Which Stocks Will Be 2020's 10-Baggers?

Pop quiz, hot shot.  Name the company that’s most likely to be a 10-bagger by 2020.

It’s a hard question. There isn’t just one correct answer -- you can find three candidates here -- but it’s easy to weed out some popular incorrect answers. 

If you named Google (Nasdaq: GOOG  ) , ExxonMobil (NYSE: XOM  ) , Amazon.com (Nasdaq: AMZN  ) , or any other large-cap company, you're probably wrong. They're simply too big to grow tenfold in the next decade. My Foolish colleague Tim Hanson has shown year in and year out that a decade's biggest winners are small-cap stocks.

He found that the largest grower of the last 10 years, beverage company Hansen Natural (Nasdaq: HANS  ) , was almost a 50-bagger. Even at 50 times its original market capitalization, Hansen is a $3 billion company – one-tenth the size of Amazon.com, a thirtieth the size of Google, and a hundredth the size of ExxonMobil.

It gets better
Besides having room to grow, small caps have another hidden feature. They are more volatile than their large-cap brethren. This can lead to fluctuations that are absolutely heartbreaking for investors with low risk tolerances. But for those of us with higher risk tolerance, the volatility provides opportunity.

As we've seen recently, large-cap stocks can be quite volatile, too. When their price losses significantly outstrip the market's, though, there's usually something terribly amiss. Familiar examples are former blue chips General Electric (NYSE: GE  ) , Bank of America (NYSE: BAC  ) , and Ford (NYSE: F  ) . If they recover, each could be a multibagger. However, they're all priced at fractions of their former highs because each faces a huge "if." At this point, they're speculations more than investments.  

Meanwhile, small caps are a little different. Since they tend to have greater volatility than the market as a whole, sometimes they experience dramatic stock price tumbles on very little news. Or even on relatively good news.

A quick example
Take the recent case of restaurant company Buffalo Wild Wings. Back in late October, it reported quarterly earnings that were disappointing. But given the state of the economy in general and the restaurant sector in specific, the results were downright robust: positive earnings-per-share growth and impressive same-store sales growth (6.8% at company-owned stores).

In response, shares were sliced in half in the month following the earnings release ... only to gain it all back and then some after beating analyst expectations in the subsequent quarter. Over the past six months, it's been the same company with the same long-term prospects. There have been no huge company-related events and its price is about the same now as it was six months ago.

But somewhere in the middle, the market threw a half-off sale for investors patient enough to wait for a discounted entry point. By taking advantage of volatility, those investors need only a five-bagger from here to reach the vaunted 10-bagger status.

The 10-bagger club
In 2020 when we look back at the decade's list of 10-baggers, the list will be dominated by stocks that can be described as:

  • Small
  • Volatile

The list of investors who profit from these 10-baggers will be dominated by people who can be described as:

  • Patient
  • Risk-tolerant

If you have these two qualities, I invite you to join our analysts at the Motley Fool Hidden Gems newsletter. They are putting the Fool's money where its mouth is by building a real-money portfolio of small-cap stocks. You can see all the companies they're investing in with a free 30-day trial. If you're not impressed, there's no obligation to subscribe.

Already subscribed to Hidden Gems? Log in here.

Anand Chokkavelu does not own shares of any company mentioned. Buffalo Wild Wings is a Motley Fool Hidden Gems recommendation. Google and Hansen Natural are Motley Fool Rule Breakers picks. Amazon.com is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Buffalo Wild Wings. The Fool has a disclosure policy.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 15, 2009, at 9:07 AM, catoismymotor wrote:

    Don't forget about an additional source of potential 10 baggers: China, Brazil and India.

  • Report this Comment On May 15, 2009, at 9:21 AM, EggplantWizard wrote:

    Not all companies have to be "small" to fit your criteria --- troubled might work, without being overly speculative. As opposed to BAC, Ford, etc, the list below seems to have much better odds for survival than not -- the current climate just implies a significant amount of risk.

    Some examples:

    Precision Drilling Trust --- volatile, but not small.

