Every investor would love to see the stock they own double in value.
But a 100% gain does not happen overnight.
For instance, shares of taxi operator ComfortDelGro Corporation Limited (SGX: C52) have delivered total returns of 200% for investors. But the returns occurred over a period of a decade.
At the basic level, the example above tells us two things: first, we have to find the right company to buy. Then, we have to have the resolve to hold the company for the long-term, through the thick and thin.
Finding the courage to hold, though, is not as simple as it looks.
Courage, Principles, and Multibaggers
Our analyst team works closely with fellow analysts and investors from our Motley Fool headquarters. One of whom we’ve had the pleasure of working with is Jeff Fischer.
Jeff Fischer has a long tenure with The Motley Fool. He first started writing online for the Fool in 1996. Today, we would like to help you, our fellow investor, with five principles that we have gleaned from Jeff’s decades of writing.
Let’s start with the first principle today.
Principle #1: Predictable or Recurring Revenue
Most people dream of having enough “naturally” recurring income that they can live life however they wish.
Companies benefit from recurring income in a similar fashion. A company that is able to generate predictable or recurring revenue is in a much stronger position to use that steady revenue to fund additional growth.
Predictable, recurring revenue can come in a few key forms: Subscription-based sales that rebill automatically, as is true with many software companies, for example; and transaction-based revenue that is earned every day, perhaps every second, as with the major credit-card operators who earn a toll on every transaction. Companies selling big-ticket items like cars and household appliances lack recurring revenue, and that’s why you see them spending money on advertising all the time. They always need to work to sell again.
The bottom line is we don’t want our companies spending their time and money looking to remake a past sale. Instead, we want past sales to become recurring sales, and our company to be free to find brand new avenues of growth on top of that.
This business model is so attractive that more and more companies are turning to subscription-based revenue models.
More to come …
That’s not all.
Recurring revenue, on its own, is not enough reason for us to consider a company. Check back tomorrow when we will talk about our next principle, which delves into the growth runway that a company has ahead.
Before I sign off, I am proud to share that our stock recommendation service, Stock Advisor Singapore, has uncovered two companies that have delivered 100% returns in less than two years. And these two multi-bagging stocks have Jeff’s principles written all over it.
Their names, including the full research reports, are available inside our flagship stock recommendation service Stock Advisor Singapore. In fact, we have over 30 stocks ready for you to consider buying now.
Click here to find out how you can get access today.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chin Hui Leong does not own shares in the companies mentioned.