In mutual fund legend Peter Lynch’s parlance, a 10-bagger is a stock that has gone up in price by 10 times. It is one of the most elusive yet satisfying kinds of stock an investor can hope to find. Is a 10-bagger possible here, in our humble Singapore stock market, where the Straits Times Index (SGX: ^STI) has climbed about 160% in the past 10 years? Let’s consider these four stocks and take a guess at their returns (inclusive of dividends)…
In mutual fund legend Peter Lynch’s parlance, a 10-bagger is a stock that has gone up in price by 10 times. It is one of the most elusive yet satisfying kinds of stock an investor can hope to find. Is a 10-bagger possible here, in our humble Singapore stock market, where the Straits Times Index (SGX: ^STI) has climbed about 160% in the past 10 years?
Let’s consider these four stocks and take a guess at their returns (inclusive of dividends) since Jan 2003:
- Infrastructure engineering and geospatial imaging company, Boustead Singapore (SGX: F9D)
- Instant beverage manufacturer, Super Group (SGX: S10)
- Conglomerate holding company, Jardine Strategic Holdings (SGX: J37)
- Another conglomerate holding company, Jardine Matheson Holdings (SGX: J36). Incidentally, Jardine Matheson and Jardine Strategic belong to the complex and sprawling mega-conglomerate Jardine Matheson Group, which also have holdings in retailer Dairy Farm International, and hotelier Mandarin Oriental.
Have you made your guess? The answers will be revealed soon but no peeking yet! Ready? Here you go:
- Boustead returned an outstanding 2780%.
- Super Group’s shares were a distant second with growth of 1820%.
- Jardine Strategic’s shareholders were enriched with a 1550% return.
- That’s a “shabby” 1117% gain by Jardine Matheson, isn’t it?
These are the returns an investor would have gotten if he or she had invested in them in Jan 2003 and stored them under the mattress. Don’t forget that during the intervening 10 years, the Global Financial Crisis of 2007/2009 and the more recent Eurozone debt debacle happened. But, these financial disasters could not harm those stock returns.
So what’s the secret you might ask? It might astound you, but it’s as simple as buying them and holding them. That’s right – you invest in a company’s shares and do nothing, besides periodically checking up on the business’ fundamentals.
In the case of the four companies above, their earnings have been steadily creeping upward since 2003, despite the occasional hiccups. As profits grow, the business’s intrinsic value increases. Dividends also played a part in enriching shareholders, as we can see these companies ratcheting their dividend payments upward. The graphs below will show you what I mean.
If a business’s fundamentals remain sound even when the markets are falling steeply, as it did in 2008 and 2009, then the best thing to do would be to hold on tight to its shares. For example, investors who sold Super Group’s shares when it fell from $1.14 on May 2008 to around $0.330 on March 2009 would have missed out on the eventual 1060% gain from the trough to its current price of around $3.85.
If you have picked a good business to invest in, then invest in it and wait. The key to market beating long-term returns isn’t clairvoyant foresight or trading in and out of shares furiously – it is to simply buy and hold.
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The Motley Fool’s purpose is to help the world invest, better. The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Contributor Chong Ser Jing doesn’t own shares in any companies mentioned.