Nifty Tips
What is a "Multi-bagger" Stock?
The term ‘multi-bagger’ is the most over-rated in the world of stock markets. First of all let’s discuss as to what does a multi-bagger mean? The term multi-bagger is used for stock where the price appreciation has been significantly higher than other stocks.
Usually, we measure the returns from a stock price in terms of percentage price appreciation, for example, 30% gains or 40% gains. Whereas returns from a multi-bagger stocks are measured in terms of certain number of ‘times’ of the original investment or more than 100% returns, for example, a stock ‘X’ has appreciated 2 times or 5 times from the price an investor could have bought.
The most common myth about the term multi-bagger is that most of such stocks could be explored amongst small or mid-cap stocks with lower base size. However, that is not true. Investors can as well explore such multi-baggers amongst fundamentally sound large-cap counters but at a time when the valuations are at their cheapest.
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