Finding a UK share that can go up 1,000%, that is, ‘ten bag’, requires a mix of luck, research, and a lot of patience I think. Yet of course there are UK shares with massive growth potential. Here’s how I go about rooting out such shares.
Note of caution
Before we get to the exciting bit, it’s worth noting that finding and then holding a 10-bagger through ups and downs is pretty rare.
It’s also not worth taking exceptional risk in order to try and find 10-baggers because the maths shows that losses can really hurt a portfolio’s return. For example, a 50% loss requires a 100% gain just to get back to breaking even. This explains why Warren Buffett’s famous first rule of investing is: don’t lose money.
Also, apart from during exceptional periods of volatility and with perfect timing, it’s unlikely any share will earn this kind of return in a short time period. That’s why I think it’s worthwhile looking for shares that can gain value over a period of at least five years. This is about quality investing and patience, not about gambling and pure speculation.
All this to say, I believe that with a strategy, the right mindset, and an eye on the risks, it should be possible to find shares that can appreciate by 1,000%.
Finding UK shares that can 10 bag
I think it is better to choose companies with good prospects rather than getting too focused on the current share price. It comes down to picking high-quality companies, ideally in an industry that investors could get excited about. Finding a winner within an emerging technology field could be one good way to find a UK share capable of 10 bagging. My personal favourite sector is artificial intelligence, which I think is generally underutilised but has massive potential. It’s why I own shares in IXICO, for example.
Buying shares when a company has been losing money but is approaching profitability could also be a good strategy. More generally, it can take most investors a while to cotton on to a company’s improving prospects, especially if it is a smaller company. This creates an opportunity for a savvy investor to make money by doing research into whether a turnaround can be sustained.
To find the next Renew Holdings, FW Thorpe, GB Group, or IMPAX Asset Management, which have all 10-bagged over the last two decades, I think this is the way to do it. Find shares with strong growth prospects in an industry where sentiment will be very positive, make sure they are a leader in that industry, or back a turnaround before other investors get wind of the improvement. Then make sure the improvement will keep leading to earnings growth.
Deciding between a stock that is a nearly-ran and a true winner separates the best growth investors from the rest. Good luck finding shares that multi-bag! It’s possible — but it’s also harder than it sounds.