If you have been in the world of stock trading/investing for quite some time, you must have heard the term ‘multibagger stocks’ or ‘multibagger shares.’ This is an important term to understand for every investor who is in the market for exponential growth.
Multibagger stocks are the stocks that give returns multiple times higher than their cost of acquisition, resulting in high profits for the investors. However, the real challenge faced by many investors is to identify multibagger stocks and invest at the right time.
As Suyog Dhavan explains in the video attached below, there are some key attributes that you can consider when identifying potential multibagger stocks. Here are the seven most significant factors to keep in mind when looking for the best multibagger penny stocks for 2025:
1. The Stock Should be Undervalued
This is the first and foremost thing that you must keep in mind. The stock should be undervalued, very little-known, and not much liked by investors. Once a stock is there is news and everyone is investing in it, it’s no longer a potential multibagger, but it has probably reached high prices already.
So, you need to identify stocks when they are ignored by everyone. They might have been overlooked due to the underperformance of the entire sector, but over time, these stocks can deliver high returns.
2. The Stock Should be Under Researched
Stocks under observation should not be covered by many analysts. Once analysts start doing research, the information about these stocks is published in papers, media, etc. But in that case, the stock is no longer undervalued as this is when more and more people will buy it. So, you must do your research and find these stocks before analysts find them. That’s when the maximum discount is available, and you can buy a few stocks at the most affordable
3. It Should Not Be Held by Any Institutions
No institutions like mutual funds should be holding that stock. It’s a great sign that nobody knows the stock, and it is undervalued. As Suyog Dhavan says, “It’s already too late if a mutual fund holds that stock. Mutual funds are always late as they are restricted by certain rules and regulations.” So, if you plan to invest in multibagger stocks, check and make sure that it is not held by any mutual fund or other institutions.
4. Most Hated Stock
This might sound confusing, but yes, you have to look for stocks that are hated by investors. There are stocks that consolidate for months or years but never show a rise in their share prices, even after a significant rise in the company’s profitability. This is a particular situation where the stock is out of favor, and nobody wants to buy that because its price has not moved in years.
Those who hold it now hate it as it gave no returns for years. These can be potential multibaggers. Just look for a sign of trigger that can help the stock unlock its value.
5. Single Segment Companies & Niche-Specific Companies
Companies that sell a single product or single segment companies have a high potential of becoming a multibagger compared to conglomerates. Standalone companies are easier to value and have better chances of good valuations or exchanges.
On the other hand, conglomerates have a lower chance of high profitability as it is less likely that all businesses will perform well simultaneously. As Suyog Dhavan says, it’s better to invest in niche-specific companies as they are highly likely to beat the competition.
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6. Market Leader in Its Segment
The company should either be the market leader in its segment or must be the second best. Companies that are best in their segment generate higher profits, which can result in high returns for the investors. Being a market leader means having strong fundamentals, a well-established position in the market, and sustained growth. If not the best, it should be at least the second best or a reputed name in its segment.
7. Equity Size Should Not Be Huge
Based on his personal observation of several years, Suoyg Dhavan says that stocks with lower equity size have a higher potential to become multibaggers. The best multibagger stocks are often the ones with smaller equity sizes. Companies with a lower equity size often show rapid growth. However, if all other factors seem well enough to ignore the equity size, you can still go for a bigger equity size.
Learn More About Multibagger Stocks and Get the Right Guidance at Strategic Alpha
As you enter the world of stock trading, you will find out that there is always more and more to learn out there. One essential concept is multibagger stocks or multibagger shares. By now, you must have understood what multibagger shares are and how to identify potential ones.
But there is much more that you need to know before you actually decide to put your money into multibagger penny stocks. You can learn all of this at Strategic Alpha by joining our live workshops or becoming a part of our Conviction Club, where you get personalized investment guidance and mentorship.
