You don’t need big bucks to make a lot of money in the market.
If you pick right… and let your winners ride… you can turn a few thousand dollars into a large chunk of change.
One or two multibaggers—stocks that increase by 100% or more—can easily make up for a bunch of losing positions.
For example, if you buy 20 stocks and one of them goes up 400%… the other 19 stocks could all decline by 20% each, and you’d still end up with an overall gain.
And there are two simple steps to finding these life-changing companies…
No. 1: Follow the money
While it’s easy to get distracted by the daily ups and downs of the market… it’s important to remember each stock represents a specific business.
Put simply, strong companies tend to have rising stocks… while weak businesses tend to have declining stocks.
This brings us to the first ingredient of multibagger stocks: dominant, growing companies. We want to own companies that are growing their sales at a double-digit rate.
If you look back at some of the best-performing stocks of all time, you’ll notice they all have this trait.
Let’s take Amazon as an example.
Whether it’s groceries, movies, or electronics… Amazon has dominated ecommerce for years. Statista estimates Amazon has 50% of the U.S. retail ecommerce market today—up from 37% back in 2017.
And as you’d imagine, that dominant position means big revenue growth. You can see below how AMZN grew revenues from $177 billion to $386 billion (118% growth) from 2017–2020…
No. 2: Harness the power of compounding
The second ingredient needed for a multibagger can be summed up in one word: time. That’s right—the biggest money is made by holding great stocks for the long term.
Using the Amazon example, it would be hard to capitalize on Amazon’s success if you were trading in and out of the stock constantly. Similarly, if you sold after one good year, you would likely miss out on much bigger gains.
From 2017–2020, shares of AMZN returned more than 330%. But that figure doesn’t tell the real story. The annual breakdown of returns looks like this:
- 2017: 55.2%
- 2018: 26.3%
- 2019: 23%
- 2020: 76.3%
At first glance, those numbers might seem unexciting. Notice the stock didn’t generate a triple-digit gain during any single year above. Yet it still gained more than 330% combined.
This shows the power of compounded growth.
Spotting a fast-growing company takes skill. However, holding a fast-growing stock takes perseverance.
Let me show you a pair of real-life examples…
How a couple grand can turn into Big Money
Back in 2014, Netflix caught my attention with its multibagger potential. It was already dominating the video streaming market and generating monster revenue growth. What really piqued my interest was its double-digit sales growth between 2012–2014 (from $3.6 billion to $5.5 billion—a 53% increase).
In 2014, I bought 10 shares of NFLX for $379.98 each—an initial investment of $3,800. Today, that grub stake is worth $46,534.
Below is a chart of where I bought the stock and how much it’s grown to date. You’ll also notice a bunch of blue bars. Those are Big Money buy signals lifting the name higher and higher over the years. Each bar indicates that big institutions were buying the stock heavily on a particular day. Netflix is a poster child for this type of institutional support.
To make a Big Money buy signal, the stock needs to be heading higher on outsized trading volume… Plus, it has to have great fundamentals (like double-digit revenue growth).
The 10 shares I bought in 2014 eventually split into 70… and have returned 1,124% so far.
Netflix wasn’t the only stock I bought that day. Less than an hour later, I purchased another hyper-growth company: Tesla (TSLA)… buying 10 shares for $234.95 apiece, for an initial investment of $2,350.
I’d recently sat in one of its cars for the first time and was completely blown away by how amazing it was. The experience inspired me to check out the stock.
But more important was the massive growth: Between 2012–2014, the automaker’s sales ballooned from $413 million to $3.2 billion… a 675% growth rate. Today, Tesla is the leader in electric vehicles, with 79% of the US electric car market and annual sales well over $30 billion.
Below, you can see how far the stock has risen since my purchase:
You’ll notice less Big Money buying (fewer blue bars) compared to Netflix. That’s because TSLA took years to become profitable. Still, the 10 shares I bought ended up splitting into 50 over time… and have returned 1,835%.
Combined, my relatively small $6,150 investment in NFLX and TSLA is worth more than $90,000 today. They’re two of my best-performing investments ever… and a great example of why you should buy—and hold onto—great stocks.
That’s the power of knowing which stocks to bet on… and giving those companies time to grow.
P.S. Want to know which stocks are on my radar month after month?
The stocks Big Money thinks will become the next Tesla or Netflix?
Join my newsletter, The Big Money Report, and get my latest pick—a beaten-down tech name that’s ready to ride again—delivered straight to your inbox TOMORROW.
