Where to find “ten-bagger” stocks – the market’s Holy Grail

Ten-baggers,” stocks with the potential to rise tenfold, are rare but not impossible to find. Dr Mike Tubbs explores their key characteristics and suggests where you should start your search.

The most famous recent ten-baggers have been American companies and they are some of the biggest names in the US equity market. They include Walmart (which soared from $10 in 1991 to $100 in 2018), Alphabet ($120 in 2005 to $1,200 in 2018), Microsoft ($11 in 1997 to $110 in 2019), Facebook ($20 in 2012 to $200 in 2018) and Apple ($17 in 2007 to $170 in 2017). Whereas Walmart took 27 years and Microsoft 22 years, Facebook required a mere six. That reflects a compound annual growth rate of a staggering 47%. A stock rising tenfold in nine years would notch up compound growth of slightly over 29.2% per year, the average annual growth rate of Peter Lynch’s Magellan Fund.

As with all shares, some ten-baggers fade away; some keep going, but far more slowly; and some fall back significantly but then embark on another growth spurt that eclipses the initial run. Britain’s Immunodiagnostic Systems, for instance, rose from 119p in mid-2006 to 1,200p in mid-2011, becoming a ten-bagger in just five years as the company benefited from strong interest in vitamin-D testing. However, the shares fell sharply during the rest of 2011 and have mostly been in the range of 170p-300p for the last five years.