    I am quite confident it will be trading for over $50 or $0 in 2020. Presently a small mid-cap or large small-cap, depending on how you look at it.

    CHK: Same rationale. Lots of debt, great technology. over $200 by 2020 easy (with reinvested dividends), or zero. Currently a midcap.

    I had tended to cite at least three, but I think my point is made -- neither of these companies have issues approaching the scale of Ford or BAC, both are reasonably sized already, and both are likely 10 baggers in 10 years without a bankruptcy, which is less likely in both cases than in the case of BAC, or Ford. (or possibly even GE)

  • Report this Comment On May 15, 2009, at 9:33 AM, TMFBomb wrote:

    Thanks for your favorite 10-bagger picks so far...keep 'em coming!

    catoismymotor,

    The BRIC countries certainly hold interesting possibilities. I've given some thoughts on them in my article, Why India is No China:

    http://www.fool.com/investing/international/2009/05/13/why-i...

    -Anand

  • Report this Comment On May 15, 2009, at 10:31 AM, catoismymotor wrote:

    I think that healthcare small caps hold some great promise as 10 baggers. ARAY, GXDX and NPD are strong possibilites.

    Thank you for the article,

    Cato

  • Report this Comment On May 15, 2009, at 10:46 AM, FinancialFellow wrote:

    I's very bullish on Buffalo Wild Wings. Every time I go there (different locations) they're packed. It's a really neat, unique environment and they offer pretty good food (not necessarily healthy) at a very reasonable price.

    I don't know that folks should necessarily throw their money behind 10 bagger hopefuls, though. That said it may not be a bad idea to set aside a little bit to go after them. Just for fun, though. I think it's important to stay diversified across a wide array of investments: large caps, medium, small, international, REITs, etc. I think it's also important to consider exposing yourself to returns from lending. P2P lending boasts annual returns of 9%: http://financialfellow.com/2009/04/22/peer-to-peer-lending-o...

  • Report this Comment On May 15, 2009, at 1:49 PM, BTShine wrote:

    Sears is a potential 10 Bagger

  • Report this Comment On May 15, 2009, at 1:57 PM, Melaschasm wrote:

    I am giving NCSoft serious consideration as potential 10 bagger. The price is down a little because of the bad economy and having one of their new product launches fail. However, their core business is intact, and I expect signifcant growth over the next decade.

  • Report this Comment On May 15, 2009, at 2:34 PM, AirForceFool wrote:

    Hmmmmmmm......

    I like JRJC... lots of room to grow once the economy starts back up... Really like CHK... have mroe then a few shares..... who else.... LVS, but they could be all or nothing... really like GEOY, but don't think we're looking at a ten bagger on that one... a couple of bags though... who else.... hmmmmm WMB is pretty darn cheap, and they make money on the pipes no matter what the cost of NG. Also like ATPG, but I honestly think that in the next decade or so, perhaps sooner, we're going to see a fuels squeeze.

    Love NFLX, but at their current price, a couple of baggers maybe... not ten... who else....

    I guess that's enough for folks to chew on and offer up other opinions on my picks... please feel free to back up or refute my picks... always happy to hear the bear case against stocks I like...

    Chris

  • Report this Comment On May 15, 2009, at 3:09 PM, bullreturns wrote:

    GE is "speculation more than an investment"

    WOW!!! That's funny. Thanks for the tip d-bagger............

  • Report this Comment On May 15, 2009, at 3:41 PM, EggplantWizard wrote:

    "On May 15, 2009, at 3:09 PM, bullreturns wrote:

    GE is "speculation more than an investment"

    WOW!!! That's funny. Thanks for the tip d-bagger............"

    He's using the Ben Graham differentiation of speculation and investment, I believe.

    Can you give me a reason that buying GE is a good "value" right now, that is unrelated to speculation about an improving economy, bailouts, inflationary pressures, new business lines that are proven?

