Some time ago, I have written about Henrik Bessembinder’s analysis of stocks with extreme returns in the past. His analysis suggests that there are a couple of fundamental indicators that can be useful to narrow down the list but even so, these factors only explain 2% of the variation in stock returns. In other words, finding the next multibagger stock based on fundamental analysis is a fool’s errand and mainly a matter of luck.
Thanks for this, Joachim. After the first 5x, might further multiples of 5 be explained by fundamental analysis? Could there be a correlation with revenue growth (or asset growth) for example? Peter
Instead of thinking in terms of "singular" multi-bagger situations, one may instead, want to think in terms of a diversified multi-bagger "portfolio". A simple portfolio construction based on three equity asset classes has produced steady "multi-bagger" returns ( over seventeen 20 year rolling periods since 1986), averaging an equivalent 11X multiple growth ( chart 1 Apoendix https://tinyurl.com/c39hr65k ).
Thanks for this, Joachim. After the first 5x, might further multiples of 5 be explained by fundamental analysis? Could there be a correlation with revenue growth (or asset growth) for example? Peter
Instead of thinking in terms of "singular" multi-bagger situations, one may instead, want to think in terms of a diversified multi-bagger "portfolio". A simple portfolio construction based on three equity asset classes has produced steady "multi-bagger" returns ( over seventeen 20 year rolling periods since 1986), averaging an equivalent 11X multiple growth ( chart 1 Apoendix https://tinyurl.com/c39hr65k ).