The stock market is the only place where things go on sale and customers run for the hills.
Last year’s bear market – while painful at the time – created many incredible profit opportunities for astute investors that were able to look past the noise. And while many investors may fear that they have missed out on the rally, there’s reason to believe that this next leg up may be just getting started.
We want to make sure we’re ready to pull the trigger when the time comes to snag the next ‘ten-bagger’. Famed investor Peter Lynch is credited with coining this phrase in his book One Up On Wall Street.
The Wonderful Ten-Bagger
In stock market terms, a ten-bagger is a stock that has risen ten times in value since the original purchase. If you’ve ever had the pleasure of snagging a ten-bagger, you know how appealing it can be.
The best time to initiate a bullish position with ten-bagger potential is after a vicious bear market when stock prices are depressed. The undervaluation created by a decline in demand and extremely negative consumer sentiment helps to mark a shift for the bulls. While the move can be subtle at first, prices can swiftly reverse course and notch huge gains in a very short period of time.
We’ve seen tech leaders such as Nvidia NVDA and Facebook-parent Meta Platforms META deliver ten-bagger appreciation (and more) over the last decade. Many of the largest winners in stock market history have come from the technology sector.
After last year’s bear market bottom, NVDA has soared more than 340%, while META has risen more than 235%. Clearly, the run for these technology giants isn’t over. NVDA is a Zacks Rank #1 (Strong Buy), while META is currently a Zacks Rank #3 (Hold). Both stocks are part of the Zacks Computer and Technology sector and are in leading industries.
While these companies likely have more upside ahead, do they have ten-bagger potential from here? This will depend on how their businesses evolve in the future. But we likely want to look away from the current market leaders in order to find the stocks that will become ten-baggers in the coming months and years.
The market’s risk-reward profile has improved significantly relative to last year. If the market’s long-term upward trend has indeed resumed, it needs to be supported by an increasing appetite for risk. This has certainly been the case this year, we just need to know where to look for stocks with ten-bagger potential.
Where to Look Now
Artificial intelligence (AI) has come to the forefront this year, with a host of AI-related stocks and ETFs surging higher. Generative AI applications like ChatGPT have been all the rage, capturing the imaginations of people around the world. The Global X Robotics & Artificial Intelligence ETF BOTZ has surged more than 50% off the lows from last year:
Image Source: StockCharts
A good place to start is to pinpoint relatively smaller companies within the AI space that have the ability to grow their revenues and earnings at an extremely fast pace. Target companies that are heavily involved in new technologies which will drive the future such as robotics and machine learning.
The disruptive innovation that these technologies will produce will create new markets and help drive stock prices higher. So make sure you’ve got plenty of dry powder and you’re ready to pull the trigger when the time comes. Here’s to your next ten-bagger!
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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Global X Robotics & Artificial Intelligence ETF (BOTZ): ETF Research Reports
Meta Platforms, Inc. (META) : Free Stock Analysis Report
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