Help defining Really Attractive MULTI-BAGGER Propositions

I could do with some help defining guidelines to pick the next great UK multi-bagger :slight_smile:

My largest multi-bagger to date has been Tristel (TSTL), so that share seems as good a place to start. I have already listed ten lessons from owning 10-bagger Tristel:

That blog post lists these lessons:

  • You will probably have to study companies with imperfect histories and small market caps

  • You will almost certainly require companies that have a quality product

  • You will almost certainly require an elevated P/E rerating as other investors become very optimistic

A few quotes from that TSTL blog post on those particular lessons:

The absence of a reliable track record was reflected by the lowly £16m valuation — too small for most investors to bother with… which created the upside potential for anyone enterprising enough to look beyond the shaky headline numbers.

The business carried net cash and was still paying a (smaller) dividend, and therefore was not a complete basketcase.

The results narrative also contained some very enlightening remarks about the company’s lead product:

"During the year, over 1.7 million disinfection procedures were undertaken by Tristel’s proprietary wipe in the 27 countries in which it is commercially available. The Wipes System can fairly be described as having become the principal method of decontamination of nasendoscopes, cardiology and ultrasound probes in those markets it has gained a commercial foothold.

proprietary” = competitive advantage, “principal method” = market leading;

The 12x multiple looked very modest for a business with 36% sales growth and upbeat management expectations

Some other thoughts:

  • TSTL was in transition. Demand for certain products had collapsed and the cross-over to selling the “proprietary” and ‘market leading’ replacement was well underway.

  • TSTL had just undergone a step-change from loss to profit. The company said at the time of my purchase:

"We expect unaudited pre-tax profit to be no less than £0.6 million for the period, compared to adjusted pre-tax profit of £0.5 million for the full year ended 30 June 2013 and adjusted pre-tax loss of £0.6 million for the same period last year. "

  • So H2 profit for the preceding year was £1.1m, versus a loss of £0.6m for H1. Clearly something had just happened to right the ship.

  • Also, international sales in the preceding year had gained 61% to represent 32% of group revenue. That performance indicated TSTL’s growth was not limited to the UK – i.e. successful overseas expansion gives more chance of long-term earning growth and a multi-bagger potential.

There are vague similarities between TSTL and System1 (SYS1), a share I believe can multi-bag!

From this review:

Small: Market cap was £23m at 173p.

Evidence of a worthwhile product: No clear evidence, but previous RNSs had cited ambitious goals and a service validated by a powerful industry partner:

“Over the last two years, we have reshaped much of the business, automated many of our products, generated increasing industry profile and created a management team capable of achieving our goal to become the world leader in predicting advertising effectiveness. There remains much to do, but we believe that we are further ahead than our competitors.”

“On the strength of the industry attention received by AdRatings, we have announced a strategic commercial partnership with ITV, the UK’s largest seller of advertising space, to support its customers in creating ever more innovative and effective advertising”

Lowly valued, but undergoing a promising transition: The pandemic thumped the company, which had followed a few disappointing years as the business transitioned from consultancy work to automated/data services. The P/E looked to have been 8.

Not a basketcase: Net cash of £5.1m and a possible Q2 margin of 16% suggested the financials were in reasonable shape.

Profit turnaround: A Q1 loss of £0.5m has transformed into a Q2 profit of £0.9m.

International acceptance: 70% of revenue was already from outside the UK.

So my rough Really Attractive Multi-Bagger Proposition (RAMP) guidelines are:

Small: Market cap below, say, £50m. :white_check_mark:
Evidence of a worthwhile product: Is there something special here? :white_check_mark:
Lowly rated, but undergoing a promising transition: Low P/E belies a business reinvention. :white_check_mark:
Not a basket case: Low/no risk of funding issues. :white_check_mark:
Profit turnaround: Have costs reduced to ensure sustained profitability? :white_check_mark:
International acceptance: Could revenue growth extend well beyond the UK? :white_check_mark:

A final guideline could be motivated insider. TSTL’s non-exec chairman was a 27% shareholder when I was buying, while two SYS1 executives owned a combined 30%. :white_check_mark:

Any thoughts? What have I missed? I would welcome any other guideline suggestions!


Hi Maynard
Interesting line of thought you have here.

Oddly enough I have an ongoing piece of research in progress to look at the profile of mutibaggers over a 3 year period. My database is LSE shares less miners, oilers, investment trusts and a few other odd balls.

It is still at a discovery stage, but I can offer this snippet which you may want to consider.
Have a look at the sectors which give rise to multibaggers.
I was surprised to see only 2 retailers in my preliminary find of multibaggers over this period. Not surprisingly, the highest contributors were pharmaceuticals.
One thought may be not to sweat over the sectors that have not thrown up multibaggers in the recent past?

