A 10-bagger share increases in value by at least 10 times its purchase price. At the moment everyone is pretty excited about the Afterpay Ltd (ASX: APT) share price. Yesterday alone, it rose by 8.96% to new highs. In fact, if you had purchased Afterpay on its IPO, you would have seen your investment increase in value more than 15 times. At the time of writing, the Afterpay share price had a compound annual growth rate (CAGR) of 285.5% in just under 3 years.
Unfortunately, most of us aren’t smart enough or lucky enough to pick great shares at IPO. The 5 ASX 200 shares below would all have turned $10,000 into at least $100,000 over the past decade. Many of them had listed way before 2010.
5 top 10-bagger shares
Jumbo Interactive Ltd (ASX: JIN) is a lottery retailer in Australia, selling games under agreement with government licensed lottery operator Tatts Group. Unlike previous lottery resellers, Jumbo Interactive sells via the internet. The company considers itself to be a software engineering company first and foremost. The company became a 10-bagger share when it opened its software to be licensed by lottery sellers globally. Since 2010, its share price has grown just over 31 times.
Appen Ltd (ASX: APX) provides or improves data used for the development of machine learning and artificial intelligence products. It works with some of the world’s leading technology companies. This has included working with Apple Inc. on its voice assistant “Siri”. Since listing in 2015, this company has grown over 54 times.
Magellan Financial Group Ltd (ASX: MFG) is the definition of compound growth. Smart investing in US growth shares has given this company a massive CAGR of 52.4% over the past 10 years. Its share price today is 66.6 times larger than on 1 January 2010. An investment of $10,000 at that time would now be worth ~$656,000. It holds significant stakes in some of the worlds largest companies and has done so since very early in their growth. These have included Apple, Facebook, Alphabet (Google) and business software giant SAP.
Altium Limited (ASX: ALU) is, I think, one of the truly spectacular performers on the ASX across many areas. This company is not a 10-bagger share, it is a 100-bagger. It sells PC-based electronics design software for engineers who design printed circuit boards. Over the 10 years in question, it has achieved compound annual growth rates (CAGR) across sales, earnings per share, and equity growth well in excess of 10%. With a share price CAGR of 65%, Altium would have grown a 2010 investment just over 146 times.
The big one
The dominant share across the past decade has of course been gold miner Northern Star Resources Ltd (ASX: NST). If you had invested $10,000 with Northern Star on 1 January 2010 it would be worth over $4,700,000 today (at the time of writing). A growth rate of 479 times is the stuff that dreams are made of. The current high gold price has helped in during 2020. Still, most of its share price growth happened between 2014 and February, 2020 – a period entirely pre-pandemic.
The company’s secret formula has been to buy well, increase the gold reserves, increase the production and profitability, and divest itself of poorly performing assets quickly.
This decade’s 10-bagger shares are likely to have many characteristics of these companies. They will likely be technology focused or technology adaptors and productive users of capital, consistently improving revenue and profits. I do not think that many of these companies have finished their growth stages yet.
For example, Northern Star clearly has global domination in its sights. Altium has a 10-year track record of excellent growth with no signs of stopping. And Magellan is run by one of the most respected investors the nation has ever produced.
Where to invest $1,000 right now
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Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and Appen Ltd. The Motley Fool Australia has recommended Jumbo Interactive Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.