  • Report this Comment On May 15, 2009, at 4:06 PM, booyahh wrote:

    "Can you give me a reason that buying GE is a good "value" right now"

    Earnings. And lots of it. It made 17b profit in 2008, and made a 2.8b profit in the first quarter of 2009. There are other reasons, but you asked for one :)

  • Report this Comment On May 15, 2009, at 4:18 PM, TicoHombre wrote:

    APWR easy!!!!!!

    But it won't take 10 years to achieve. Study it and you'll buy it.

  • Report this Comment On May 15, 2009, at 4:24 PM, clanza875 wrote:

    JMBA, could be zero, could be 20x

  • Report this Comment On May 15, 2009, at 7:29 PM, TMFBomb wrote:

    A few comments to the comments:

    As EggplantWizard correctly pointed out, I called GE a speculation in the Benjamin Graham sense. It could very well provide excellent returns from here (maybe even the 10-bagger returns we're talking about), but most of us don't have the insight into GE's balance sheet to call a purchase an investment.

    Regarding the chase for the 10-bagger, small caps have their rightful place in a well-diversified portfolio. The percentage of your portfolio dedicated to small caps (and whether you pick them individually or as part of an index) depends on your risk tolerance, time horizon, and expertise.

    -Anand

  • Report this Comment On May 15, 2009, at 8:26 PM, Seano67 wrote:

    Well we all know that oil is going to rise again, so I wouldn't bet against HERO being a 10 bagger in ten years time.

    I also really like NTE in the IT sector. Cash rich, extremely well managed company, I believe they've got a great future ahead of themselves.

  • Report this Comment On May 15, 2009, at 10:21 PM, greenwave3 wrote:

    If you want a 10 bagger, look to China's Wuhan General (WUHN), and you probably won't have to wait ten years to see it, either. Exposure to energy technology and industrial production -- two things that are going to need to take off for China to meet its growth goals.

  • Report this Comment On May 15, 2009, at 10:26 PM, greenwave3 wrote:

    GE? Are you kidding? It's no 10-bagger, not even as a product of a wildly creative imagination. However, GE does represent a very solid investment at today's prices. It may or may not outperform the S&P, but it promises to provide a very nice return at today's levels.

  • Report this Comment On May 16, 2009, at 1:07 AM, Collaredkitty wrote:

    This article redefines asinine.

  • Report this Comment On May 16, 2009, at 9:24 AM, TMFBomb wrote:

    Further on GE:

    Its market cap is at $136 billion (that's huge!)...to be a 10-bagger even from today's prices would require it to be 3 or 4 times the current size of Exxon, America's largest company (by market cap).

    Even at the height of bubble times in the early part of this decade, its market cap was only about 4 to 5 times where it stands now.

    -Anand

  • Report this Comment On May 16, 2009, at 10:09 AM, SwampBull wrote:

    The concept of selecting "10-Baggers" is no more scientific than a Kentucky Derby bet, or filling out a March Madness bracket. I don't follow the logic used to derive such a valuation of even small cap companies. This article emphasizes the characteristics explained by Everyday Investor regarding the individual's belief that they are significantly more talented than the general population of investors.

    Most people would be better served avoiding the (0.95) Baggers - throwing their caution and money to the wind in hopes of spectacular gains.

  • Report this Comment On May 16, 2009, at 10:11 AM, SwampBull wrote:

    Most investors would be better served by avoiding (.95)-Baggers than searching for 10-Baggers. There is more skill involved with the former, anyhow.

  • Report this Comment On May 16, 2009, at 10:33 AM, IIcx wrote:

    As the information age climbs its bell curve, nano tech is emerging. 10 years from now we'll use thin film transparent computers for contact lenses and the exotic materials industry will be expanding exponentially.

    Winners and losers are hard to pick but one is likely to be GLW.

  • Report this Comment On May 16, 2009, at 11:38 AM, TMFBomb wrote:

    SwampBull,

    Thanks for the comments.

    Personally, I like to have a portion of my portfolio in companies that have the potential to become 10-baggers -- and these are almost exclusively small cap stocks. You're right that honing in on exactly one company that will grow wildly from here is a crapshoot.

