Guide To Finding Multibagger Stocks For 2017

Multibagger Stocks Meaning

Peter Lynch, the highly respected manager of Fidelity Investments Mutual Fund, coined the word “multibagger stock” in his books One Up on Wall Street and Beating the Street.

The term became very popular amongst investors because Peter Lynch gave practical examples of how companies that we use in the daily life like McDonalds, Dunkin Donut, Walt Disney, Ford Motor Co etc are great investment opportunities and give huge gains to shareholders.

The reference by Peter Lynch was to stocks which can give a return which is several times the investment made in them.

So, a stock which gives a gain of 200% and returns 300% of the investment becomes a 3-bagger. A stock which gives 10 times the investment is called a 10-bagger.




Meaning Of 100-Baggers

The concept of 100-baggers was made popular by Thomas Phelps in his book “100 to 1 In The Stock Market”.

Thomas Phelps referred to stocks which the potential to give 100x the investment made in them. Phelps gave several examples of such stocks and also gave a detailed explanation on the process that should be adopted by investors to find such stocks.

Penny Stocks, Micro-Cap & Small-Cap stocks

Generally, multibagger stocks are to be found in penny, micro and small-cap stocks. The reason for this is simple. These stocks have a smaller market capitalisation and find it easier to double and triple their net worth in a short while.

For, example a stock with a market capitalisation of only Rs. 100 crore can easily grow to a market capitalisation of Rs. 500 crore and give investors a 500% return.

In contrast, large-cap companies will find it very difficult, if not impossible to give multibagger returns to their shareholders.

Examples of multibagger stocks in India

There are several stocks in India which have given 10x and even 100x returns. Most of these stocks belong to the penny and small-cap space.

Caplin Point Laboratories is one example of a stock which has given a 10x return in a short period of time. Caplin Point manufactures pharmaceutical products and exports them to Venezuala and other Latin American countries.

Another example of a multibagger stock is Uniply Industries. The stock has attracted marquee investors like Radhakishan Damani, Ramesh Damani and Vallabh Bhanshali and has given a return of 1400%.

There are several other examples of stocks which have become multibagger and created huge wealth for investors. Stocks like Ajanta Pharma, Alembic Pharma, Mangalam Drugs, Intrasoft Technologies, Lanco Industries (Srikalahasthi Pipes), Shreyas Shipping, Page Industries, Hawkins Cooker, PI Industries etc are examples of such stocks.

How To Find Multibagger Stocks

Generally speaking, one has to hunt for such stocks in the penny, micro and small-cap space. Such stocks have a low market capitalisation which makes it easier for them to grow exponentially.

Moat

One has to find stocks that enjoy a moat from the competition. The moat can be in the form of a technological advantage or a marketing advantage. Basically, the company must be able to fend off competitors from laying stake to the market.

High RoE Companies

It is a common feature of penny and small-cap stocks which are growing fast that they will enjoy high rates of RoE. The RoE must be in excess of 20% to be attractive. The high RoE shows that the Company is growing in a profitable manner and that the growth is not coming at the cost of profits.

It is elementary that if a company does not make profit and instead suffers a loss, it will soon run out of capital and will have to go for liquidation and be wound up.

In fact, several companies in the e-commerce space have chased high growth at the cost of profits. Such a strategy is not sustainable in the long run and has resulted in the closure of these companies.

Examples of such companies are Local Banya, Tiny Owl, Grofers, Hola Chef etc.

Characteristics of multibagger stocks

The following are the salient features that all potential multibagger stocks display

(i) The Company offers a product or a service that is unique or innovative and for which there is a lot of demand and not much competition;

(ii) The size of the opportunity should be huge in relation to the size of the Company;

(iii) The Company should enjoy high profitability which will be reflected in the RoE levels;

(iv) The promoters should be highly committed and able to steer the Company to new heights through hard work and perseverance;

(v) The promoters must have the honesty and integrity to want to share the gains of the Company with the shareholders;

(vi) The Company should have low debt or be debt-free.

Multibagger Stocks 2017




The following five stocks are small-cap stocks with excellent quality of management and high RoEs. They have a huge scale of opportunity ahead of them. These stocks have the potential to give multibagger returns in the future as well.

(i) Caplin Point Laboratories;
(ii) Shaily Engineering Plastics;
(iii) Vidhi Dyestuffs;
(iv) Apcotex Industries;
(v) Oriental Carbon;
(vi) Adi Finechem;
(vii) Astec Life;
(viii) Prima Plastics;
(ix) Heritage Foods;
(x) Capital First.

