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MULTIBAGGER SMALL / MID CAPS & LONG TERM INVESTING REPORT >>>  FREE DOWNLOAD

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Friday, July 19, 2019

Potential 5-Bagger Stock in 5 Years - A Secular Growth Story!

Dear Reader,

The small and mid cap rally ended in Jan 2018 amid concerns over high valuations, waning domestic flows after re-categorisation of mutual fund schemes by SEBI, liquidity crunch and corporate governance issues. From their peak levels last year, mid cap and small cap stocks have witnessed significant correction over the past 15 months in spite of better bottom line of mid and small cap index companies compared to large caps.

It’s interesting to note that profitability of mid and small caps jumped 50 percent and 27 percent respectively in last one year against 7 percent earnings growth for Nifty 50 stocks. However, while major indices Sensex & Nifty is hovering at all time high delivering returns of 15% and 12% respectively since 1st Jan 2018, BSE Mid Cap and Small Cap index is down delivering returns of -23% and -33% respectively during the same period. With divergence of ~40% since Jan 2018 between small caps and Sensex large cap stocks, its very likely that we can see strong out performance from small and mid-caps delivering significantly higher returns over next 12 to 24 months compared to large caps.

We believe broader market will show a meaningful recovery with rise in stock prices of small and mid caps based on earning growth in coming quarters. Broader market participation is lowest as fear has engulfed investor's psycology. That spells opportunity, as many quality stocks from the mid and small cap segments are now ruling at multi-year low valuations, offering buying opportunities. Hence, this is the best time to build up equity portfolio gradually by investing in high quality small and mid caps backed by strong business fundamentals.

We are pleased to inform you that during these opportune times, we recently released detailed report of a small cap company which offers unique investment opportunity with potential of delivering 5-Bagger returns over period of next 5 years. Below are some of the reasons considering which we believe the company offers multibagger investment opportunity currently available at attractive valuations with huge upside potential.

1. The company operates in non-cyclical business, has a moat with well established brands, and strong growth potential with rising demand of its products. Being in B2C business, rising disposable income and consumer preference shifting towards premium products will support company to achieve robust revenue growth and profitability over next 3 to 5 years.

2. Favourable developments in the sector, recession proof business catering to domestic demand, significant capacity addition in past, thrust on becoming a pan India player from regional player and launch of new products with focus on end consumer are some of the reasons which make this company a right investment opportunity for medium to long term investors.

3. The company has robust fundamentals as it enjoys strong cash flow from operationIts revenue and profitability has grown by more than 15% in the last 3 years, company’s bottom line is expected to grow well above 25% in coming years considering recent capacity addition and ongoing expansion with entry into new geographies. It has strong financials with ROE and ROCE of more than 15%. The balance sheet is strong with debt to equity ratio below 0.5 to support future growth.

4. The company is a small cap company with market capital to sales ratio of less than 1, where as other mid size players are commanding market cap to sales ratio of ~3. In last 8 years, the company used to command market cap to sales ratio of 2.5 to 3 with higher price to book and PE ratio but due to severe correction over last 18 months, the company is now available at multi-year low valuations. 

5. The company is paying dividend every year and dividend yield is maximum at current price compared to all other listed players in the Industry. The company has already announced dividend for FY18-19 which is expected to be paid in Sept 2019. However, possibility of higher dividend payout for FY19-20 cannot be ruled out considering increase in earning estimates compared to previous years.

Moreover, while looking at trading volumes, we find that stock is getting accumulated since last few months and is on the verge of giving strong upside in short term with positive news flow.

1. The company has registered lowest trading volume in NSE over last few months in past two years, similarly volumes are significantly low in BSE also. This indicates that buyers are waiting for lower prices to buy however there is no seller also to sell the stock at current price. Recently, the stock price is witnessing accumulation.

2. Delivery percentage of shares traded has significantly increased over last 2 years. In 2017, the delivery percentage to trading volumes was ranging between 5% to 30% whereas now with similar or lower volumes during last few months (much lower volumes compared to last year), delivery percentage is ranging between 50% to 80%.

3. Some of the Institution / big investors have invested in the stock during last 12 months keeping a long-term view considering improved business fundamentals and higher earning visibility, hence availability of shares in market is decreased. In such a case, any positive news flow from company / management can bring significant upside in stock price in near term. Moreover, the total no. of shareholders have decreased in June quarter compared to March quarter which indicates that bigger investors / institutions have bought / increased their holding where as small investors have sold off their shares.