    However, the whole point of picking individual stocks is trying to separate out those companies that have the highest probability of success from those with the lowest. Even then, as Peter Lynch once noted, picking 6 out of 10 right means you're doing well.

    Indexing is a great option for those who don't have the time/inclination/skill to pick individual stocks...it's also great for those who want to dedicate part of their portfolio to individual stock picks and part of it to indexing options (I fall in that latter category myself).

    -Anand

  • Report this Comment On May 16, 2009, at 12:37 PM, TSIF wrote:

    Anand, you are correct, there will be many 10 baggers in the next ten year. Buffett wasn't after 10 baggers, he was after consistancy, understandability, and preferrably a moat. He ended up with some 10X and then some.

    I agree that you don't have to be a tiny or small cap to be a ten bagger, but it gets harder. Distressed does work. Ford is currently a 5x in my portfolio in a few months. I think it's over valued, but Mr. Market makes the calls. Too bad I only have a very small stake!

    Stec is a 3X and nearing 4X in less than six months in my portfolio. If not bought out STEC has 10X potential even from here. (again, not as much as I should have bought!)

    FHC will be a 10X if no one steals their technology as they did the male verson of the uh-ummm product.

    If oil goes back up to $120+ or the $200 some analysts predict, then yes I agree wtih Hero and PDS.

    Disruptive technology, energy, wind, some solars, small foreign, yes, 10X potential out there.

    As a hidden gems substiber I have found 2 of your tinies and a few of your others that are in my portfolio.

    As far as picking companies that beat the S&P and not worrying about 10 baggers, ....where's the fun in that. In my opinion everyone needs 2-3 small caps in their portfolio. (unless they are of the age where pure income is all they want, which is a mistake in my book at any age with inflation highly possible).

    I think the hardest part about picking a 10X is taking the risk and then finding one that some big giant doesn't buy out.

    Nice points.

    TSIF

  • Report this Comment On May 16, 2009, at 5:15 PM, chi2jxw wrote:

    Learn to buy options and you can hit 10 baggers in months...

  • Report this Comment On May 16, 2009, at 7:27 PM, HuntforRedStktbr wrote:

    which options are ten baggers? iyo

  • Report this Comment On May 16, 2009, at 11:06 PM, dividendgrowth wrote:

    LVS was an 8 bagger in less than 2 months.

    SCSS, the former HG favorite, went from 0.19 to 1.02.

    JMBA is also a 3 bagger so far.

  • Report this Comment On May 17, 2009, at 2:09 AM, nartable wrote:

    I believe COIN and FHC will be ten-baggers by 2020, if not sooner.

    COIN:

    -- owns the processes they use to make their compost, and have started to license smaller units to other entities.

    -- they are easily supplied with the waste food they use to make the compost.

    -- the products are very green, which is very important in the context of ag runoff - read about the Gulf of Mexico hypoxia problem and the Chesapeake Bay's woes.

    FHC:

    -- patents pending in the US for the new FC2, a superior female condom which is cheaper to make than the first generation one

    -- FDA-approved as preventing pregnancy and STD transmission, including HIV

    -- also approved in the EU, India, Brazil and other countries

    -- the estimated world-wide market for condoms is vast, and the female condom doesn't compete with male condoms. Many countries distribute them via the public health sector, i.e.government contracts

    I am long on both of these companies.

  • Report this Comment On May 17, 2009, at 11:26 AM, TMFBomb wrote:

    Options certainly offer greater upside potential, but it's at the cost of time. You not only have to pick the right company but also the time frame in which the company will make its price movement (up or down depending on if it's a call or put). In my opinion, this gets further down the path of speculation (vs. investment)...not saying there's no room for options as part of your overall portfolio...just be careful and know the bet you're making.

    -Anand

  • Report this Comment On May 17, 2009, at 11:34 AM, automaticaev wrote:

    I ate at buffalo wild wings last night and i was pukeing for like 2 hours and kept pukeing after nothing was ;eft to puke out. Really i thought my kidneys shut down or smthing and i couldnt walk only crawl. I was about to ask for a ride to the hospital. Im ok now though.

