Name: Stock Advisory service In India
Brand: univest
Rating: 4.4 (197000 reviews)

Do you know who invented multibagger stocks? Peter Lynch coined it in his “One Up On Wall Street” book. This title highlighted the stocks that increase multiple times than their original investment value, typically over 100%. No doubt that investors are looking for options with tremendous growth potential and sound management. To identify them, they kept exploring multibaggers to add extra returns to their portfolios. However, a few people still need clarification on what are multibagger stocks and how to identify them. Read the article below to learn everything about these stocks to encourage your investment potential.

Table of Contents

What are Multibagger Stocks?

Multibagger stocks are the low-cost equities that yield exponential returns, typically over 100% over a while. These stocks generally trade on the NSE (National Stock Exchange) or BSE (Bombay Stock Exchange) with great fundamentals. One must possess excellent research and analytic skills to pick multibaggers from the big basket of shares in the Indian stock market. However, these investments might prove to be speculative in some cases, as a few stocks reflect an economic bubble that might impact financial markets adversely.

Features of Multibagger Stocks

The above section is all about what are multibagger stocks. Now is the time to understand the features of these stocks deeply so that you can invest potentially. Explore some of the key features of stocks with tremendous growth potential.

Robust Financials

Multibaggers typically reflect the potential to increase their YoY (Year-Over-Year) revenues or profit margins. Improved financial margins could be the best factor in deriving stock prices with upward movement. Strong financials of multibagger stocks might encourage liquidity and trade volumes.

Growth Potential

Multibagger stocks, the name itself indicates stocks with high growth potential. These shares generally belong to the organisation operating with scalable business models. It helps the management team influence their target customers and product segment. Expansion of companies into new markets specifically leads to exponential growth in stock prices.

Differentiated Products

Multibagger stocks offer unique products in different market areas. It offers them additional competitiveness against other companies operating in the identical market. The addition of innovative products into a portfolio or offering of unique items encourages most investors to trade in the stocks.

Undervalued

Multibagger stocks are generally undervalued. One can invest in these stocks with small capital investment or place an order at low prices to buy bulk quantities. The future growth potential of these stocks is still pending to be priced in. Moreover, technical indicators like PE ratio, EPS, PEG ratio, PB ratio, dividend yield, etc., also reflect the undervaluation nature of these multibagger stocks.

Operational Excellence

Multibagger stocks generally involve operational excellence and leveraging innovative technologies to grow in a fast-paced, competitive environment. These companies are able to maximise their profit margins and returns on investment. Moreover, the adoption of cutting-edge technologies in these organisations will make them multibaggers in the coming decades.

How to Identify the Multibaggers Stocks?

To identify whether the stocks are multibaggers or not, investors can closely monitor different factors. These include.

Strong Management: Professionals working to manage the daily operations of a company play a vital role in its growth and expansion. Look who is leading the organisation and its management. A strong management team could help businesses navigate economic slowdowns in advance and might encourage investors’ trust. As a result, the stock will likely deliver multibagger returns in the coming decades.
Long-Term Orientation: Investing in multibagger stocks could generate wealth, but make sure that you might have to wait for longer durations. It takes time to grow. And holding a stock in the long run would benefit individuals with higher returns. Be clear about the holding period before investing in such stocks.
Competitiveness: Multibagger stocks should have the ability to sustain a competitive edge in the market. Assess the competitiveness of the business organisations to know whether the stocks could become multibaggers or not. To analyse a company’s competitive strengths, you can consider different factors like production cost, scalability, strong leadership, IPRs, supply chain management, and research efficiencies.
Growing Industry Exposure: To check whether stock could deliver multibagger returns or not, consider the industry in which the associated company is operating. For example, currently, the solar energy sector has strong growth potential for 2025, as the government and private sectors are promoting it. Thus, investing in solar stocks might offer you a multibagger opportunity to generate higher wealth. Invest in stocks operating in strong industries to feel resilient during economic downturns.

Also Read: Best Multibagger Stocks For Next 5 Years in India

Risks Associated With Multibagger Stocks

Investing in multibagger stocks could be a stepping stone to building wealth. However, they also come with multiple associated risks. For example, stocks that could be multibagger are available to be purchased in bulk. It might incur significant losses due to uncertain market sentiments.

Another risk of investing in these stocks could be a trap to an economic bubble. Some multibagger stocks trade at a high price and reflect the creation of a bubble. Remember, one bubble pop might incur a huge loss in your capital investment.

Note: Invest with careful consideration so as to generate tremendous returns from multibagger stocks.

Why You Should Invest in Multibagger Stocks?