Regards, Ram

1 Like

Hi Ram

Good to hear you are researching past multi baggers. I think for the last three years the pandemic may have unduly influenced proceedings, and I just wonder on a three-year timeframe whether retailers (and other Covid-battered sectors) may outperform.

My Stockopedia gambles selections for 2021 currently show three doublers in the hospitality sector…

…so maybe the 2021-2022-2023 top multi baggers will be different to those of 2018-2019-2020?

Longer-term multi-baggers seem to emerge from all sectors. The top performers of the last 20 years are listed below (from this blog post):

A few engineers and software firms in there, but also plant hire, carpet making, pizza selling and sports retail. Mind you, two of my top five shares are healthcare stocks, and it is hard to deny the healthcare sector has favourable traits for investors as you say. I too overlook sectors such as oilers, miners, banks and insurers for a variety of reasons, so that narrows things down as well.

Don’t forget to let us know if you develop a winning multi-bagger process! :slight_smile:


1 Like

Hi Maynard
Of course you are correct in pointing out that the past 3 years analysis is heavily skewed by the Covid impact. So looking ahead, perhaps some of badly bruised sectors may be candidates for sudden rises in share price? (Boo and Asos come to mind…)
I am actually tackling this problem from a different angle. I am analysing past multibaggers from a technical analysis viewpoint. Are there combinations of technical indicators which can help us reduce the population of shares into a manageable subset?
I know coming up with a formula that exactly identifies future multibaggers is fool’s gold. That will never happen. So the next best thing is to come up with a good hit rate. The noise/ signal ratio if you will. My target is 50% hit rate. That way, I can further reduce the potential subset by applying fundamental analysis.
That’s my starting position. Let’s see how far I get once I start serious analysis and detailed back testing.

1 Like

I think the multibaggers (greater than 10x) that I’ve been lucky enough to hold have mostly tended to display the characteristics you describe Maynard.

JDG & SDI Both have exploited the private/public valuation arbitrage in small scientific companies along with considerably improved multiples over the time i’ve held them. For example I bought JDG on a PE of around 6-8 and it is now on a 30x multiple. They both appear to have quality products with good margins in niche areas.

XPP - Transition from distributor to a manufacturer of power supply units with latterly some growth from acquired adjacent specialist power areas. Industry leading margins in a relatively commoditised vertical. Extremely well managed (although the architect of that success has recently left which prompted me to sell - perhaps foolishly??). Again extreme stretching of valuation multiples has contributed to the multi-bagging. Bought on a PE of around 4, now around 27.

GAW - Transition from a totally unambitious defensive business to one confident in exploiting it’s IP, embracing it’s fan base via social media and developing a fun products that its die hard fans were craving. A new CEO (Kevin Rountree) was clearly the catalyst. They again have a great product and throw off cash to allow aggressive investment in manufacturing (probably have 3x the capacity from when I first purchased in late 2016). They were on a PE of around 14 on clearly ludicrous house broker forecasts on purchase (but around 8x on my own), this has elevated to 25-30 now contributing to the stunning organic growth and operational gearing of the last few years.

From my current portfolio I’d also say SYS1 has the characteristics of a potential multi-bagger. Modest valuation and Mcap, a transition from a consultancy to a scalable platform business with a product (to my untrained eye) that looks highly quality and has grown exponentially and well ahead of house broker forecasts (although the reduction in consultancy has also accelerated!!). It’s not too difficult to imagine it as a £50m revenue company on a PE of 25.


Hi cockerhoop,

Some fantastic winners there!

This chimes with my multi-bagger thinking – buying on low multiples and hopefully enjoying the double whammy of EPS growth and a powerful re-rating.

The advantage of buying at lower multiples is that you do not have to 100% verify the existence of a true long-term ‘moat’ before buying. You can instead piece together clues about the products/services (as I did with TSTL, and we are doing with SYS1) that a moat is being dug, and take an educated guess as to how events may unfold. Subsequent ‘moat’ investigation can then be undertaken to build ‘conviction’ as the company delivers and the shares favourably re-rate.

Hopefully the lower multiple also limits the downside if things do not work out!


1 Like

To balance things out I’ve also looked at companies that have greater than 10 bagged since I 1st purchased but I sold out well before they achieved anywhere near 10 bagger status.

2 spring to mind:
Diploma bought in late 2012 for around £3, sold in March 13 for £6.25 after thinking it’d been on a great run as was somewhat pricey for a distributor. Now £32. Another bolt on acquisition growth play but always having a decent rating (I think)

Dechra Pharma which I bought in 2001 for around £1.40, sold in 2007 for £3.25 ish (from memory). Now £49 but held so long ago so hazy recollection but successfully transitioned from distribution to drug manufacture (perhaps similar to XPP).