  • Report this Comment On May 18, 2009, at 11:08 AM, OttoBismarck wrote:

    I think LDK has the potentional: this Chinese solar company giant sell worldwide while the biggest potential is in their own garden.

    I think CDII has the potential once (Chinese) commodities will go up again.

    CMED: Chinese medical technology firm to diagnose efficiently diseases like cancer. Fast growing and profitable.

    DRYS: but ONLY if prices of dry bulk carriers are skyrocketing like in 2008.

    PBR, VALE and GGB if prices of oil, ore and iron go up and beyond 2008 prices.

    - Wouter

  • Report this Comment On May 20, 2009, at 9:46 PM, dividendgrowth wrote:

    Buying junks near market bottoms gives you the best return.

    Who gives a damn about 10 baggers in 11 years when you can do the same thing with junks in a few months?

  • Report this Comment On May 21, 2009, at 2:08 AM, HarryCarysGhost wrote:

    VISA your buying a brand with a huge moat.

    Give these new credit card laws a chance to shake out and V should gain even more market share.

    In a normal market this would already be a 4-bagger.

    Disclousure- yes I own it.

  • Report this Comment On May 21, 2009, at 5:38 PM, maxhoffa wrote:

    some good recs so far . . . some i own, some i wish i had bought, others i dunno about. we can disagree i guess.

    BAC at the level i bought in, will either be a ten-bag or a bust.

    i'd toss out FEED as a potential multi-bagger. well positioned in the biggest hog market in the world.

    take a peek.

    disclosure: i own a grip of it

  • Report this Comment On May 22, 2009, at 12:37 PM, TxTom wrote:

    Future ten baggers... Well, C has a chance since it was trading at $1. It's at least a "seven bagger". BAC will do very well, but probably not a ten bagger.

    For the spec portion of my portfolio, I like STEM, SQNM (if they ever prove their product), SIRI will make the grade over time, DRYS almost certainly when shipping resumes.

    Other multi-baggers (although probably not ten) are JEF, HBAN (watch out for this sleeper folks), WFC (Wachovia will make the bunches of money for WFC over time), and don't overlook AA. The new cars will use a LOT of this company's products.

    Don't laugh at STEM and SIRI... one or both will be an eventual big winner. You heard it here.

    Best of luck everyone. We couldn't be trading during a better time in history! Make the most of it.

  • Report this Comment On May 22, 2009, at 1:40 PM, rruben wrote:

    I think Vaaldiam Resources will be such a ten bagger. A diamond company which is 0.07 CAD at the moment.

    Since January this year it already went up with 366%

    I will keep this one for the long term.

  • Report this Comment On May 22, 2009, at 1:43 PM, stgodby wrote:

    Buffalo Wild Wings has been a MF pick for quite a while and yet this stock has barely more than doubled in the past five years. It's now trading at $33.89 which is the same place it was in May of 2007 and it's heading down. Perhaps money can be made, as they suggest, by buying the swings of this wildly volitile stock. But buy and hold? I think not!

  • Report this Comment On May 22, 2009, at 1:43 PM, Morfax wrote:

    I need a 2-bagger in 2009 or 2010! not in 2020. How about CIEN??

  • Report this Comment On May 22, 2009, at 1:59 PM, Francorp wrote:

    I like OCNF here. How can you lose with a stock this devalued currently that seems to have a pretty good position in the dry shipping market?

  • Report this Comment On May 22, 2009, at 2:54 PM, drtcusick wrote:

    Easy: ZOLT. Currently, wind projects are on hold due to Administration debating the incentives, but they will sky-rocket. 35.5 MPG cars are going to need a lot of carbon fiber panels. Deep-rig oil platforms love the product for umbilical cords (can't beat the tension vs. weight equation). 10 bagger? I think that's setting the sights a bit low.

  • Report this Comment On May 22, 2009, at 3:01 PM, epVET wrote:

    One word..... PLASTICS!

