That’s not to say you should not speculate on such shares, because a) it’s fun and b) there is always a slim chance that you might pick the rare winner. But you can increase your chances by choosing carefully, and our feature describes some of the approaches you can take to help you do so. And you should only speculate with cash you can afford to lose – in other words, don’t bet your pension on them. You might do well for a while, but always lock in some gains if you do.
That said, there is something to be said for the idea of finding what’s known in the world of investing as multibaggers. Indeed, it is the basis of many successful investors’ investment styles, not least Nick Train, who once gave an unforgettable presentation to an IC audience on this very subject. But, as Mr Train explained, finding what he called “baggers” is not about chasing hot commodity stocks or blue-sky inventors, but finding good companies and letting the power of time do its work. It is an approach that is absolutely compatible with the long-term and moderately low-risk approach we generally favour – ‘get rich slow’ as it were.
With this in mind I thought I’d crank up the Datastream terminal to see just who the big gainers of recent years have been. The results are both surprising and unsurprising. The big winner over 20 years – by a country mile – among companies still listed is not in the business of commodities, or tech or biotech, but trainers: JD Sports Fashion, with a capital gain of over 10,000 per cent. Over 10 years the honour goes to 4Imprint, more corporate tat than tech, while you don’t have to look far down the list to find Nick Train’s investment trust, Lindsell Train, proof positive that he walks his bagger talk. Head to Aim, and Victoria – a carpet manufacturer – tops the 20-year list, and it is only when we get to the 10-year table that hi-tech winners start to emerge.
The lesson is that with patience there is often more gain to be found in the seemingly mundane than from exciting story stocks. And if we look at the median share performance over both indices over several periods – in Aim’s case, always appalling – we can also see just how valuable analytically-led stockpicking is to generating alpha.