To sum up, our recent recommendation under Potential 5-Bagger stock in 5 Years report is a great buy at current valuation and we presume it to be a wealth creator for our subscribers over next couple of years. The company not only offers significant upside in short term considering attractive valuations but also has the potential to create significant wealth by delivering upto 5x returns over next 3 to 5 years.

To receive our potential 5-Bagger stock along with the detailed research notes and relevant follow-up updates, you can subscribe to our Hidden Gems, Value Picks or Wealth-Builder service.

The stocks we reveal through Hidden Gems & Value Picks are companies that either under-researched or not covered by other stock brokers and research firms. We keep on updating our members on our past recommendation suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook. Wealth-Builder is our offline portfolio management service under which we suggest higher investment allocation in selective small & mid caps having strong fundamentals to build a robust and diversified portfolio.

Add power to your equity portfolio by investing your long term savings into best of small & mid cap stocks with our services Hidden GemsValue Picks and Wealth-Builder. Avail attractive discounts by subscribing to our combo packs under ongoing Saral Gyan 9th Anniversary offer  (closes on 31st July 2019). Discounts & valuable freebies which make our 9th Anniversary special for all our readers are as under:

1. Maximum discount up to 30% on combo pack subscriptions
2. Hidden Gems Flash Back Report - Released on 30th April 19
3. Value Picks Flash Back Report - To be released in Aug'19
4. 5 Stocks - Potential 5-Baggers in 5 Years Report Update - To be released in Jul'19
5. Existing Portfolio Health Check Up under Wealth-Builder subscription 
6. Saral Gyan eBook - "How to Grow your Savings?" worth Rs. 599 for Free.

Below table indicates subscription services and discounted prices valid up to 31st July'19.
Saral Gyan 9th Anniversary Offer 
SARAL GYAN
SUBSCRIPTION SERVICE
9TH ANNIVERSARY OFFER
DISCOUNTED PRICE
PAY ONLINE 
CARD / NET BANKING 
Hidden GemsRs. 10,000 9,000
Value PicksRs. 6,000 5,400
Wealth-BuilderRs. 20,000 18,000
Combo 1: HG + VP + WB + 15%Rs. 40,000 28,000
Combo 2: HG + VP + 15%Rs. 20,000 15,000
Combo 3: HG + VPRs. 16,000 13,000
Combo 4: HG + 15%Rs. 14,000 11,500
Combo 5: VP + 15%Rs. 10,000 8,500

Simply choose the subscription service / combo pack you would like to opt and click on SUBSCRIBE! link in above table to make online payment using your debit / credit card or net banking facility. In case if you are not comfortable in making online payment, click here to know about our other payment options and bank details.

Click here to know more about Saral Gyan 9th Anniversary Offer.

We also take this as an opportunity to inform our readers that our Combo - 1 (Annual subscription of Hidden Gems, Value Picks, 15% @ 90 Days & Wealth-Builder) is the best selling subscription service at Saral Gyan, we have registered maximum subscription of Combo 1 since beginning of this year followed by Combo 2 subscription. We keep on updating our members on our past recommendations suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.

Below are the details of our services:

1. Hidden Gems (Unexplored Multibagger Small Cap Stocks): Based on fundamental analysis, our equity analysts release one Hidden Gem research report every month with buy recommendation and share it with all Hidden Gems members. Stock finalized as Hidden Gem belongs to small / micro caps space with market cap of less than 500 Crores, expected returns from Hidden Gems is above 100% in period of 12 - 24 months. Once target is achieved, we inform our members whether they should continue to hold the stock or need to do partial / full profit booking. If fundamentals are intact and valuations are reasonable, we suggest to continue to hold the stock for long term for multibagger returns. Annual subscription charge of Hidden Gems is INR 10,000 9,000 under which you will receive total 12 Hidden Gems research reports (one on monthly basis). Click here to read more about Hidden Gems.

2. Value Picks (Mid Caps with Plenty of Upside Potential): Our equity analysts team consider Warren Buffet approach to short list stocks from mid cap segment as Value Picks. Market cap of Value Pick will range from 1000 crores to 10,000 crores. Holding period of Value Picks is 12 - 24 months and one can expect returns of 40-50%. Annual subscription charge of Value Picks is INR 6,000 5,400 under which you will receive total 12 Value Picks research reports (one on monthly basis). Click here to read more about Value Picks.

