How do I pick multi-bagger stocks?

Multi-bagger stocks refer to stocks that have increased in price multiple times during your investment period. As the stock price will increase multiple times, your investment will also increase by many folds. Mostly multi-baggers are penny stocks with good fundamentals. Once the company starts to perform well, it comes into the limelight, and more investors pour in, which increases the value of the stock.

The main challenge for an investor is to identify a multi-bagger. There are several penny stocks in the market with good fundamentals, but all penny stocks don’t turn out to be multi-bagger. So as an investor, you should have strong research skills to find a multi-bagger.

How to pick multi-bagger?

Multi-bagger stock is a bit hard to identify. But, if you follow the below-mentioned ways, then you may find the next multi-bagger by yourself.

• Industry

Identifying multi-bagger stock starts by identifying the next industry that will boom. In 2021, India is planning to get the whole population vaccinated. So the pharma industry will grow. Also, people have understood the importance of medical and life insurance. So as an investor, you should target these industries that have the potential to grow in 2021.

• Fundamentals

Once you have figured out the industry, try to search for fundamentally good stocks in that particular industry. All the stocks in the industry will not be fundamentally good. Concentrate on the profit potential, price/earnings ratio, price/book value ratio, debt level, etc.

• Price level

A multi-bagger stock should have the potential to increase your investment by many folds. So, try to concentrate your research on stocks that are trading at low prices. If the stock is trading at a 52-weeks low level and is fundamentally good, then that can be your next multi-bagger.

Conclusion

Finding the next multi-bagger requires research, risk-taking ability, and patience. The stock that you have identified may fail to provide you with the desired return. So it is always advisable to choose a basket of potential multi-bagger stocks. This diversification will better your chances that at least one will turn out to be a multi-bagger.

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