The word multi-bagger is common in the stock market. Knowing its meaning, everyone goes in search of multi-bagger shares. So first let us explain the meaning o multi-bagger,
What is multi-bagger stock?
A multi-bagger stock is a stock whose price has multiplied many times its purchase price. If the price doubled, it became two baggers, if the price increased twenty times, then it became twenty baggers, and if it increased 50 times, then it became fifty baggers.
Finding a stock that will multiply in the future is like finding a multi-bagger! Finding such a future multi-bagger means studying the stock that has multiplied many times in the past and buying shares by finding similarities between all the previous multi-baggers!
How to find multi-bagger stock?
Many studies investors have discovered a number of methods using this technique. One of them is the world-famous CANSLIM method invented by William O'Neill. Let us now understand this method -
William O'Neill studied multi-bagger stocks in the United States from 1953 to 1985 and discovered seven similarities. The word CANSLIM was made by taking the initials of these seven things to remember.
CANSLIM in detail
C = Current quarterly earnings per share. The company's quarterly profit should have increased by 20%. Each company publishes its accounts every three months. This year's profit should have increased by at least 20% over the same quarter last year. Eg. March 2017 profit should be at least 20% higher than March 2016 profit.
A = Annual earnings per share. The annual profit of the company should have been increasing a lot every year for the last five years.
N = New things (product, management, price). The company may have launched a new product or the company must have new management or the shares of the company should have recorded a new initial high of the price in the stock market.
S = Shares outstanding. The fewer shares available in the stock market for buying and selling, the fewer the number. If demand increases then supply should be less.
L = Leaders. Choose the leading company in that area/industry.
I = Institutional Ownership. The shares of this company should be invested in three to ten large institutions such as Mutual Funds, Insurance Companies, Pension Funds, and Foreign Institutional Investors. Such institutions study in depth before investing.
M = Market Direction. buy when the stock market is booming.
If any stock fulfilling all the above points, then we can say it is a possible multi-bagger stock.