Multibagger stocks defined

Here’s your guide to those elusive multibagger shares.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Everyone dreams of picking up a multibagger, don’t they? The name is attributed, in the form of “tenbagger”, to Peter Lynch, the author of One Up On Wall Street (which is an excellent read, by the way). If you keep at it for long enough, you’ll probably snag at least one during your investing career — and very possibly a good few more. But what are they, and where should you look for them?

Before I answer that, I’ll offer a few words of caution. Over the 30 years of my investing career, people have asked me many times for tips for shares that will double, treble and more in a very short time. But I always tell them I don’t know of any (if I did, I’d be retired now) and that all I can suggest is some that stand a good chance of doing it over the next 10 years or more.

So what is it?

What is a multibagger? If a share price climbs by 200%, is that a 2-bagger? Is a 500% gain a 5-bagger?

Should you invest £1,000 in M&G right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if M&G made the list?

See the 6 stocks

Actually, no, that’s not what investors usually mean. What you need to do with a share that has gone up is divide the current price by the original price, and that’s how many “bags” you’ve got. So if a share has risen from 100p to 200p, dividing it gives you 2, and you’ve got yourself a 2-bagger — it’s gained 100%, it’s 2-bagged.

And it works like that all the way up. If a share price has trebled, it’s a 3-bagger and it’s gained 200%. Likewise, a gain of 900% (for example, from £1 to £10) is a 10-bagger and a 1,000% gain gives you an 11-bagger — and a 10,000% gain is a 101-bagger, not a 100-bagger.

The harder question

Now to the difficult bit — how do you find a multibagger for yourself?

If you ask investors who bought into mining explorer SolGold a year ago and are now sitting on a very nice 11-bagger, or oil & gas exploration firm Sound Energy which has 5-bagged over 12 months, you’ll probably find two things.

Firstly, they’ll most likely be speculative investors who really can handle a bit of risk, and wouldn’t have turned into gibbering wrecks if they’d lost their stake. And as a consequence of that risk, they’ll most likely be diversified with their fingers in a lot of investment pies to minimise the damage done by one going bad.

So for every enviable short-term multibagger you see, there’s likely to be a lot of lwho have fallen by the wayside. Is this a strategy that’s likely to win in the long term? For most people, no.

Or perhaps not so tricky

So what if, instead of looking for get-rich-quick punts, you put your money into big solid companies with proven track records? Think that will rule out your chances of finding multibaggers?

Well, if you’d bought shares in ARM Holdings in August 2006 and kept them until the chip designer was taken over by Japan’s SoftBank a decade later, you’d have seen your share valuation soar from around 120p to 1,700p — and that’s a 14-bagger!

And you really don’t need a high-tech growth stock to do it either — even shares in plodding old Unilever have 13-bagged since 1988.

And that leads me to the really key factor that separates the successful multibagger investors from the wannabes — time.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »