Multibagger stocks can create immense wealth for investors who spot them at the right stage. At an early stage, before it becomes a hot favourite of investors. But the most important question is how to spot multibagger stocks.
Experts recommend evaluating stocks using multiple parameters which can be help to identify multibagger stocks like low or zero debt, high return ratios, exclusivity of products/service offered, huge future growth potential etc.
However one of the most important factor to identify a multibagger stock is its management pedigree. The vision of the management, passion to take the business to new heights and the management’s past peformance are the crucial driving factors which makes a multibagger stock.
The best example of a multibagger stock which created huge wealth for investors is Infosys. When Narayan Murthy and his friends came together to start Infosys in the year 1981 they did not have enough funds. But they had a strong vision and belief in what they were doing. Despite difficult times it was only their passion which helped Infosys to become what it is today.
Today Infosys is the leading global leader in technology services and consulting with the revenue of over 1,131 crores USD and subsidiaries operating in over 50 countries across the globe.
Importance of management pedigree in identifying multibagger stocks for 2019
A strong management is the core strength of good company. Just like the captain of a sports team who is responsible for delegating appropriate duties to the team members to enable them to win a match, it is the responsibility of the management to steer the company in the right direction by taking the right decisions.
One way to identify a good management is to analyze the company’s performance over long term. If a company has been consistently doing well from several years it reveals the management’s skill to navigate the company through good and bad times.
Another important thing to consider while looking for multibagger stocks in 2019 is how the management does the capital allocation by investing the excess free cash flows (FCF) generated by the business.
Is the management reinvesting the capital back in the business for capex and working capital or using it for paying dividends or acquiring other companies or stock buy backs.
Transparency of the company reveals the integrity of the management. A transparent management will always reveal the true picture of the company’s financials in its quarterly and annual reports.
To summarize, while looking for multibagger stocks in 2019, one should start by looking at the management pedigree first. Although it is difficult to quantify the value of management in numbers, the real value of a good management is very important while choosing multibagger stocks in 2019.