Multibagger stocks are popular because of their high growth potential. They can typically generate higher returns of more than 100% over a specific time period. For example, if you invest ₹1000 in multibagger stocks and realise a profit of ₹10,000, it will be considered as tenbagger stock. One must consider high patience when investing in these stocks. It takes time for the company to grow and expand its product segments. A rise in the company’s fundamentals and financials can directly benefit investors in terms of high stock value. Thus, investing in these stocks could be an ice on the cake.

How to Invest in Multibagger Stocks?

Investing in multibagger stocks is not a complex procedure. Investors should consider the steps mentioned below to make a diversified investment portfolio.

Step 1: Open a demat account and consult a financial advisor like Univest to choose the best investment option.
Step 2: Research stocks that could be multibaggers in the coming decades.
Step 3: Select the quantity or stock and place a buy order through your demat account.
Step 4: Track your returns in the portfolio section and have some patience to generate tremendous returns from the best multibagger stocks.

Alternative Investment Options

Individuals with low-risk tolerance should consider investing in different options other than multibagger stocks. Here are some of the alternative investment options to consider for a safe and diversified portfolio.

Debt Funds

For risk-averse investors seeking stability and consistent returns, investing in debt funds instead of multibagger stocks could be a good decision. Debt funds, with less volatility than equities, invest in bonds and fixed-income instruments. They are perfect for protecting money since they are usually safer and provide a consistent income in the form of interest payments. Multibagger stocks could be riskier and more volatile than other stocks, but it has the potential to expand exponentially. Investing in such stocks may provide huge gains, but there is also a strong chance of suffering major losses, particularly during volatile market circumstances.

Conversely, debt funds are much more conservative in investment and less exposed to the whims of the market. Thus, they are suitable for conservative investors or those with a short investment period. While a diversified portfolio may be a balance between development and security, if stability and capital protection are the goals, debt funds may be a better choice.

Hybrid Funds

Hybrid funds might be a more balanced option for investors with intermediate risk tolerance than multibagger stocks. Hybrid funds combine fixed-income and equity instruments, which provide diversification and lower total risk. Even though these multibagger stocks have a lot of room to expand, there is a lot of risk and volatility involved. Hybrid funds offer the opportunity for steady growth at a relatively lower risk, which makes them ideal for investors seeking stability and capital growth. Hybrid funds offer a more reliable but lucrative alternative to multibagger stocks for investors seeking modest returns without being too exposed to market swings.

FAQs for Multibagger Stocks

What are multibagger stocks?

Ans. Multibagger stocks are shares that yield tremendous returns, typically more than 100% over a time period. These stocks generally come with immense growth potential and lower costs to offer the highest possible returns. Remember that research is the only way to safeguard your investment portfolio against several risks associated with the stocks.

Is investing in multibagger stocks risky?

Ans. Investing in multibagger stocks could be a good fit to diversify your portfolio. However, it also comes with several risk factors. These include pump/dump schemes, asset bubbles, significant losses, and bluffing threats. Invest with careful consideration to eliminate these risks from your investment journey.

How to identify multibagger stocks?

Ans. Different factors must be considered to identify whether the stocks are multibaggers or not. These include a strong management team, growing industry exposure, high competitiveness, and long-term strategies. Moreover, you can assess the growth potential of the stocks through technical analysis. Consider the parameters like PE ratio, EPS, ROE, ROCE, etc.

Who should invest in multibagger stocks?

Ans. Investors with high-risk tolerance and high patience should invest in multibagger stocks. These stocks generally have low prices and high growth potential to deliver seamless returns over a specific time period. It is essential to invest with proper research on the stock’s financials and technical indicators.

Explore for more details:

Top Multibagger Stocks Based on 1-Year Returns

Stocks	CMP (in ₹)	Market Capitalisation (in Cr.)	1-Year Return (in %)	52-Week High (in ₹)	52-Week Low (in ₹)	PE Ratio
Shri Adhikari Brothers Television Network Ltd.	1,493.75	3,950	4,9691.67	2,176	3.00	0
Technvision Ventures Ltd.	3,550.00	2,210	545.81	4,597.00	549.70	127.07
Marsons Ltd.	218.05	3,660	2,543.03	349.40	8.25	274.95
Shakti Pumps (India) Ltd.	1,120.95	12,790	564.07	1,120.95	165.70	38.89
Garware Hi-tech Films Ltd.	5,106.25	11,650	272.20	5,294.30	1,371.90	38.04
Abhishek Integrations Ltd.	82.35	49.60	205.00	115.00	27.00	64.47
Kalyan Jewellers India Ltd.	775.85	79,080	113.91	775.85	330.00	126.21
JSW Holdings Ltd.	16,113.80	17,000	213.30	19,420.20	4,995.45	70.78
Neuland Laboratoratories Ltd.	14,294.10	17,610	160.99	17,846.35	5,381.75	62.98

*Data is updated as of 1st January 2024.