Intuitive Surgical (Nasdaq: ISRG), which specializes in robotic equipment for surgeries, has more than tripled in a little more than a year. Lucky me -- I bought in at $95 per share in September 2006.
I'd like to brag that I found the company on my own, but this was one of many stocks I discovered through our Motley Fool Rule Breakers growth investing service. Its impressive rise has taught me a fascinating lesson about growth stocks' power to multiply your money.
Wonderful math
As of the time of this writing, Intuitive Surgical's stock sits around $290 per share. In cocktail-party parlance, I'm sitting on a "three-bagger." Better yet, the company is still growing, and it has many admirers. In our CAPS stock prediction service, 94% of the 2,358 participants rating the stock are bullish on it. Among the 775 All-Star participants rating the stock -- investors whose returns consistently outscore their peers -- 96% are bullish.
The stock's rapid rise has led me to marvel at the math behind its progress. If you're going from $100 to $200, you have to achieve a 100% increase to hit "two-bagger" status. But to get to three-bagger status, you only need to rise another $100, to $300 -- just a 50% increase from $200.
From there, multiplying your money only gets faster and easier:
|
Dollar Amount |
"Baggers" |
Increase |
|---|---|---|
|
$200 |
2 |
100% |
|
$300 |
3 |
50% |
|
$400 |
4 |
33% |
|
$500 |
5 |
25% |
|
$600 |
6 |
20% |
|
$700 |
7 |
17% |
|
$800 |
8 |
14% |
|
$900 |
9 |
13% |
|
$1,000 |
10 |
11% |
Once you reach, say, a 20-bagger at $2,000, rising to a 21-bagger at $2,100 requires only a 5% increase. That's the same percentage that many stocks rise or fall in a single day. Here are just a few of the stocks that did exactly that one day last week:
- Smith & Wesson (Nasdaq: SWHC), up 23.3%
- MBIA (NYSE: MBI), down 15.2%
- Nuance Communications (Nasdaq: NUAN), up 12%
- Molson Coors Brewing (NYSE: TAP), up 9.5%
- Blockbuster (NYSE: BBI), up 11.7%
- Flotek (NYSE: FTK), up 12.6%
It took me almost a year to double my money on this stock -- and with many stocks, it can take far longer. But each successive "bag" is easier and easier to achieve. Rule Breakers specializes in finding growth stocks that achieve exactly this sort of amazing growth. Lead advisor and Fool co-founder David Gardner even coined a term, "daybagger," to describe when a stock rises more in a single day than the amount you paid for it.
The big picture
So stay focused on the big picture for your investments. Aim to hang on to solid performers for a long time -- a decade or more, even -- as long as they're performing well. Great investors from Shelby Davis to Warren Buffett have created enormous amounts of wealth simply by holding their best investments.
And if you'd like some promising investment ideas that may eventually be daybaggers for you, I invite you to test-drive David's Rule Breakers service. There's no obligation to subscribe.
