What are Multibagger stocks ?
These are the stocks who are undervalued currently but has a great potential to Increase in future.
The fundamentals of the company are good, have a good management and the business scalability are some of the factors which ensure future growth of the company.
Stock market Investors always want to buy such stocks for a longer period of time may be 5 - 30 years in some cases.
Picking up a stock by an Investor depends on the time horizon they are looking to Invest and their Investment goals.
If an Investor fails to identify the right stock at the right time they may not achieve their Investment Goals. Many of the Investors consult the Brokerages and the traders to get an advice and we end up Investing money basis their analysis. Brokerages have dedicated researchers and financial analyst to do this task.
You need to ask some Questions to yourself?
As an Investor, How you can be sure that the stock a brokerage firm has suggested will surely rise after 20 - 30 years and will give you exponential returns?
All the Early Birds in the Stock Market are so much fond of the Penny Stocks, the stocks whose value will be in single digits or in '20s '30s. Thinking that these stocks will perform surely in decades to come.
In most of the scenarios, this decision will be based on the recent uprise in stock price or the recent news trend.
Are your Investment Decision driven or Influenced by these factors? If yes, then you need to stop these habits and stick to the fundamental basics of reading a stock.
Please go through a basic check of the company before making any kind of Investments, these are the certain factors you need to look before Investing for Decades and long.
1. Business Fundamentals -
The company should be fundamentally strong, i.e the company business model should be good and there should be significant rooms for the company to expand.
2. Company Debt -
The company debt should be less, although there is no defined threshold for debt as it varies from Industry to Industry and also on the ongoing company projects.
3. Management -
The company management should be well experienced with a long-term approach to move forward in years to come.
4. Tie-ups -
We should consider company recent tie-ups and collaborations with other partner companies to sell their product and services.
For example - A steering wheel manufacturing company get on contract with the bigger motor companies for supply of steering wheels, this will surely Increase the overall sales of the products and this will surely increase the company trajectory towards growth.
It also highlights the company in the Industry and a collaboration with one company could lead to getting some more offers from other companies as well.
6. Raw Material Cost -
The Raw material cost for a Manufacturing company plays a bigger role in company profitability. If the overall Ram material cost for the company is relatively lower than the Industry then it gives an advantage over other peers in the Industry and also helps the company in booking some basis points direct profit.
7. Profit and Loss -
The financials of any company directly shows how a company is performing, a company will good financial record should always be considered for long-term Investments.
8. Sales Performance -
If a company is doing in terms of its Quarterly and Monthly sales then it is a direct example that the company is performing good and also gives a positive trajectory for the quarters and years to come.
9. Earning Per Share (EPS) -
You can check this data under the financials, Company also declares this data in every result. If EPS is Increasing, it clearly tells that the company has done well from last quarter or year.
10. Manufacturing Capabilities -
This is applied to all the manufacturing companies, let it be a steel company, a tyre company or a ceramic manufacturing company.
Suppose, Indian Government issues a tender to supply steel for a rail project or a bridge project, Even if the company has all the capabilities and cannot match the production requirement for the tender then this will surely will be a blocker for the company to achieve goals.
I will share some of the Multibagger stocks in coming posts for 10, 20, and 30 years.
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