  • Report this Comment On May 22, 2009, at 6:53 PM, dividendgrowth wrote:

    Cyclicals also can make great ten baggers, as long as you know when to sell out.

    Just like at TIE, was 0.31 in late 2002, went all the way to 48 in May 2006, but is now back to 9.

    TIE is hardly a junk, but a leading producer of titanium alloys. If the airplane production picks up again in the future, it's an easy multi-bagger story.

  • Report this Comment On May 22, 2009, at 9:50 PM, gaahdaah wrote:

    I have 2 suggestions for 10 baggers: Intuitive Surgical and Accuray.

  • Report this Comment On May 22, 2009, at 9:53 PM, FLEESEee wrote:

    I bought AAPL at 92, I wish I'd bought more, lets see if I made a good investment for the future.Lets give it a little while.

  • Report this Comment On May 22, 2009, at 11:36 PM, KanuckSteph wrote:

    Interesting article. I am no professional stock picker, but I am willing to bet that if you buy GXC now and hold it till 2020, you'll have over a ten bagger. With the combination of China's growth and the devaluation of the USD, it's almost a no-brainer. I bought in March so I'll let you know in 10 years.

  • Report this Comment On May 23, 2009, at 6:39 PM, Mayascribe wrote:

    Northern Dynasties Minerals (NAK): This mining company has not yet scratched the surface of its 82 billion pounds of copper, and 32 million ounces of proven gold reserves. At current gold and copper prices, that's close to a quarter trillion waiting to be mined. Stock has shot up to $8.00, but if you got in it @ $5.00, you may have your ten bagger.

  • Report this Comment On May 25, 2009, at 10:16 AM, Raddleman wrote:

    AZZ zinc coaters would seem to be a no brainer if we get serious about improving the grid system.

  • Report this Comment On May 25, 2009, at 1:50 PM, slpca wrote:

    Why would anyone invest in Exxon anyway? Has everyone forgotten the Exxon Valdez, and the disrespect Exxon holds for the environment? Does the Fool have a social conscience?

  • Report this Comment On May 26, 2009, at 7:13 PM, jtofabc wrote:

    What do you care? You don't hold onto a stock long enough for it to multiply any way. You guys just sold most of your BWLD and SNS.

    JT

  • Report this Comment On October 16, 2009, at 5:04 PM, afrodz wrote:

    IMGG-OB is currently a 64 bagger for me. Bought for pennies and currently trading at .73 I believe this one has a big future. Great company and technology.

  • Report this Comment On October 16, 2009, at 5:15 PM, Counterparty wrote:

    SGAS

    KAZ

    GFGU

    WHI

    WH

    FBP

    S

  • Report this Comment On October 16, 2009, at 5:17 PM, afrodz wrote:

    Plastics? Another one to look into is CERP.OB. Soon to be trading on the NASDAQ, this is an innovative company creating non-petroleum based plastics. Consistently building a client base. Aggressive, smart company.

  • Report this Comment On December 23, 2009, at 3:33 AM, Fool wrote:

    pfe

  • Report this Comment On February 25, 2010, at 6:07 PM, xjp83x wrote:

    Wow, so many newbies here with investing.

    GE is a safety play. Somewhat like JNJ. Too big to grow, but worth an investment. Same with KO, GOOG, AAPL. You cannot see a 10 bagger in these stocks unless their valuation is AWESOME to the point where their P/E is less than 4 (LOL). Their market caps are too big.

    10 bagger stocks are most likely the ones that many people do not know or heard of. Stocks with market caps less than 10B probably can be a 10 bagger if the company is going to do REALLY.. REALLY great. Hence, it's very hard to find the gem. I'm looking at companies like Becton Dickinson to become close to a 10 bagger. I think a successful chocolate business can see a 10 times growth as well.

  • Report this Comment On April 24, 2012, at 12:21 AM, jscraze wrote:

    after lots of DD I found EGT not a ten bagger in one year,... but I think soon

  • Report this Comment On May 09, 2012, at 6:53 PM, betabaker wrote:

    this is the tower of Babel...........

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