Is a past Multi-Bagger Stock, a Future Multi-Bagger Stock?

0. What is this post about?

Multi-bagger stocks are a delight to hold. They give you consistent returns over multiple years. Multi-bagger means giving more than 100% returns. Finding and investing in a multi-bagger stock is every stock investor’s aim. While there is much info and tricks on picking the next multi-bagger, this post is about identifying when to leave behind (exit) a past multi-bagger. Leaving a stock which has given you two or three times returns is tough. However, stock investment, profit/loss booking, should be done without the influence of emotions. This post aims at providing a framework on how to evaluate a past multi-bagger, to help you decide whether to invest more, hold, or actually exit the stock. Let’s get right into it.

1. Decreasing Life of Companies

It is important to understand the different stages of a company, and its overall life span. Typically, a company goes through four stages in its lifecycle — (a) Startup — when a company comes into being, is the underdog, and is figuring out a product-market fit, or finding its first customers. (b) Growth/Expansion: When the company has figured out the formula for scale, and grows non-linearly, scaling revenue and profits. (c ) Maturity: Company has reached critical mass, its…