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Over the past six months, I've identified 7 businesses that share potential multibagger characteristics.
Today I'll share my personal process that led me to these opportunities.
The Multibagger Reality
Most businesses will never come close to being multibaggers.
The math is demanding.
To become a 100-bagger, a company needs the perfect storm: small initial size, extraordinary returns on capital, competent management, massive market opportunity, and time for compounding to work.
99.9% of publicly traded businesses fail this test.
But here's what the market consistently misses: when all these variables align, the results can be extraordinary.
I doubt an investor could build a high return portfolio of potential multibagger candidates in a day or a week. My strategy is to look at companies all day long. For every 1,000 publicly traded businesses, there may be just 1 or 2 potential multibaggers worth owning. When I find them, I add them to the Multibagger Index.
That's why this newsletter exists.
I release my opinions on multiple potential multibagger ideas each month.
There are simply not enough of these opportunities out there, so I only focus on the absolute best candidates I can find.
The Hunting Ground
I spend most of my time in places institutional money can't go.
Companies with market caps under $500 million.
Businesses too small for large funds to own meaningfully.
Industries too "boring" for retail investors to notice.
This is where inefficiencies persist. Where a $200 million market cap business generating $40 million in free cash flow can trade sideways for months because nobody is paying attention.
The big money can't play here. The fast money doesn't want to.
That leaves focused research with a significant advantage.
My Multibagger Criteria
Here's my criteria for an investable multibagger candidate:
Sustainable, understandable business model: I want a business I can understand. Something you could explain to granny. If the business description is something like "disrupting legacy systems through proprietary blockchain integration solutions", I'll be taking my capital elsewhere.
High returns on capital: I need a business that generates returns on invested capital above 20% consistently. This is non-negotiable. Without high returns on capital, compounding is impossible.
Reinvestment runway: The business must have ample opportunity to reinvest profits at similarly high rates of return. A high-ROIC business with nowhere to reinvest will never become a 100-bagger.
Owner-operator management: I like my 100-baggers to be run by founders or executives with significant skin in the game. They need to think like owners because they are owners.
Strong balance sheet: I prefer businesses with minimal debt or even net cash positions, which provide optionality during tough times.
What I Don't Do
I don't try to time markets.
I don't follow analyst recommendations.
I don't buy businesses because their charts look good.
I don't chase momentum or follow trends.
I don't invest in industries I don't understand.
Most importantly, I don't sell quality businesses because they've appreciated.
The biggest mistake multibagger hunters make is selling too early. A 3-bagger feels great until it becomes a 30-bagger for someone else.
The 7 Companies
Here’s the bit you’ve been waiting for.
To view all these posts, future ideas and get access to the Multibagger Index, you can upgrade here if you want:
Thanks for reading,
Nico
Disclaimer: The Content does not constitute investment advice, financial advice, trading advice, or any other sort of advice. Nothing in this newsletter should be construed as a personal recommendation or advice to buy, sell, or hold any investment or security. All Content is provided for general informational purposes only and should not be relied upon for making investment decisions. You should not make any investment decision based solely on the Content without first consulting with qualified financial advisors, conducting your own research, and considering your individual financial circumstances, investment objectives, and risk tolerance. To read our full disclaimer, click here.