This article is very helpful for every investor. In India, more than 5500+ companies are listed in the stock market. If you go to find 4-5 stocks in your portfolio it becomes hard to find the best stock in these 5500 companies.so the question is How to Find the Next Multibagger Stocks?
In this article, I am telling you 6 points so you can identify the Multi-bagger stocks.
1- Are Promoters Buying or Selling?
Promotors means the people who have started the company or the founder of the company. Suppose the promoters start selling their own stake, so it can be considered as they do not believe in their own companies or it may be the company does not have well future growth.
if they do not sell their stake so they have considered that they have good faith as well as good business which is growth chances in the future is good.
The question is, how do we have to know that the promotor buys or sells their stakes.
You need to study or research for that. you can check now this on the ticker tape. Go on the deal section on you can see the big transaction who buy or sell the stock in high quantity.
2- Institution investors who Don’t own it yet.
If big Institutions such as Mutual funds, an insurance companies who never invest in a small amount. It means when they invest in any company, they invest in a high amount so it is good for those stocks.
So, you need to find such stock that is not in the news or popular in the market, but the stock you find may have performed well in recent years. So when you find such a company where there is no holding of big investors so you can invest them before big investors invest them.
When Big institutions invest in such companies then they have high chances of giving good returns in the future.
3- Does the Company Have a Recurring Model?
The recurring model means the customers buy products at specific intervals. Like, Amazon Subscription. You need to find such companies so; you can get more returns in the future. You need to do also fundamental analysis.
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4- Identify Sunshine Sectors.
It means Sectors are expected to do well in the future.
When you identify the sunshine sectors then you need to eye on the stocks which are come in the sector which is selected by you.
Check that government policy should be favorable for the sector. You need to do this exercise for 3 to 6 months. suppose your eye is on 3-5 sectors and that which after 3 months 2 sectors are not performing well according to your analysis. then you drop out that sectors which do not perform well according to your research.
5-Shortlist Performing Stocks in The Sunshine Sector.
Now you have to select stocks from each sector which are performed well. Suppose you had selected 03 sectors for analysis so you have to sort out some stock from each sector according to your opinion. generally, I shall be always select 03 stocks from each sector, who performed well.
6- Do Fundamental Analysis and Technical Analysis.
It is the most important part of Find Next Multibagger Stocks.
Whatever stock you chose from different sectors you need to do a fundamental as well technical analysis of those stocks.
Check the company’s balance sheet, financial parameters, etc.
Must check this parameter mentioned below.
1- Average Sales growth of the company for 03 years, which have selected by you must be more than 10%.
2- Profit growth of the company should be more than 10% over the 05 years.
3-Average Return on Equity of the company must be more than 12% over the 05 Years.
4-Average ROCE must be more than 12% over the 05 years.
5- Market Capitalization of the company should be less than 10K crore.
After all analysis you have remained some stocks then you have to decide what time you should enter the stock.
Then you should check the news regarding that stock, do technical analysis, find support and resistance level.