I have read stories about people holding a stock for 20 years and getting their investment multiplied by many folds. I want to know if there is any method to spot such stock which can deliver many folded returns in the long run.

I suppose the only method is Fundamental Analysis. But that as a subject is too broad. What are the five most important things to notice from the annual report of a company to get its real valuation?

closed as too broad by Nathan L, Dheer, Daniel Anderson, MD-Tech, JoeTaxpayer Feb 17 '17 at 15:09

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    Any financial adviser who says it's anything but luck is trying to cheat you – Marshall Tigerus Feb 15 '17 at 16:37
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    There are "stock screener" tools that let you search for certain criteria and fundamentals (like PE ratio between X and Y, operates in certain industries, with a market cap between X and Y, etc) but no, you can't predict the future. – Rocky Feb 15 '17 at 17:32
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    Siegal's Constant is about 6.9% per year average growth in the stock market over long periods of time. (The short term is lumpier) The law of 72 would give this a doubling period a bit over 10 years. So if you bought an index ETF and did nothing, in 20 years it would be roughly a 4 bagger. In 20 years it would be an 8 bagger. So extraordinary skill is not required, just patience. – zeta-band Feb 15 '17 at 20:14

Well, one "method" is to be clairvoyant.

Another method is to have profound insight into trends in technology and society. I personally did very well from investing in Microsoft and Apple because I thought that personal computers were going to be very important. Of course my thinking was "I bet these companies will do well, and the stocks will increase in value over time." Not, "I see that we are on the cusp of a technological revolution, and my investment will increase by 100-fold."

However, Enron, and Theranos were thought to be revolutionary at one time too! So it comes back to clairvoyance.

  • Did you analyse the valuations of Microsoft or Apple when you invested in them? If yes, how to analyse a stock? – ddas Feb 16 '17 at 18:43
  • @ddas No, not particularly. My motivation was my belief that personal computers would become ubiquitous. As it turns out I right beyond my wildest dreams, but that's luck, not a method. Venture capital companies do this for a living, but they mostly do it with other people's money, and they are doing super well if they pick one winner out of ten tries. Of course they scrutinize the financials with a microscope, but they are mostly making educated guesses about trends in technology and society. – Charles E. Grant Feb 18 '17 at 3:42

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