Looking for a multi bagger

It is very rewarding to find the next Apple making many times profits. It is possible.

I developed a screen to find multi baggers.  Basically they double in sales, profits... every year. They will be penny stocks with low market cap and not in the three major exchanges initially.  When they move to a major exchange, it is a good sign. Usually they do not pay dividends as most of the profits have to plow back to research and development in the initial years.

Most likely, the screen would find them a few years after their IPOs as we need the initial historical data.

Even so, I suspect many small companies fail for each multi bagger found. The losers may not show up as they're taken from the database when the stock price goes to 0 (termed as survival bias). If your test database does not take care of the survival bias, your test result will appear better than it really is.

You need to have cash for investment, a lot of patience and the mental power to face many losers. It is for riskier investors for their riskier funds.

Apple, Microsoft... have the right products in this generation. Judging from the recent IPOs, I do not think they will be many multi baggers in the current generation, but I could be wrong.

Tax considerations.
As previously stated, most likely you will find many big losers for every multi bagger. You may want to sell a loser when it does not show any promise to offset any gain.

When you find a big winner, you can keep it until you die and the cost basis will step down, give it to your children or give it to a charity for extra deduction. Tax law changes and I'm not a tax professional, so ask your lawyer for advice.

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(c) TonyP4 2012. Written in 1/10/12. Last updated in 1/10/12.

Disclaimer:

Do not gamble your money you cannot afford to lose. Past performance is a guideline and does not guarantee future performance.

All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.