Which are the top multibagger smallcap stocks in India right now?
As per Equitymaster's Stock Screener, these are the smallcap stocks which have given multibagger returns to shareholders -
These smallcap companies have been ranked as per the returns they have delivered to shareholders in the last three years on a compounded annual growth rate (CAGR) basis.
Remember, it's not easy to identify future multibagger stocks, but if you do it carefully and with due diligence, you can find high growth smallcap companies which can turn out to become future multibaggers.
There are other parameters you should take into account as well before forming a hard opinion on the stock.
What are smallcap stocks?
According to the market regulator, smallcap stocks are companies which rank 251st and beyond in terms of their market capitalisation.
Investing in them is perceived to be risky. However, the potential for higher returns makes them an appealing investment avenue.
How should you screen smallcap stocks?
Investing in smallcap stocks can be a tall order because they are less proven, and so are rife with speculative investment due to lack of data and operation history.
If you're looking to invest in the smallcap space, this is how you should screen for the best smallcap stocks.
Which smallcap stocks can become multibaggers in the long run?
Fundamentally strong smallcap stocks that have a long runway for growth and are trading at reasonable valuations have the potential to become multibaggers in the long run.
Apart from the above, another way to look for future smallcap multibaggers is to look into the past. Smallcap stocks which have delivered the highest returns in the past might be a good place to begin your search.
How much should one invest in multibagger smallcap stocks?
According to us, in a scenario of ideal allocation of funds, small cap stocks should not comprise more than 10% of one's total equity portfolio.
Further, we believe that a single small cap stock should ideally not form more than 2-3% of the total portfolio.