More reflections on multi-baggers


In post #7 on this board I made some remarks about multi-baggers, which I will expand here:

I pay no attention to 2-baggers, 5-baggers, 10-baggers or whatever in individual stocks, nor do I count them. This is important 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. That’s what counts.

Here’s another way to think about it: If you have an 80-bagger on a stock that grows to a 90-bagger, it sounds exciting, doesn’t it? Ten more bags(!) and maybe some spiffy-pops. However, it’s only a 12% gain on your money. However, if you had taken the same money and put it into a new stock where you just got a tiny little 2-bagger, you’d have 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, fine, but it’s not my focus.

Last night I had another thought. 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, 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, so what?