Over the last one-year after markets witnessed bloodbath due to the pandemic crisis, there have been stupendous gains with Nifty scaling new high of 15431.75 on February 16, 2021. Now as the markets are still 5% down from peak, here we suggest few of the stocks that have or have the potential to turn into multi-baggers, meaning reaping huge returns and enabling you to generate good enough wealth, by holding them for some meaningful time.
What are multibaggers stocks?
In numeric terms which hold far more relevance in today's world, multi-bagger stocks are those that can generate over 100% return or just double in price. And there are several triggers that aid in a stock to double in price.
Triggers for a stock to turn into a multi-bagger stock/ How To Identify A Stock Which Can Turn Out to be A Multibagger?
There could be a host of factors aiding the rise of a particular share.
1. Industry headwinds say in the pandemic times after a steep correction pharma shares witnessed a good buying and hence traction in their share price.
2. On potential growth, MFs and other foreign portfolio investors (FPIs) and foreign institutional stocks (FIIs) upping the stake in the counter.
3. Low or no debt for a company is also a plus
4. Then there is earnings and valuation that also come into play for determining the stock's possible rally.
5. Sound management and strategy for the company's growth has also its part to play.
6. Economic moat i.e. any entry barrier that prevents competition into the space that gives the company the authority on product pricing and hence not suffer in adverse times.
7. Stocks with High return ratios typically return on equity (RoE) that point to efficient deployment of capital should also be chosen. But remember here that such companies should have low equity base that triggers the stock to become a multi-bagger.
Choosing multi-bagger stocks from Charts
Based on the charts the stock pick for multi-bagger returns can be done basis the Dow Theory and here what is aimed at is those stocks which after bottoming out ( Say as in the recent past of March 2020 correction ) have recovered swiftly on a month basis.
Now coming to multibagger stocks or stocks with potential to turn into multibaggers:
Multibagger stocks to buy in India in 2021
1. Reliance Industries- (Potential to scale to Rs. 10,000 in 2-3 years time)
This is one heavyweight that you definitely be picking at any steep correction as after the steep bottoming out for the reversal to happen on the Nifty , RIL contributed a big 1000 points and now from current levels of around Rs. 1940 it has the potential to scale to Rs. 10000 in 2-3 years time, making 5 times surge in stock price.
2. Bajaj Finance:
Actually, when looking at a multibagger stock, brands of importance which need no introduction work. For a stock like Bajaj Finance which has over the years established its brand equity it is being cited by experts that as the stock is trading over Rs. 5000, the journey to Rs. 10000, i.e. the next 5000 journey shall not be very difficult and in fact will be highly rapid. Further, the stock of Bajaj Finance is seen to be the next ‘MRF' stock. So ‘higher low' can be sought for a stock to get into it. And another factor that can be looked at is for the uptrending stock as is the case with Bajaj Finance.
3. Divis Labs:
Pharma pack is expected to outperform all other sectors in the next 3-4 years. And as this stock hasn't given any significant correction over time, this can be another good pick.
This is one HDFC Securities top pick for 2021 and has been performing overwhelmingly. Now due to increased demand to go digital, cloud technology etc. the company is betting on huge deal wins. Furthermore what comes in its favour is the company's debt free balance sheet as well as potential to generate healthy cash flow.
5. SBI Life Insurance:
The life insurance industry amid the pandemic is booming and this private life insurer commands the highest distribution reach which enables it to tap a broader market base. The other positives for the company are high agent productivity as well as SBI Banca association. There is forecasted Cagr of 11% over FY20-22E. New Premium income for the FY22 period is expected to surge to Rs. 54,424.
The stock has showed patterns of continuous uptrend to be a good pick.