No stock is specifically created to be a multibagger when it first enters the market. There are some traits and signals that eventually make it a multibagger.
Identifying multibagger stocks can be challenging, and before you understand that, you should know what actually turns a stock into multibagger stocks. Are there any specific characteristics of multibagger stocks? Well, we can say yes; there are a few factors that make a stock a multibagger.
As Suyog Dhavan says in the attached video, “You have to buy when nobody is buying, i.e., no one knows about that multibagger stock.” This is the most basic and foremost thing you need to keep in mind when investing in multibagger shares.
Further in this blog, we will help you understand some key traits of a stock becoming a multibagger (based on what Suyog Dhavan explains) so that you can identify potential multibagger penny stocks for 2025 and make the right investment decisions:
Stage 1: Nobody wants or holds the stock
Stocks that are often ignored and hated by investors end up becoming multibaggers over time. There can be shares of companies that are actually doing well and have a profitable business, but their share price never goes up.
A reason behind this can be that nobody wants to buy that stock or nobody has recognized its potential so far. If you have recognized it, it may give a different turn to your stock trading journey.
This stage is the best time to buy a multibagger stock. But keep in mind that the stock must be unpopular and should have a growth potential.
Stage 2: Buying of shares from informed investors
If informed investors and experts are buying shares that are not in the limelight and have not given any significant returns in the past, maybe it’s a signal that they know its potential.
They might have analyzed the stock based on the company’s performance and started buying it. It’s still a good time to buy multibagger stocks when some informed traders are buying it, but it’s not very popular or not yet in the news.
Stage 3: News planted in media/papers
Then comes stage 3, where the stock is no longer hidden from investors. Now the news of that stock’s potential is all over there is newspapers, media channels, etc. This is where people may overbuy these multibagger shares. When the stock reaches this stage, it has probably already increased to a significant extent.
Stage 4: Mutual Funds start buying the stock
Mutual funds are too late when it comes to buying multibagger stocks. So, if mutual funds have started buying a particular stock, that is its stage 4 of becoming a multibagger.
Now you can say that the stock has already become a multibagger. As Suyog Dhavan explains in a previous video, it’s no longer a good idea to invest in multibagger stocks when mutual funds buy them because mutual funds are very late due to their policy restrictions.
Stage 5: Research reports are circulated
Now that the stock is already popular and its liquidity has been increased after mutual funds buy its shares, researchers start publishing reports.
These reports are then circulated in media, among brokers, and in newspapers. This further results in more and more people knowing the stock. This is when HNIs (High Net Worth Individuals) enter the stock and invest large amounts in it.
Stage 6: The stock becomes HOT
This is the 6th and last stage, where the stock becomes hot for all analysts and traders. Media channels start posting with bullish stories, and so do analysts. In this stage, the stock becomes overvalued and has a risk of dropping or becoming stagnant. Informed investors exit the stock while small investors get trapped at peak levels in this stage.
Wrapping Up
If you are running behind media stories posting about the best multibagger stocks, you are probably making a big mistake. It’s already too late when analysts and media become bullish about a stock.
To make the most out of a multibagger stock, you should aim to invest in it when nobody knows the stock. There should be no mutual funds holding the stock, and the stock shouldn’t be there is news.
To learn more about multibagger shares and the basics of stock trading, you can consider attending the online workshops conducted by Strategic Alpha.
Or you can also join the Conviction Club, which is a large online community of investors and mentors who share their experiences and learning from each other to make informed trading decisions. To know more, get in touch with us now!
I have something very exciting for you!! I am bringing to you the most awaited content which will help you in your journey towards financial freedom. As demonstrated by my Stock Picks.
My Focus is Finding Potential Multibaggers and Investing in them Inspired by Warren, Peter Lynch, Mohnish, Porinju. I write about a company only if it has a reasonable chance of becoming a multibagger in 2-3-5 Years’ time.
This Video is a Part of a Multibagger Workshop that I took for the Strategic Alpha Mentorship mentees.
This Youtube Video Will Cover the Following Aspects:
1)What is a Multibagger?
2)Why are Multibaggers Important?
3)How can Multibaggers Lead to Financial Freedom?
4)How does a Stock Becomes a Multibagger?
5)How to Find a Potential Multibagger?
6)How to Make the Most of a Potential Multibagger to Create Fortunes for Ourselves?
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