(4) Unique Or Disruptive Business Model
It is one of the most unbeatable ways to identify and pick multibagger shares. A business model is a critical element for the success for any organization.
It is something necessary to unlock long-term value for an organization while delivering valuable products & services. Simultaneously, it should also create & capture value for its investors.
Ideally, ‘would-be multibaggers’ are those companies which possess unique or disruptive business model. They are found to belong either to a niche category or be a new entrant.
They have great market potential with promising earning visibility going forward. These ‘would-be multibagger’ companies hold unique position in the market due to the presence of sustainable competitive advantages.
They offer unique products or services that are difficult to be replicated by others. Therefore, there exists an entry barrier for the competitors.
This competitive advantage can be in form of a big & powerful brand value, low production cost, patents & copyrights, first-movers, favorable government policies, etc.
Additionally, it provides the company enough pricing power to protect its profit margins even in adverse market conditions. Therefore, a favorable demand-supply dynamics exists for the company due to continuous demand from customers.
Generally, business of such great companies will not be a part of any large or broad industry. They prefer to stay focused solely on their own products & services of expertise rather than going for diversification. Sometimes, they might be struggling for their survival in new emerging sectors.
However, due to the presence of monopoly or duopoly command in a particular industry, these would-be multibaggers start delivering exceptional performance in favorable business scenario. The stocks of such great companies should never be missed out to gain manifold returns.
(5) Business Opportunity, Scalability & Sustainability
It is one of the single biggest ways to identify and pick multibagger shares. No business organization can succeed in the long-run in absence of business opportunity.
It is something necessary to generate enough profits for investors. A company operating in a sector or segment with huge business opportunity can provide super returns in the long run.
It is particularly true for investors who have identified the hidden value of such a company in its formative stage. It is the reason why size & longevity of any business opportunity gains significance.
Simultaneously, it is equally important to look towards scalability & sustainability of business operations. A stock that offers a business that is scalable within a short period of time without affecting its profit margins can be a good bet.
You should go for a company whose business activities can sustain & grow exponentially for years to come. It should not be working on an idea, or product, or service that may go out of fashion within a year or two.
In such a scenario, you should not bother much about market capitalization category of underlying company. This potential multibagger stock can be from any category such as large cap, mid cap, small cap, or even micro-cap.
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