Multibagger Stocks 2016

The following stocks have already given huge returns in 2015 and 2016. However, they are of such good quality of management and have such a dominant command over the market that they can be expected to give excellent returns in the future as well.

(i) Pricol
(ii) LIC Housing Finance
(iii) Repco Home Finance
(iv) VST Tillers Tractors
(v) Bharat Electronics

Experts in multibagger stocks

There are a number of experts who have mastered the subject and are able to find stocks that give huge gains. Their names are as follows:

(i) Rakesh Jhunjhunwala and Radhakishan Damani

Rakesh Jhunjhunwala and Radhakishan Damani became billionaires by buying small-cap stocks which became large-cap stocks. The present size of the portfolio of Rakesh Jhunjhunwala and Radhakishan Damani is so great that they can no longer invest in penny or micro-cap stocks. Even small-cap stocks are out of bounds for these investors. They can invest only in large-cap stocks.

(ii) Dolly Khanna/ Rajiv Khanna

Dolly Khanna and Rajiv Khanna have made a large number of investments that have become very big success stories. Dolly Khanna has made a lot of money in stocks like Cera Sanitaryware, Hawkins Cooker, Avanti Feeds etc.

(iii) Vijay Kedia

Vijay Kedia has also made a large number of investments which have proved to be big winners. Vijay Kedia is famous for stocks like Atul Auto, Sundaram Chemicals, Repro, etc where he has made a fortune.

(iv) Porinju Veliyath

Porinju Veliyath has a Portfolio Management Service called Equity Intelligence. He has made a lot of money by buying penny and small-cap stocks.

Porinju Veliyath has recently recommended stocks like Future Consumer, DCM Shriram, Tata Global Beverages, Biocon, Jubilant Life Sciences, Emkay, NIIT, HSIL, Transport Corporation etc.

(v) Basant Maheshwari

Basant Maheshwari is a well-known stock advisor. He runs a Portfolio Management Service called Basant Maheshwari Financial Services. His favourite stocks are Granules India, Ujjivan Financial, Equitas Holding, Repco Home Finance etc.

(vi) Mudar Pathreya

Mudar Pathreya writes a column in Business Standard where he recommends penny, micro and small-cap stocks for investment. Some of Mudar Pathreya’s recent stock recommendations include Mercator, Sumeet Industries, Lakshmi Foods, Alphageo, Caplin Point Labs, Indo Count Industries etc.

Several other experts who have made a fortune from buying penny, micro and small-cap companies include Ramesh Damani, Kenneth Andrade, Kalpraj Dharamshi, Madhusudan Kela, Shyam Sekar, Sunil Singhania, Ambareesh Baliga, S. P. Tulsian etc

Download Multibagger stock research reports

The research reports prepared by leading brokerages like Sharekhan, ICICI-Direct, Motilal Oswal, Religare, Kotak Securities etc are available for download.

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Comments (63)

  1. Prakash

    Guj alkalies 320 shares @398 hold or sell,if sell other better multibagger stocks to invest

    Reply
  2. Jose Abraham

    Is the bull run in specialty chemicals stocks over? They are showing signs of weakness? Is the disrupted Chinese production back on track? What are the outlook for these stocks?

    Reply
  3. koushik

    koushik

    Reply
  4. Raj

    Future of sun pharma, lupin?? Hold or sell

    Reply
  5. Raj

    How is the future for established pharma companies? Like sun, lupin, torrent etc

    Reply
  6. shweta

    very informative

    Reply
  7. Abhijit

    1)What about Hindustan motors after selling his brand to PEUGEOT company.

    Reply
  8. DILEEP KUMAR

    Suggest about mblinfra 400 sh/144 rs.
    What we do now
    And lupin at rs 1700

    Reply
  9. Deepak

    Sterling international cmp @1.7 tgt 10 .. 1 year time

    Reply
  10. Pavan

    How is marksans pharma for long term?

    Reply
  11. Prof Swapan

    Please suggest 5-10 small/micro Multi bugger stocks for long term holding

    Reply
  12. rohit prajapati

    infosys 150
    icici bank 500
    sun pharma 300
    aurobindo pharma 100
    tata motor 100
    sintex industris 300
    reliance industries 100

    Reply
  13. Arun Kaul

    can you advise on the following :

    Rasoya Proteins Ltd.
    Ambuja cements

    Reply
  14. krishna p

    I have the following shares and would like to hold for at least 5 years.Would like to know if they can give multibagger returns.
    i have been holding last two years ,request you to suggest need to change any of them.

