(2) Concentrating On Few Parameters Only By Ignoring Others
It is one of the most significant mistakes of investors analyzing multibagger stocks. Stock analysis is not an easy task as one might think. It requires a lot of information to differentiate good stocks from bad stocks.
Similarly, multibagger stock identification is a lot more difficult task than finding a good stock. It is due to the fact that these stocks are mostly away from limelight.
You need to concentrate on a number of parameters before coming to a final decision. But, new & unskilled investors are often in a habit of evaluating a stock depending on few parameters.
According to a post published in MoneyControl, a company which is forecasted to deliver higher earnings is a good bet for your portfolio. But, at the same time investors should investigate whether economic conditions permit such kind of growth multiple.
For example, several investors look for stocks trading below book value, stocks trading at low P/E ratio, stocks trading around 52 weeks low, & many more.
Although, these factors are quite important to analyze a given stock but these should be considered in combination with other factors. It is perhaps true when evaluating potential multibaggers in making.
A stock can trade below its book value because it deserve to trade low. Similarly, a stock trading at high P/E ratio might show exponential sales growth to become multibagger.
Therefore, investors should always look for a wide range of parameters together rather than few parameters only.
[Read Also: 20 Basic Rules To Make Money From Multibagger Stocks]
(3) Rushing To Book Profits Even On 30% Or 40% Upside
It is one of the most popular mistakes of investors sitting with multibagger stocks. Every investment requires reasonable amount of holding time before delivering good returns. It is perhaps true even when investing in multibaggers.
You need to hold multibagger stock until its price is reached to its full potential. But, holding good stocks for long period is not an easy task.
Several amateurs investors who got success in buying true multibagger stocks end by exiting too early. These investors rush to book profits as soon as the stock has shown 30% to 40% upside.
The funny aspect is that on the one hand investors are hunting for multibaggers, while on the other hand they sell a stock just for 30% upside. They don’t wait to even check if the selected stock becomes a multibagger.
However, if the same stock (potential multibagger) falls by 50% then investors can hold them until the original buying price is reached. This is the worst strategy that results in more losses rather than profits.
Fundamental investing is that if you found a hidden gem in stock markets then buy & forget it at least for 3 to 5 years. Thus, your investment horizon should be sufficient enough to allow multibagger investment to get matured for profit booking.
- Mistakes Of Investors Hunting For Multibaggers: Shutterstock