Multibaggers Defined | The Motley Fool
If you don’t know what multi-balers are, you should learn now, because multi-balers are what to look for in your stock portfolio.
A multi baler is an investment that has earned several times its original value. each “bag” represents your entire original investment. So if you invested $5,000 in a stock and your holding is now worth $10,000, you have two bags. if it continues to appreciate and is ultimately worth $35,000, it’s a seven bag. at $50,000, of course, that’s a bag of 10.
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The idea for a multi-baler is believed to have started with Peter Lynch, who referred to “10-balers” in his seminal book on investing, One Up on Wall Street. the term comes from baseball, in which players accumulate “bags” by running around the bases.
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here’s some interesting math related to multibaggers – check out the percentage gains that come with investments in multibaggers:
This may all sound crazy, but think about it. If you have a $100 investment that grows 100%, that means you add another $100 in value, now for a total of $200. therefore, your 100% profit is doubled because you doubled your money. If you’ve gone from $100 to $500, you’ve added $400 in value, or four times your original investment (400%), thereby quintupling your money, making it a bag of five. The percentages quoted to describe the growth of an investment generally refer only to the gain and exclude the original investment. but when talking about “packers”, the original investment is included.
a word of caution
It’s worth noting that while multi-balers are obviously desirable and worth targeting, they shouldn’t become your primary focus. If you put your desire to make huge profits above your desire to find attractive and undervalued investments, your investments may not turn out as impressive as you hoped. Remember that high returns are often correlated with high risks. a lottery jackpot offers a huge return on your dollar bill, but only with the near certainty that you won’t win it. Likewise, chasing high-flying stocks carries the risk of some of those rockets crashing to earth, perhaps even leading to the complete loss of your investment.
If you’ve developed a successful investment approach, stick with it, refining it over time as you learn more through reading and experience. be sure to use a lot of patience too, and you’ll probably rack up some multi-bags.
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Patience is more important than you think to successful investing. After all, if you love the idea of hitting a bag of 10, that means you should think twice about selling a stock once it doubles or triples for you. Of course, you should consider selling if your confidence in the company’s future has diminished or if it seems overvalued. but if the company’s long-term prospects remain strong and its performance remains strong, it’s often best to hang on.
find multiple bags
It may seem difficult to find stocks that convert to multiple exchanges for you, but it’s not as difficult as it sounds, and you don’t need to search only among the high-flyers to find them. warren buffett’s berkshire hathaway, a conglomerate that has many insurance deals, is a great example, as its value has increased 167-fold in the last 30 years, making it a 167-fold bagger for some patient believers.
Many multi-balers of the future are right under your nose, and they don’t always look like multi-balers. netflix has been a volatile eight-stock machine for the last five years, and wal-mart is a 10-stock for the last 20 years, though it’s only one stock of two bags in the last decade. starbucks has been a four-bag machine for the last five years and a 63-bag machine for the last 20 years. watch? patience can bear great fruit with the right actions.
here’s a lot of multi balers in your own portfolio for years to come!
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