    ADF FOODS LIMITED 100
    CHENNAI PETROLEUM CORPORATION LTD. 230
    CUBICAL FINANCIAL SERVICES LIMITED 4
    DCB BANK LIMITED EQ 90
    DISH TV INDIA LIMITED 110
    DISHMAN PHARMACEUTICALS AND CHEMICAL 180
    GVK POWER & INFRASTRUCTURE LIMITED 6.35
    HBL POWER SYSTEMS LIMITED 40.00
    HIMACHAL FUTURISTIC COMMUNICATIONS 14.50
    IDBI BANK LIMITED EQ 85.15
    IDFC BANK LIMITED 61.65
    IDFC LIMITED 54.85
    INDIAN OVERSEAS BANK 28.20
    KWALITY LIMITED 137.75
    NARAYANA HRUDAYALAYA LIMITED 334.05
    PENNAR INDUSTRIES LIMITED 43
    PITTI LAMINATIONS LIMITED 50
    PNB GILTS LIMITED 40
    SHREE RENUKA SUGARS LIMITED 15
    RASOYA PROTEINS 1.50
    SUZLON ENERGY LIMITED 20
    TVS ELECTRONICS LIMITED 200
    UNION BANK OF INDIA 187

    KM SUGAR 22
    NETVISTAIT 3.72
    VIJAY TX 50
    ASHOK LEYLAND 90
    IBVENTURES 50
    SYNCOMF 2.00
    MARKANS PHRAMA 50
    NAHA POLY 70
    VEER ENRGY 25
    ALOK INDUSRTIES 3.00
    BPL 70

    Reply
    1. michael (Post author)

      I think commodity stocks like sugar are avoidable because they are cyclical stocks. Some stocks appear to be low quality e.g. Cubical is a penny stock. GVK Power, HBL Power etc also appear to have doubtful pedigree. I suggest you create a filter that only stocks with a RoE in excess of 15% over the past two years, with a debt-free status or a low-debt status will be considered. This will eliminate loss making concerns and junk stocks. You can invest 80% in such high quality companies and keep the balance of 20% for investing in unproven stocks which may become multibaggers.

      Reply
    2. SANJIB

      YOU CAN CONSIDER THE FOLLOWING
      JUBILANT LIFE SCIENCES
      MANAPPURAM FINANCE
      KARNATAKA BANK
      UNIPLY
      SUDARSHAN CHEMICAL

      Reply
  15. krishna

    can i hold netvista information technology stock ..now trading at 3 rs

    Reply
    1. michael (Post author)

      Such stocks are not investment worthy and cannot create serious wealth in the long run. It is better to invest only in companies with a proven track record, high ROE and with management of good pedigree.

      Reply
  16. Uday

    Myself Uday I am a new Investor to stock market. I have just booked profit of 28k in idea share and I am really happy and want to invest more.i am looking for multibagger stocks Can you suggest some for me.

    Reply
    1. michael (Post author)

      Congrats for the heavy gains. Hope there will be many more to come your way 🙂 I suggest you build a complete portfolio with small and mid-cap stocks from various sectors. In the NBFC space, Manappuram Finance is a good choice. It has Dolly Khanna as a major shareholder. You can also look at Prima Plastics, TCI Express, Veto Switchgears, L&T Finance Holdings. These are well managed companies with an excellent track record for growth and profitability. Good Luck!

      Reply
  17. Abhijit

    Can s h kelkar be multibagger

    Reply
    1. michael (Post author)

      SH Kelkar is an excellent small-cap engaged in the manufacture of fragrances which are used in a variety of products. The Company has a long track record of growth and profitability. The Company is one of the largest domestic fragrance and flavour companies by revenue with a market share of 12% in CY13. The estimated size of Indian fragrance industry and Indian flavour industry was ~Rs 2090 crore and ~Rs 1715 crore, respectively, in CY14. It is the largest domestic fragrance producer with a market share of 20.5% in CY13. It exports its fragrance products to 52 countries. Fragrance It has four manufacturing facilities in Raigad and Mumbai in Maharashtra, Vapi in Gujarat and Barneveld in the Netherlands with a total installed manufacturing capacity of ~19800 tonnes annually. So, it is a very good investment candidate stock.

      Reply
  18. Minakshi

    I have the following shares and would like to hold for 1 years. would like to know if they can give multibagger returns. Do I need to change any ?

    1) Meghmani Organics
    2) NBCC
    3) Linc Pen and Plastics
    4) Redington (India)
    5) Prakash Industries
    6) SJVN
    7) Fedders Lloyd

    Reply
    1. michael (Post author)

      All the stocks are of very high quality. They will do well over time. However, one year is a very short period for the stocks to show their mettle. You have to hold for at least three or five years for the gains to compound.

      Reply
  19. mohan

    Myself mohan I am a new Investor to stock market. Can you suggest some good stock for 1year horizon.

    Reply
    1. michael (Post author)

      Congrats for deciding to invest in equities. If you are young in age, it is better to think long term of three to five years rather than just for one year. There are several top-quality small and mid-cap stocks that you can look at. Look at stocks like Astec Lifesciences, Apcotex, Cosmo films, Cera Sanitaryware, Kajaria Ceramics, Manappuram, L&T Finance, Adani Transmission, Minda Industries, Apar, Fiem Industries, Prima plastic, SP Apparels, Shaily Eng, Srikalahasti Pipes, TCI Express, Veto Switchgear etc.

      Reply
  20. Pankaj SHAH

    What are you views on:
    1. Uniphos Enterprises
    2. Balkrishna Paper Mills
    3. Excel Care crop

    Reply
    1. michael (Post author)

      All three are very good stocks. Excellent management capabilities and good product line up. I would have no hesitation in buying these stocks. They are bound to do well over the next three to five years.

      Reply
  21. Praveen

    I have the following shares and would like to hold for at least 5 years.Would like to know if they can give multibagger returns. Do I need to change any ?

    1.Bharat electronics(Bel) at 1214
    2.Pnbhousing at 835
    3.Atul auto at 617
    4.Bhageria industries at 158
    5.Bpl at 76
    6.Equitas at 120
    7.L and T at 992
    8.Mayur uniquoters at 435
    9.Motherson sumi at 339
    10.Persistent Systems at 670
    11.Shakti pump at 222
    12.Sun pharma 743
    13.Trf at 393
    14.Ujivan at 210
    15.V guard at 163
    16.Gabriel India
    17.Plastiblend at 490
    18.Apar industries at 638
    19.Sterlite technologies at 111
    20.Eros media at 176
    21.Icici prudential at 354.5

    Im thinking of buying LICHFL and Bhel by selling some of these stocks. Please suggest.

    Reply
    1. michael (Post author)

      Do you really want to keep the large-cap stocks like L&T, Sun Pharma etc in the portfolio? These can be replaced with mid-cap stocks which are of equal credibility in terms of management quality but with better growth prospects. The existing mid-cap and small-cap stocks in the portfolio are of good quality. You can consider allocating the funds from the large-caps to these stocks.

      Reply
  22. Jagat

    Very good article.thnks

    Reply
  23. Jose Abraham

    I have the following shares and would like to hold for 4-5 years. would like to know if they can give multibagger returns. Do I need to change any ?

    1. ADF Foods at Rs 129/-.
    2. Astec Lifesciences at Rs 230/-
    3.ABFRL at 152/-
    4. Apcotex at 320/-
    5. Cosmo films at 396/-
    6.Manappuram at 78.5/-.
    7. Minda Industries at Rs 310/-
    8. Omkar Special at 163/-
    9.Prima plastic at Rs 234/-
    10. Repro India at Rs 427/-
    11. Ruchira at Rs 116/-
    13.SP Apparels at 331/-
    14.Shree Pushkar at 126/-
    15. Shaily Eng at 520/-
    16/-Srikalahasti Pipes at 317-
    18.TCI Express at 320/-
    19. TCI at 160/-
    20.Vetoswitchgear at 157/-

    Reply
    1. michael (Post author)

      It is a superb portfolio of the best small and mid-cap stocks. I want to use it as a Model portfolio. The only change is that I would remove TCI because TCI Express is already there and it may be a duplication.

      Reply
  24. Padmanabha Hegde

    I have following shares and would like to hold for at least 2 years please offer your remarks. Whether these can become mtibaggers?

    1. Geecee Ventures at 133

    2.Kanpur plastipack at Rs. 100

    3.Sree Rayalaseema Hypo at 136

    4.PNB gilts at Rs. 46

    5.Rishiroop at 38

    6.Swasti vinayaka art and heritage at 3.20

    7.Nitin spinners at 70

    Reply
  25. Jose Abraham

    Can Ester industries be a multibagger

    Reply
    1. michael (Post author)

      Ester Industries is a good stock for investment. Ashish Kacholia has invested in 1,503,121 shares in December 2016 quarter.

      Ester Industries plans to spend Rs 50 cr for new R&D centre in Gurgaon. It is engaged in the manufacturer of polyester films & engineering plastic compounds. Ester Industries markets its engineering plastics under the brand name Estoplast and production capacity of 16,500 MTPA.

