You get a multibagger when all three are in alignment and in your favour.
Most fundamental investors focus on the earnings. Most technical analysts focus on the liquidity (price, volume). Very few focus on the narrative.
If you look back, markets and individual stocks are always built around “stories”. The dotcom boom was based on the story of the rise of ecommerce. Then in India we had the infrastructure story, the “Indian decade” story, the BRICS story, “the Modi rally”. And the list goes on. Same thing has happened in individual stocks and sectors.
The IT story, the consumption story, the Pharma story, the Chemicals story, the agri story, the intelligent fanatic story. People call it by difficult names – “megatrends” or “long cycles”. But at the end of the day, it is nothing but a story we tell ourselves.
If the earnings and liquidity fits the story line, you get a self-perpetuating story!! Then mediocre or poor managements start look visionary. Valuations reach the sky. Corporate governance is swept under the carpet. Promoter shenanigans are spoken of in hushed tones. Believers are heralded and disbelievers are trolled.
These three are inter-related. Most of the time, you start with one and the other two follow. Sometimes, earnings come first, and at other times liquidity. Rarely does the story come first. Usually, the story gets built on the prevalence of the first two. But for the long term returns, the story is as important as the other two.
Bottomline – Be aware of the story in the stocks you buy or the sectors you invest in. Be tuned in to any changes in the story.