dedication and strategic planning, investors can build wealth for themselves and future generations. Start using these tips today to move towards financial success and long-lasting prosperity.
