When it comes to investing, everyone wants to get an edge, and “10 bagger” stocks can help you accomplish this coveted edge.
And if you are anything like other reasonable investors…
…making money is a primary objective when trading stocks.
However, picking winning stocks and generating sustainable income from your portfolio is much easier said than done.
You need to be a smart as you can when it comes to investing your hard-earned money.
Both new and experienced investors alike are always looking for an edge in their trading.
But, before we get into 10 bagger stocks…
…let's start with a few basic tips.
Building a Portfolio
Regardless of how long you have been investing, you probably heard the term portfolio quite a bit.
If you are going to try and make money in the stock market, you should be familiar with two things:
- What a portfolio is; and
- How you should a portfolio.
Once you have the basics of portfolio management under your belt, searching for high-performance stocks will feel more natural.
In doing so, you WILL be able to spot potential winners much easier.
Diversification is probably the most crucial concept to understand when you are building a portfolio.
For example, let's look at two hypothetical portfolios – both have ten different stocks in them.
This portfolio is comprised of exclusively automotive stocks (like GM and Ford).
While ten stocks may provide intrinsic diversification (meaning there are ten different companies), the portfolio is very heavily weighted towards the automotive industry.
If anything were to happen to that industry as a whole, most of this portfolio would suffer.
Why is that?
Because this portfolio relies on similar supply chains and manufacturing processes.
You simply cannot properly diversify if all of your stocks are in the same industry!
This portfolio contains:
- Three automotive stocks;
- Three technology stocks;
- Two financial services stocks; and
- Two telecommunication stocks.
Right off the bat, you can see how diversifying your portfolio like this one provides exposure to many markets and decreases risk.
Consider a circumstance where one sector experiences turbulence…
…there are three other sectors that operate independently and can carry those losses.
This leads us into the other most crucial portfolio management factor…
…controlling how much risk is in your portfolio.
Although risk is a very subjective term, it revolves around your potential to lose a large amount of your investment.
As we discussed above, diversifying your portfolio is a great way to reduce risk in your portfolio.
Another way to mitigate risk in your portfolio is by balancing:
- Growth stocks;
- Value stocks; and
- Income-generating stocks.
For example, a portfolio comprised entirely of growth stocks will be very volatile because of the nature of high-growth companies.
Conversely, dividend-only portfolios generate stable income, but their share price doesn't appreciate nearly as fast as it grows the company would.
By balancing a portfolio this way, you have the potential to enjoy steady returns with a solid base.
10 Bagger Stocks
Now that we have given some tips on setting up your portfolio, you may be ready for a nap.
Well, this is not the time for a nap!
Now, we will get into those “grand slam” stocks that defy all expectations and return over 1,000%.
We call these stocks “10 baggers” because these stocks return tenfold your original investment.
You cannot expect every company to be a 10 bagger, but these companies certainly do exist.
So, how do you find them?
In all reality, you need to find the perfect storm.
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Examples of 10 Bagger Stocks
Ulta (ULTA) and O'Reilly Auto (ORLY) have returned over 1,000% over the past decade.
It might seem crazy to think household names like Ulta and O'Reilly Auto generated such high returns.
Still, these companies have uniquely positioned themselves in the market.
Furthermore, these companies set themselves apart from their competitors and other industry disruptors.
These are also great examples to show that you don't need to be a flashy tech company to generate stellar returns for investors.
So, how do you identify the next company like that?
Potential 10 Bagger: Square (SQ)
This company has a ton of upside potential because of its:
- Business model;
- Strategic acquisitions; and
- Growing customer base.
Square's primary business is payment processing software for small businesses and restaurants.
The comapny's core revenue has grown over 25% in the past year, and momentum does not seem to be slowing down.
Sqaure's cash app has over 24 million users.
These users represent 300% growth from when the company launched it in 2017 to compete with Venmo.
There are no guarantees on Wall Street…
…but this impressive track record looks like it has the potential to be a 10 bagger over the next decade.
This is just one example have a potential 10-bagger.
But how do you find inspiration and tips on hot stocks like this to research and potentially buy?
This is where the Motley Fool comes into play.
The Motley Fool
The Motley Fool is an investing publication offering:
- Stock recommendation newsletters;
- Stock trading advice;
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The Motley Fool was founded in the late 1990s by brothers Tom and David Gardner, who saw a gaping hole in the marketplace.
You see, the internet was fairly new at the time.
For this reason, retail investors did not have access to the same amount of information that we have access to today.
Most digital investment research was only accessible to Wall Street professionals and high net worth individuals.
The Gardener brothers saw an immense opportunity to create a platform where all investors, of all levels, could perform their own research and make informed investment decisions.
Stock Advisor is the flagship service of the Motley Fool.
The service has evolved from a small email newsletter to one of the most popular and established investment tools in the world.
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So, what do you get when you subscribe to the Motley Fool's Stock Advisor service?
First and foremost, you get the two monthly stock picks from Tom and David Gardner.
Each brother has their unique investing style and methods of conducting research.
Over the course of the month, the brothers work with their teams independently to scour the market for potential stock winners that are either:
- Poised for growth; or
- Just exceeded expectations in quarterly earnings.
At the end of the month, the brothers submit their stock pick to the newsletter along with the research and data they used to come to their decision.
After the two primary stock picks, subscribers also receive a list of other stocks with high potential curated by the analysts at the Fool.
The lists include the underlying research to allow readers to see why those Fools chose that particular stock.
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The Starter Stocks are a hidden gem for investors because it is a sample portfolio of stocks that are well-diversified and well-established.
Building a portfolio can be difficult because there are so many decisions to make when you are trying to invest in an industry that you do not fully understand.
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Find the Next 10 Bagger
Congratulations for making it to the end.
Was it worth the wait?
You should now understand:
- What a 10 Bagger stock may look like; and
- How to find a 10 Bagger stock.
You should also understand that you need some help finding a stock of this magnitude.
The Motley Fool makes a living by finding these stocks.
You can try them out risk-free, with a 30-day money back guarantee.
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A whole lot of money – that's what!
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