Multibagger stocks: Over the past two decades, about 60 per cent of the current BSE 200 stocks would have outperformed the benchmark, Goldman Sachs said. Foreign brokerage Goldman Sachs sees KPIT Technologies, Devyani International, FSN E-Commerce Ventures (Nykaa), Bharat Dynamics, Kajaria Ceramics and Bharat Forge among 35 stocks in its India Midcap multibagger list, which satisfy at least four of six traits that it identified with multibaggers of the past. Others included Jubilant Foodworks, Oberoi Realty, Syngene International, JK Cement, Bata India, Kansai Nerolac and VIP Industries, among others.
The basket of 35 stocks generated 18 per cent return on equity (ROE) and is projected to log sales growth of 20 per cent and earning growth of 38 per cent CAGR over the next 3 years. Goldman Sachs said its basket outperformed Nifty by 18 percentage points and BSE200 by 15 percentage points since 2020.
The foreign brokerage said its study on 10 major markets across emerging and developed markets, covering 6,700 stocks and 10-baggers suggested that more than half (54 per cent) of the NSE 500 (269 stocks) generated 10-bagger returns, the largest proportion of multibaggers among the 10 markets. This is against 30 per cent for EMs and 20 per cent for developed markets. China (MSCI China) and Taiwan (TWSE) markets had only 18 per cent while US (S&P 500) and Japan (Topix) had 16 PER CENT stocks generating 10-bagger returns, one-third of the proportion of the stocks in India, Goldman Sachs noted.
"The 269 multibagger stocks all share a number of the following traits: 1) high realized growth rates; 2)
high capital return ratios; 3) mid/small-cap bias; 4) inexpensive starting valuations; 5) domestic sector orientation; and 6) high promoter holding," Goldman Sachs said.
Goldman Sachs all 269 historical multibagger stocks in India over the past two decades share at least one of the above 6 traits, and about 75 per cent of them share at least 4 traits.
Among the six factors, size, promoter holding, growth, and valuations have been comparatively more dominant factors, while sector and capital allocation appear to be less influential in identifying multibaggers, it noted.
"While India has historically offered superior multibagger peak returns (24x median total returns vs. 16 times for the overall 1500 multibagger stocks across 10 markets), we acknowledge that stocks don’t go up in a straight line and often investors are likely to face drawdowns on the road to multibagger returns, particularly given the small-mid cap dominance among multibagger stocks, which is usually associated with higher price volatility," it said.
Here's Goldman Sachs India Multibagger midcap basket:
Indian market, Goldman Sachs said, has outsized alpha opportunities. In addition to a strong track record of delivering long-term beta via a simple buy-and-hold index strategy, the equity market in India has offered outsized stock returns and alpha opportunities for EM investors, it said.
Over the past two decades, about 60 per cent of the current BSE 200 stocks would have outperformed the benchmark, it said adding that nearly 40 per cent of the current BSE 200 stocks have generated more than 20 per cent annualised returns over the past two decades, double the 20 per cent of stocks for broader MSCI EM.
"While the basket trades at expensive valuation of 32 times 2024 P/E, median forward PEG ratio appears reasonable at 2 times, it said.