Ideally, you want a firm whose growth puts it in the top quartile for the market. Four benchmarks here: Firstly, the firm's products must be in demand - look for 25% or more top-line sales growth in the past year. Secondly, those sales must be profitable - you want consistent net profit margins of 10% -15%, along with a return on total capital employed of at least 10% for the past two years. The next step is to look for a decent trend in earnings, not just the share price - a good guide is whether the company achieved earnings per share growth of at least 10% per year and ideally closer to 20% for the last 12 months. Directors should own at least 10% of the share capital.
I dont have one ten bagger - well I might, if I hadn't kept adding to my SPP position. I seem to add to my good shares so chasing my ten-tail a bit. Believe it or not, but at one stage I had a ten bagger on my BDM shares, and then held and held and held and held, until I now hold a negative 3 bagger...ha ha weep weep weep!
Kwagga I note your piece starting with"Idealy" With utmost respect selection on that basis could produce very boring results. Tenbagger yes, but when. I have no idea but wonder to what extent a "Lucky packet" is associated with a tenbagger.....ie that is when something good unexpectedly happens, or being at the right place...some event which could not easily have been foreseen, Some business models are mre likely to experience this good fortune than others ie a P&P model works within tight framework. Any thoughts on this conjecturing.
Sure, but all of this is based on chance. You control the element of chance as best you can but at the end of the day... You do not know which shares (companies) will succeed. The nature of these high reward companies (ten-baggers) is that they are high-risk. So you take a spread to control that risk - across companies, sectors, markets. Diversification is the only real tool at your disposal to control risk (and timing for traders.)
On those conditions it almost sounds easy to find a "ten-bagger". Though, I'm inclined to think that companies with those prospects are already very highly priced (in terms of PE) and thus it would take around 10 years to bag your ten. In my view, a ten-bagger would have to be a failing company that is on the verge of being turned around. Of course, you have to be a special kind of investor to be able to identify that company when it looks like it's going down the drain. In retrospect, it's easy (for e.g. Blue financial which at one time sold as low as 2c) to find those companies. I think the trick is in identifying star management teams that can turn a company around. Also, on a more speculative note, you could go for mining exploration companies which may per chance strike it lucky with a big oil/other precious metal find.
AND then you have to take a big enough position to make it worthwhile. Would you have put a few hundred thousand into BFS - which was (and maybe still is) junk. You need confidenc in your judgement / abilities. Nothing easy about that game. You also need deep pockets to play properly. This realy is a game for the rich to get richer. For the average Joe, stick to quality!
Bought a million at 39/40. Sols too early in anticipation of a pullback. Tried to convince mates (including guys in SBK) that this was a sitter. They were all convinced that I was mad. So... again - not easy.
Nope. I would never have taken a position on BFS. I'm still not equipped to value a financial company properly. And even if I was, I still believe in diversification even though I may have a 'best idea' stock. There is one stock which I am taking a big position in... Oando. Though it's the biggest holding in my portfolio, it still only counts for 20%. If I could get more at a slightly lower price, I would be willing to bet my whole portfolio on it. It may not be a clear cut 10 bagger, but I'm pretty sure it's good to outperform the market.