Legendary American investor Peter Lynch popularised the concept of tenbaggers or stocks that could deliver more than 1,000% returns in the long run. While the market veteran’s search was mostly limited to Wall Street, Indian investors may not have to search far from home.
The Indian stock market has seen sharp upswings and downswings over the past five years. Benchmark index Nifty 50 has overall delivered around 39% returns over five years, while Sensex gained 34%. This year the volatility spiked as AI’s seesaw trade followed by Middle East crisis impact rattled market.
However, some stocks continued to deliver stellar returns to its shareholders, proving that Peter Lynch’s tenbaggers not only exist on Wall Street but also ride the bulls of Dalal Street.
Tenbaggers on Dalal Street
Cupid is the top gainer on the Nifty 500 index, skyrocketing a whopping 16,413% over the past five years. From a mere Rs 2.33 apiece market price five years ago, the stock has soared multifold to the current level around Rs 385 apiece.
GE Vernova T&D shares followed, rallying 3,123% over the past five years. PTC Industries, Choice International and Lloyds Metals & Energy shares also recorded around 2,000% gains over the past five years.
Transformers & Rectifiers (India), Apar Industries, Authum Investment & Infrastructure, TD Power Systems, Cemindia Projects, HBL Engineering, Welspun Corp, Neuland Laboratories, Mazagon Dock Shipbuilders, Force Motors, Hitachi Energy India and Chennai Petroleum Corporation shares were the other tenbaggers, rising 1,000% to 2,000% over the past five years to deliver stellar returns to their shareholders.While tenbagger returns are often tempting, it is important to remember that only those shareholders who bought these stocks several years back are now sitting on such heavy returns. While such headlines often grab attention, such tenbagger returns for new investors buying the stocks now is not guaranteed.
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Where can you find the next tenbagger?
If you missed the rally and are looking for the next tenbagger, remember what Peter Lynch, the one who popularised the concept, once said. He urged investors to find out which products and brands people love and use everyday. He believed in the principle of buying what you know.
During his tenure as Magellan’s portfolio manager, Lynch bought more than a hundred ‘tenbagger’ stocks, including Fannie Mae, Ford Motor, Philip Morris International, Taco Bell, Dunkin’ Donuts and General Electric.
Amid the noise, Peter Lynch advocated focusing on finding potential ‘tenbaggers’ instead of making excessive trades. As Peter Lynch puts it in his book ‘One Up on Wall Street’, “All you need for a lifetime of successful investing is a few big winners”.
Tenbaggers typically are not the companies everyone is already talking about. They instead are often overlooked gems that one discovers through research or personal observation. While Peter Lynch advocated for buying shares of companies that one knows well, he warned that should be done only after proper research. One should not just buy the shares of her neighbourhood restaurant or her favourite clothing brand just because she sees a long list of customers there every day.
This should only mean that the company should be added to her research list, and she should invest only after properly knowing about the company’s financials, growth prospects and more, according to Lynch.
Sharp market volatility often makes investors panic and make trades that they regret later. This is true for both buying and selling stocks that gain momentum briefly before fizzling out. According to Peter Lynch, “The key to making money in stocks is not to get scared out of them.” “Markets go down, sometimes they go down a lot. If you are not ready for this, you shouldn’t own stocks,” he once said.
Lynch once said an investor should make a decision with their brain and have the stomach to stand by it, as decisions taken based on emotions can be a real performance killer.
Also read | Peter Lynch on stock picking: ‘You shouldn’t own a stock if you can’t…’
Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.