On the hunt for 10-baggers (and what to do if you find one)

Please note, this interview was recorded Friday 8 May 2026

Sir David Attenborough recently celebrated his 100th birthday, a remarkable milestone for an even more remarkable human.

It got me thinking, how would Sir David describe the elusive 10-bagger, i.e. an investment that rises to 10 times its original value?

Here goes…

And here, in some of the market’s more remote and unpredictable ecosystems, the unruly badlands of Martin Place and Collins Street… we find a truly remarkable specimen.

The 10-bagger.

At first glance, it appears entirely unremarkable. Small. Easily overlooked. But given enough time, and the right conditions, it compounds quietly and relentlessly into one of the market’s rarest and most extraordinary creatures.

Few investors ever spot one early. Fewer still have the patience to stay and watch it mature.

With Sir David having provided the colour, I turned to Luke Laretive, Portfolio Manager of the Seneca Australian Small Companies Fund to get his take on the characteristics of 10-baggers, where one might go looking for them, and, as Sir David pointed out above, why patience and discipline are so important if you ever spot one and want to actually hold on to it.

As Laretive put it:

“The knack is not to get head-faked and sell, and forget that these are still small businesses, still growing, still finding their way in the big, bad world.”

INTERVIEW SUMMARY

The hunt for asymmetry

For Luke Laretive, investors are broadly correct in believing that many 10-baggers originate in smaller companies and emerging industries. The mistake, however, is assuming that “small” and “new” automatically equate to extraordinary upside.

“I think what they get wrong is that they think because something is small and because it’s new, it’s therefore likely to 10 bag,” he said.

According to Laretive, the real task is assessing the quality of the business, the probability of success, and whether the market is materially mispricing that probability. Investors who chase narratives or rely on fear of missing out often end up overpaying for potential rather than owning genuinely exceptional businesses.

“There’s always a narrative behind it and it’s always the same sort of vibe to me,” he said.

Laretive pointed to examples such as BrainChip, which at one point reached a market capitalisation of more than $2 billion despite generating less than $10 million in revenue, before subsequently collapsing around 90%.

For Laretive, separating narrative from substance is one of the defining skills in growth investing.

Why patience matters more than prediction

One of the key misconceptions around 10-baggers is timeframe. Investors often imagine life-changing returns materialising over one or two years, when the reality is usually much slower and less exciting.

“10 times your money over 20 years is 12% per annum,” notes Laretive.

Rather than searching for a single stock tip capable of delivering overnight riches, he believes investors should focus on building a repeatable process capable of consistently generating above-average returns.

“When we talk about investment process, that’s really what we’re talking about. It’s the ability to consistently find above-average return ideas, put a bunch of them in the portfolio, some of them pay off, you recycle that capital into your next idea.”

That process-driven mindset also helps investors hold onto winners through inevitable volatility. Laretive referenced REA Group, noting the stock has fallen more than 20% multiple times over the past 15 years despite ultimately becoming one of the market’s great compounders.

For Laretive, patience is not passive. It requires conviction grounded in research, valuation discipline, and a realistic understanding of how businesses evolve over time.

Understanding consensus is the real edge

At Seneca, much of the work centres not on discovering obscure businesses, but on understanding what the market already believes.

“We really want to have a clear understanding of consensus,” Laretive said.

That includes narrative, analyst forecasts, broker commentary, and broader market positioning. Once Seneca understands consensus, the team can determine whether they materially agree or disagree with prevailing assumptions.

“If you’re buying stocks on the basis of something that everybody else knows, it’s only logical in 2026 to assume that most of that’s already embedded in the price.”

This framework also shapes how Seneca approaches high-quality compounders. Laretive acknowledged that genuinely exceptional businesses are often “bloody obvious”, meaning much of their quality is already reflected in valuation multiples.

“The problem with those sort of ideas is they’re bloody obvious. Blind Freddie can see a quality compounder on paper.”

The challenge, therefore, becomes valuation discipline and identifying when market scepticism turns into excessive optimism.

“It’s when businesses go from five to 10 to 15 times EV/sales or from 20 times earnings to 120 times earnings and then people wonder why they lose 80% of their capital.”

Laretive stressed that even elite businesses can become poor investments if purchased at irrational prices.

Four different types of multi-bagger

Laretive broadly categorises multi-baggers into four buckets.

The first is the classic “quality compounder”, businesses capable of steadily compounding earnings and returns over long periods. REA Group and Fiducian were highlighted as examples of businesses that have quietly delivered exceptional shareholder returns through sustained compounding.

“There are plenty of good, high-quality, recurring revenue, dividend-paying businesses where you can make a lot of money if you can stick fat with them.”

The second category is speculative “fad” stocks, where narrative dominates economics and investors rely on the “greater fool” theory.

The third category, and one Seneca finds particularly interesting, is turnarounds. These are businesses that may have fallen 80% or 90% due to cyclical, operational, or financial problems, despite retaining fundamentally sound underlying economics.

Laretive cited MMA Offshore as an example of a business that collapsed from around $20 to 27 cents before eventually recovering and being acquired at roughly $2.70 per share. 

He also referenced HMC Capital, which had fallen more than 80% from its highs despite limited deterioration in the underlying business.

The final category is what Laretive calls “rabbits”, or businesses capable of pulling “a rabbit out of the hat”. These typically include mineral discoveries, breakthrough technologies, or highly speculative exploration opportunities.

The speculative opportunities catching Seneca’s eye

Laretive highlighted two current speculative ideas within Seneca’s small-cap fund.

The first is Altair Minerals (ASX: ALR), which is exploring for gold in Guyana. Seneca’s thesis strengthened significantly after Endeavour Mining acquired a strategic 9.9% stake in the business before meaningful drilling had even commenced.

“That’s a situation where you’ve got a really good proven management team, strong shareholder base, underexplored jurisdiction and the right kind of setup for a potential 10-plus-times-your-money scenario.”

The second is Kaoko Metals (ASX: KAO), a newly listed copper explorer operating in Namibia. Laretive sees copper as an attractive long-term thematic opportunity and believes the company has assembled a highly prospective land package in an underexplored region.

“Again, proven management team, people we’ve made money with before.”

Still, Laretive stressed that speculative opportunities require careful position sizing and realistic expectations.

“If you are going to be in that venture capital style end of the market speculating on new technology with unproven teams with limited prospects or no revenue, you need to make sure you’ve got enough bets in the portfolio.”

Ultimately, his closing advice was simple: there are no shortcuts.

“You can’t borrow conviction.”

For investors hoping to find genuine multi-baggers, the edge comes not from AI tools, stock tips, or viral narratives, but from consistent work, pattern recognition, experience, and time spent understanding businesses deeply.

“You have to do the time, the consistent work.”