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2 ASX shares that could be 10-baggers

I think that if you are going to make serious money on the share market, then you have to find 1 or 2 companies for your portfolio that enjoy rapid growth. These preferably shouldn’t make up a large percentage of your portfolio, but are still important inclusions. 

A ’10-bagger’ is a company that will return 10 times the original investment. In my own investing journey, a few notable 10-bagger successes include Cochlear Limited (ASX: COH), which I bought early, as well as Blackmores Limited (ASX: BKL).

At the moment, my investment into Sezzle Inc (ASX: SZL) has risen by ~140%. However, I have also lost money choosing the wrong shares, so it’s important to understand the risks involved and make sure you don’t take risks you aren’t comfortable with. 

After that caveat, here are 2 shares that I think could be future 10-bagger investments.

Medical 10 baggers

Recce Pharmaceuticals Ltd (ASX: RCE) (pronounced “recky”) saw its share price rise by 54% on 9 July, after it announced two of its products had been selected for a CSIRO trial into antiviral treatments for COVID-19.

However, this is a side issue for the company. Recce is developing a new type of synthetic antibiotic, targeting the emergence of superbugs. The company is focused on dealing with sepsis or blood poisoning, which is a life threatening reaction the body has to infection.

According to the medical journal The Lancet, sepsis killed 11 million people in 195 countries in 2017. Right now, sepsis remains an unmet challenge.

I think this company could be a 10-bagger, because the FDA has already awarded the company’s product, RECCE® 327, fast track designation, plus 10 years of market exclusivity, post approval. Also, in my opinion the company’s products are world changing in a very real sense.

Corporate communications

Whispir Ltd (ASX: WSP) is a potential 10-bagger share that I am watching very closely. The company offers a cloud-based communications workflow platform to its clients, facilitating automatised interactions between businesses and people. Although it has been operating for a long time, the company only listed recently. Like Recce, Whispir is not currently profitable. 

However, as a software-as-a-service company (SaaS), it has a few characteristics which I find interesting. First, it uses a subscription business model. This means much of its revenue, greater than 95% in this case, come from recurring revenue. Second, like all SaaS companies, it has a high operating margin – in Whispir’s case, that’s 62%. 

Also, the company appears to be focusing on the right metrics. It has seen its gross revenue rise by 20% in H1 FY20 versus H1 FY19. In addition, it has been able to increase its annual recurring revenue per customer by 17% versus H1 FY19.

Finally, as evidenced by the company’s H1 FY20 presentation, the list of Whispir’s clients is both long and diverse. This shows that the company’s products are versatile enough to appeal to a broad audience, as well as being a service companies need.

Foolish takeaway

When analysing a company to see if it could be a 10-bagger share, I try to take into account the following criteria. First, does the company address a need for industry or society? Second, do they have a track record of achievement? Are they actually making progress, or just full of hot air and fluff announcements? Third, do they have access to the cash they need to get to profitability?

For me, both of these shares meet this criteria. Good luck!

These 3 stocks could be the next big movers in 2020

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In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

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Daryl Mather owns shares of Sezzle Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and Whispir Ltd. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia has recommended Cochlear Ltd., Sezzle Inc, and Whispir Ltd. 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.

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