Retail investors are six times more likely to stumble upon a sacred ‘ten-bagger’ stock by investing in US companies versus the UK, according to analysis from trading and investing platform eToro.
eToro analysed the returns of FTSE 350 companies and S&P 500 firms from 2013 to 2023 to identify ten-bagger stocks i.e. companies which have seen their share price surge by a factor of 10 or more (+1,000%) over 10 years.
In the UK, just two companies make up this exclusive club, giving FTSE 350 investors a 0.6% hit rate on ten-baggers.
Which were the British ten baggers?
The first, sports retailer JD Sports LON:JD., saw its share price jump 1,039% over the 10-year period, with the company growing sales near ten-fold despite a troubled high-street as it aggressively rolled out stores, acquired sportswear brands and rode the athleisure boom. Fellow retailer Games Workshop LON:GAW meanwhile saw its value grow by a staggering 1,329%, with the firm profiting from its unique fantasy gaming products and fanatical customer loyalty.
Across the pond, the likelihood of striking lucky with a ten-bagger increases six-fold, with 21 of the current S&P 500 serving up +1,000% returns from 2013 to 2023, a 4.2% hit rate. Perhaps unsurprisingly given the tech-heavy nature of the S&P, virtually all of the US ten-baggers are tech stocks with names such as Nvidia NASDAQ:NVDA (12,265%), Tesla NASDAQ:TSLA (2,378%) and Palo Alto Networks NASDAQ:PANW (1,439%) making up the list.
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Chip maker Nvidia has seen its share price explode in the last two years as it has established itself as a leader in AI, whilst Tesla, despite faltering in recent times, has still returned huge gains to shareholders as it turned itself from a challenger brand into the world’s biggest car company between 2013 and 2023.
One non-tech name on the US ten-baggers list is pharmaceutical giant Eli Lilly NYSE:LLY (1,043%), which has seen its value rocket in recent times thanks to the surging popularity of its weight loss drugs.
Commenting on the data, eToro Analyst Sam North, said: “Finding ten-bagger stocks is extremely difficult, yet this isn’t the hardest part. What’s even more difficult is hanging on for the ride. Many investors take profits too early or bail out if the company is going through a rocky patch. Before selling a stock that’s already rewarded you greatly, you should ask yourself whether the company still has a competitive advantage? There are various ways to analyse this and if the answer is yes, then you should think carefully before selling.”
One option is to take out a portion of profits. Taking a little bit of profit can make it psychologically easier to hold the rest of the position for the longer term, as it allows you to secure some gains while maintaining exposure to further potential upside.
Five baggers are also hard to come by in the UK, with just four UK stocks giving shareholders 5 x returns over the decade (excluding the ten-baggers). These include promotional products specialist 4Imprint LON:FOUR (584%), equipment rental firm Ashtead LON:AHT (619%), private equity and venture capital firm 3I Group LON:III (529%) and ubiquitous bakery chain Greggs LON:GRG (504%).
At the other end of the spectrum, there are three firms in the FTSE 350 which have seen their share price all but wiped out over the same period, including Harbour Energy LON:HBR (-95%) and property firms Hammerson [LON:HMSO (-88%) and Kier Group LON:KIE (-91%).
Five baggers are more common in the USA
In the US, five-baggers are far more common, with 34 firms having returned 500-1,000% to shareholders over 10 years, with firms such as Netflix NASDAQ:NFLX (826%), Apple NASDAQ:AAPL (861%) and Lululemon NASDAQ:LULU (766%) featuring.
“With its dominance of the global technology sector, the US is the best place in the world to hunt for ten-baggers and it’s never been easier to access and invest in US firms, wherever you are in the world,” said North. “When thinking about potential candidates able to achieve this level of growth, it’s worth considering not only today’s supertrends but the potential supertrends of the future.”
By comparison, the UK market has had a dearth of IPOs, and has long been dominated by sectors like banking, mining, and industrials, which despite their scale, are more dividend-focused and less likely to exhibit the astronomical growth shown by innovative and early-stage technology companies.
However, rectifying the lack of high-growth UK listings is on the government’s regulatory agenda. If measures are successfully implemented this could set the stage for more UK ten-baggers in the years to come.
It’s also worth bearing in mind that even if you don’t directly invest in these winning companies, you can still benefit from their success by investing in Exchange Traded Funds tracking the performance of particular stock markets as a whole.
