Value Investing And Discovering a Multi-bagger

November 20, 2013 Leave a comment

Value Investing And Discovering a Multi-bagger

by ValueWalk StaffNovember 18, 2013

Just the other day, one of the market ‘experts’ on a business news channel while recommending a stock, said that it had the potential to be a multi-bagger. Overall market sentiment has been subdued over the last five years and we were hearing the word multi-bagger after quite some time. Our mind raced back to the analyst meet of a technology sector company during the rah-rah days of the late 1990s.Hosted in the banquet hall of a five star hotel, the setting resembled a rock show replete with hi-tech stereos blasting heavy metal music. The investors at the event were vying with each other to advocate stocks in their personal portfolios that had been multi-baggers in a matter of just a couple of years. After all, Infosys, the poster boy of the late 1990s, was up 75 times over three years from 1996 to 1999. Moreover, during the same period, 25 stocks in the technology sector were up at least 10 times.

Multi-bagger is one of those words, used colloquially, ever so often among the investment community, but does not seem to find a place in the dictionary. Wikipedia has a reference to the word ‘ten-bagger’ on a page devoted to legendary investor Peter Lynch. Apparently, it was Peter Lynch, who first coined the term ten-bagger in a financial context. This refers to an investment that is now worth ten times its original purchase price and comes from baseball where ‘bags’ or ‘bases’ that a runner reaches are the measure of the success of a play.

To many an investor, the holy grail of investing is to seek out a multi-bagger. After all, why take the trouble of painstakingly building a diversified portfolio, churning it periodically and, if lucky, just about marginally beating the markets, when one can find that multi-bagger stock and handsomely beat the returns not just of the stock market but across all asset classes on the planet. Hence, the multi-million dollar question is, how does one discover a potential multi-bagger. In fact, this is where the folly lies.

Filed under Investing Process

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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