There are a few holy grails in investment – and one of them is the 10-Bagger.

10-Bagger is a stock that increases 10x of its purchase price, which translates to a 1000% gain. It is incredibly hard to find one and to stay vested long enough to achieve that gain.

Through my 10 years in the market, I have come to realize there are a few factors that contribute to the occurrence of a 10-Bagger:

  • An outlier market condition that drastically depressed prices of stocks in a particular industry +
  • A particular stock within that depressed industry that investors really have negative sentiments about +
  • The inherent strength (mainly financial resources and global operations) possessed by the company to withstand 12-24 months of depressed market conditions +
  • The possibility that the market will swing back to positive conditions within 12-18 months +
  • A massive dose of luck

Each of the 5 factors must come into play before giving rise to a 10-Bagger.

There is, of course, another possible scenario of getting a 10-Bagger and that is with respect to buying a growth stock within a growing industry. It is, though, an unfamiliar territory for me and out of my (limited) circle of competence.

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