Stock analysis is an art and science. Research is a very particular concept; even views of Analyst contradict in same stocks.
Generally there are 2 branches of study for finding a Multibagger stock: Fundamental Analysis and Technical Analysis.
1. Fundamental Analysis: Some Analyst prefers the past annual reports, scan the financial statements, do ratio analysis, etc. But we believe balance sheets or financial statements alone should not be considered, to filter multibagger stocks, as they are never fully transparent. It’s incompetent to deliver the view of companies actual finances, there are multiple means to manipulate it as it is basically made for tax perspective. So don’t rely blindly on financial statements for picking multibagger stocks.
2. Technical Analysis: Rarely analyst rely on technical analysis for finding Multibagger stocks as Multibagger stocks are long term investments and it is believed Technical analysis is more so for shorter term. Use of Technical Analysis requires even deep knowledge and expertise.
We have discussed here some reliable and simple steps that will surely benefit even the person with poor financial knowledge to filter the multibagger stocks. There is not a one fix way to identify the multibagger stock, one cannot say that watch these parameters and you will be able to identify the multibagger stock. It differs from case to case basis.
Indian equity market has over 3500 listed stocks. It is impossible to have knowledge about all of them. So first we have suggested brief filtration process for selecting sectors that has high potential to generate multibagger stocks. Then we have cited the method to filter stocks from those sectors. Keeping it simple we have not used any financial jargons.
Firstly, list out the name of the sectors which fulfills below two conditions as Multibagger stocks emerge from sector that has huge potential.
1. Sectors that accomplish the countries vision, favorable to taxation policies, in trend of budget policies.
Example: Indian Govt. is worsening tax policies for cigarettes so avoid investment in Cigarette selling companies; Govt.’s focus is on no slum till 2022 so prefer the infrastructure sector related companies like Realty, Metal etc. Summing up you must invest in sectors which are in direction of Govt.’s policies.
2. Sector should be favorable to countries current demand trend.
Example: These days trend is towards digitalization, eating outside, having nuclear families, etc. So companies that caters to these demands.
After selecting sectors now do a confined scan of companies few critical stuffs:
1. From the selected sector find out the companies that are in a startup or high growth phase. Multibagger stocks come from small cap or mid cap companies as they possess highest potential to give exponential growth.
2. Now most important thing is to check out the management of those companies, majority companies will be kicked out in this step. Balance sheet, ratios, figures changes with the change of management. If the entrepreneur and management are good then they are rarest of the rare chances for companies failure. In that consider ethics, experience, leadership qualities, employee and client friendly atmosphere, CSR, etc.
These are few but blasting steps that can help you get superb multibagger stocks. To increase chances of getting good multibagger stocks with blasting returns take advice of expert, contact SEBI Registered research analyst.
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Above article does not guarantee any successful multibagger stocks. Trading and Investment in stock market Involves considerable risk. The analyst shall not be responsible for any losses incurred for acting on this recommendation. Read full disclaimer.