What is: A Two-Bagger
- What Is: Passive Investing
- What Is: Dollar Cost Averaging?
- What Is: Bottom-Up Investing
- What Is: Top-Down Investing
- What Is: Value Investing
- What Is: Growth Investing
- What Is: Income Investing
- What Is: GARP Investing
- What Is: The Rule of 72
- What Is: A Falling Knife
- What Is: Cyclical Stocks
- What Is: The Dividend Yield
- What Is: The Price-to-Earnings Ratio (P/E)
- What Is: The Cash Flow Statement
- What Is: A Share Split
- What Is: A Share Buyback
- What Is: Discounted Cash Flow
- What is: An Exchange-Traded Fund (ETF)?
- What is: A Hedge Fund?
- What is: The Balance Sheet?
- What Is: The Profit and Loss Statement?
- What is: A Limit Order?
- What is: A Two-Bagger
A two-bagger is an investment whose value has doubled, i.e. has increased by more than 100%.
You bought shares of a stock for $30. The share price has increased and in January 2014 it reached $60. As a result, you now have a two-bagger in your portfolio.
Of course you can use the term for bigger returns as well:
- A three-bagger is an investment whose value has tripled, i.e. has increased by more than 200%.
- A four-bagger is an investment whose value has quadrupled, i.e. has increased by more than 300%.
And so on.
The expression has its origins in baseball and was popularized in Peter Lynch’s book “One up on Wall Street”. In baseball, after the batter hits the ball, he has to run to the first “base” (also known as “bag”). He can always try to cover multiple bases in one go. If he runs to two, it’s called a double (or “two-bagger”); if three, a “three-bagger”; and so on. The more bases he covers, the better, with a maximum of four (called a “home run”). We investors have taken some artistic license and allow our „baggers“ to go well beyond four.
People who are new to investing are often confused that a 100% return is called a two-bagger. Why not only a one-bagger? And does this mean that we have a one-bagger simply by buying shares? It is actually contrary to baseball where getting to first base is the most difficult step. (The same is often true for dating, but that’s another topic).
You just need to keep in mind: A doubling (i.e. 2x) of your investment is a two-bagger; a tripling (i.e. 3x) is a three-bagger, and so on…
In 2013 The Motley Fool celebrated its first ever 100-bagger. David Gardner — the co-founder of The Motley Fool and leader of the Rule Breaker newsletter — recommended Amazon.com back in September 1997 at a split-adjusted $3.19. On 28 Oct 2013 the share price reached $328.93 — and as a result, a hundred-fold increase in the investment value.