This was another of my initial posts, #7 on this board - http://discussion.fool.com/a-thought-that-i-had-on-investing-phi… . It’s on the subject of multi-baggers. I included some relevant comments on the same subject from post #66.
I pay no attention to 2-baggers, 5-baggers, 10-baggers or whatever in individual stocks, nor do I count them.
This is relevant because this way it never crosses my mind to think anything like “This stock is slowing down, but it’s a 9-bagger. Maybe I should hold it for another year to try for another 10-bagger.” Going from a 9-bagger to a 10-bagger is only an 11% gain, so counting 10-baggers is meaningless to me. If I’m no longer in love with the stock, I should be able to put the money into something that will be up 30% in a year, and it will never even cross my mind that I missed having a 10-bagger.
What I do pay attention to is how my total portfolio is doing. When I multiplied my results out from 1991 to 2007 it came to a 115-bagger on the whole portfolio. That’s what is really important to me, since my family and I have to live on the gains.
Here’s another way to think about it: If you have an 80-bagger on a stock that grows to an 85-bagger it sounds exciting, but it’s only a 6% gain on your money. If you take the same money and put it into a new stock where you just get a tiny little 2-bagger, you’ve made a 100% gain on the same money.
Which is why I don’t pay attention to trying to get multiple baggers. If they happen, it’s fine, but it’s not my focus.
If you were to put a small amount of money in every stock listed on the NYSE and the NASDAQ, in other words, every stock in the markets, you would eventually pick up every 10-bagger, even every 100-bagger, that occurred. You’d be able to brag “I have fifty 10-baggers now, and three 100-baggers!” But so what? You’d just be doing as well as the markets as a whole, by definition, as you were investing in the whole market. And since you just invested about a hundredth of one percent in each stock, your 10-baggers would be meaningless, and even your 100-baggers would only move your totals 1%.
So again, anyone can pick up lots of 10-baggers by just investing in hundreds of stocks. You’ll probably have more if your hundreds of stocks are MF picks, certainly, but the multi-baggers are irrelevant. What matters is how your total portfolio has done. If you have ten 10-baggers in 25 stocks, that’s darn good. If you have ten 10-baggers in 500 stocks over a number of years, so what? You could still have mediocre results overall!