Top 5 Traits of Multi-Bagger Stocks
What separates multi-baggers from the rest?
I've analyzed 100+ stocks that beat the market.
I always ask: "What separates them from the rest?"
Here are 5 traits that stood out to me:
1. Customer-obsessed management
Customers are why companies deserve to exist.
Seek out companies that are fanatical about creating value for their customers.
E.g. Every Amazon meeting has 1 empty chair for the 'customer'.
"Start with the customer & work backward" — Bezos
2. Willingness to Disrupt Themselves
Netflix started out with DVD rentals.
Reed Hastings saw the opportunity with streaming and was willing to disrupt & cannibalize their existing business.
Many others didn't: Nokia with touch screen, Kodak with digital cameras, Blockbuster.
3. Capacity to Suffer
When Starbucks entered China, its stock price took a beating.
Wall Street didn't like the huge capital outlay that was needed.
Management recognized that China was an important market.
Today, China has become a major growth engine for the mermaid.
4. Cult-like Fanbase
Think of Apple, Tesla and Peloton.
Companies that have a cult-like following generate extremely high ROI on marketing spend.
"The secret to marketing success is no secret at all: Word of mouth is all that matters." — Seth Godin
5. Great Capital Allocation
Since 1965, Berkshire compounded at a CAGR of 20%.
Berkshire did this by:
•Buying great businesses at fair value
•Buying back shares when Mr. Market is depressed
•Doing nothing when Mr. Market is exuberant
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Companies covered: Twilio, Facebook, Sea Limited, Alibaba, Crowdstrike, and more!