      However, the Company has poor return ratios. It has made a loss. If the operations turn profitable it can be a multibagger.

      Reply
  26. Prakash

    Hi am new investor holding TCS SHARES @Rs2299 59 share its getting down hold or sell with loss

    Reply
  27. Prakash

    Hi am new investor holding TCS SHARES @Rs2299 59 share its getting down hold or sell with loss

    Reply
    1. michael (Post author)

      TCS is a blue chip mega cap with market capitalisation of 450,725 crore. Over two years the stock has lost 8.49%. Over one year, the stock is flat. It is unlikely that the stock will see much upside in the near future due to macro economic challenges. It is better to shift to a small-cap or mid-cap stock like Persistent, Tata Elxsi etc.

      Reply
  28. Pawan patil

    Hi an new in share market and I want to invest for next 5 year.please suggest me witch stock should I purchase in this year for get more profit

    Reply
    1. michael (Post author)

      It is best to buy blue chip small-cap and mid-cap shares with a good track record of profitability and growth. You can look at Prima Plastics, Balaji Amines, Kuyoko Camlin, Linc Pen, ADF Foods, Vidhi Dyestuffs etc.

      Reply
  29. Pawan patil

    Hi an new in share market and I want to invest for next 5 year.please suggest me witch stock should I purchase in this year for get more profit.

    Reply
  30. KALAI

    Please suggest three penny stocks time frame 3 years
    I hold 300 shares of Rattan power @ 45 IPO stock .How long should i hold that

    Reply
    1. michael (Post author)

      Rattan Power is looking very weak. Not sure about its prospects. I suggest a shift to micro-cap stocks like Prima Plastics, Vidhi Dyestuffs, ADF Foods, Panama Petrochem. These are good stocks with good management.

      Reply
      1. KALAI

        Thank you sir
        Any penny stocks you suggest
        Thanks

        Reply
        1. michael (Post author)

          It is better to avoid penny stocks because of risks of corporate governance. It is better to invest in small-cap stocks. These have a proven track record. The capital is safe and there is also a possibility of good growth in such stocks.

          Reply
  31. RAKESH SUTAR

    Please give me TGT for following Stocks I will Hold such stocks for next 2 years
    FIEM INDUSTRIES
    MARICO
    HERITAGE FOOD
    GARWARE WALL ROPE
    JK PAPER
    BHARAT FINANCIAL INCLUSIONS
    WEST COST PAPER
    PHILLIPS CARBONS

    Reply
    1. michael (Post author)

      FIEM is a very good portfolio stock. It is a good buy. Stock should give at least 60 – 80% gain over two years.

      Reply
  32. Naresh Panchal

    Hi Basant Maheshwari, I have Granules bought at Rs. 123/- in Oct 2015, currently it is down to 106. What should I do? Should I hold? if yes up to what price I should hold? if exit then what price?

    Reply
    1. michael (Post author)

      The stock is down because of regulatory problems with the FDA of Portugal. However these problems are temporary and the stock will spring back. Continue to hold.

      Reply
  33. Kiran

    Very good article

    Reply
  34. Mukesh

    These are good stocks for the stock market

    Reply
  35. TANUJ SINGH

    Mahesh P. Parikh ji….
    You can go for MOSCHIP,
    DUCON
    MANGALAM DRUGS
    TVS ELECTRONICS

    Reply
  36. Mahesh P.Parekh

    Please suggest two / three Multibagger shares I want to invest . I can hold for long time.

    Reply
  37. Pravin

    I have invest 500000 rupees which one is the best penny stocks

    Reply
  38. jaimin

    i want to invest 200000 lack ropees for 2017. which is best stocks for me?

    Reply
  39. Praveen

    Pls give your views on GTL infra

    Reply
  40. rn singh

    Please guide me for 5 stocks as multibagger for 2017

    Reply
    1. AXVV

      LIC Housing Finance Limited(Watch)
      Repco home finance
      Caplin point laboratories
      VST Tillers Tractors
      Bharat Electronics

      Reply
    2. Alok

      Buy #peeceecosma, #zeemedia, #walchadnagar, #rcf, #hcc & #sterlitetech

      Reply
  41. tejas

    l want too multibagger stock next five year

    Reply
    1. MAK

      Go for VRL Logistics.A Cash rich logistic company with high ROI in the coming years.

      Reply
  42. Pramod

    Is Karnataka Bank a good stock to buy now? It has opened a rights issue.

    Reply

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