3. 15% @ 90 Days (Buy to Sell Stocks for Short Term Gain): Based on technical analysis, our team recommends one stock every month to our members. It’s a short term call under which you can expect returns of 15% within period of 90 Days. Annual subscription charge of 15% @ 90 Days is INR 4,000 under which you will receive 12 stock recommendations. We suggest lower allocation in 15% @ 90 Days stocks and higher allocation in Hidden Gems and Value Picks which are our portfolio stocks based on fundamental analysis.​ 15% @ 90 Days stocks recommendations are based on buy to sell and gain strategy, hence we suggest our members to book complete profits once target is achieved and exit in case target is not achieved or stock has broken its 2nd support level as per report. Click here to read more about 15% @ 90 Days.

4. Wealth-Builder (An Offline Portfolio Management Service): Wealth-Builder is our model portfolio of Rs. 10 lakhs and currently we are holding 16 stocks in our portfolio. We suggest higher allocation in our Wealth-Builder stocks which includes best of our Hidden Gems and Value Picks released during last couple of years. Our team suggest all our Wealth-Builder members to invest in the stocks which are part of our Wealth-Builder portfolio. Every month our team updates our Wealth-Builder members which stocks they need to buy / sell / hold with % allocation of these stocks in their portfolio, the suggested changes need to be replicated in the same proportion. Annual subscription charge of Wealth-Builder is INR 20,000 18,000 under which you will receive total 12-18 portfolio updates. We also review existing equity portfolio of our members and advise them which stocks to hold and which to exit based of fundamental analysis. Moreover, we do look at sector wise / stock wise allocation in the portfolio and advise in case of any corrective measure needs to be taken by increasing or decreasing the stock specific allocation. Our Wealth-Builder service is suitable for those investors who have an existing portfolio of at least 2 to 3 lakhs or planning to invest similar amount or more in equity market. Click here to read more about Wealth-Builder.

Do contact us in case of any queries, we will be delighted to assist you.

Also Read: Multibagger Small / Md Caps & Long Term Investing Report - Free Download

Wish you happy & safe Investing. 

Regards, 
Team - Saral Gyan

Pick up the Best Multibagger Stocks in 2019

How to Identify Potential Multi-baggers Small Cap Stocks?

Picking best multibagger stocks
A multibagger stock is defined as stock which gives multifold returns. Ex: A five bagger is a stock which delivers returns equal to 5 times the investment. Similarly, a 10-bagger stock gives a returns of 10 times. Picking multibagger stock requires efforts in terms of analysing a company and its growth potential in future. Having a fair idea about company, the sector in which it operates and its growth prospects, company's management and their track record are some of the important parameters to look at while picking a multibagger stock. Doing proper research before investing is always useful in picking a multibagger stock in making.

Below are the 6 basic but important parameters which we must follow to pick right companies having multibagger potential. 
  • Quality Management with High Integrity
  • High ROE & ROCE - Efficient use of Capital
  • Low Debt and Free Cash Flows
  • Asset Light Business Model - No High Capex Requirements
  • The Scale of Opportunity & Non-cyclical Business
  • Valuations & Future Growth Prospects
Let us look at each parameter in detail:

1. Quality Management with High Integrity

Alignment of management interest with minority shareholders is one of the key parameter. High standard of corporate governance ensures that company is not involved in any wrong doings. Proper and timely disclosures of shareholder related information by the companies build trust over time. Past track record of promoters, disclosures and dividend pay-out history can help us to check on this crucial parameter.

If the management is not honest, will they want to share the goodies with you? No, they will look for the first opportunity to siphon off the profits and pull the wool over your eyes. We have seen how the investors of LEEL Electricals have lost 95% of their capital over last 1 year due to personal enrichment of LEEL promoters by siphoning off company's profit from the sale of its consumer durable division to Havells. 

2. High ROE & ROCE - Efficient use of Capital

Return on Equity (ROE) measures a company's profitability by comparing its net income to shareholders equity (book value). ROE is a speed limit on self-funded growth (company's profit). That is, a company cant grow earnings faster than its ROE without raising cash by borrowing or selling more shares. For instance, a 15% ROE means that the company can’t grow earnings faster than 15% annually by relying only on profit to fuel growth. ROCE measures the overall returns for all stakeholders and is a relatively good measure of the overall efficiency of the company. A consistently low ROCE signifies that there is something inherently wrong with the business or the company.

Wealth creator stocks usually have very high ROE and the ROCE relative to the rest of the industry. Typically, companies with high ROCE and ROE would also be generating positive free cash flows consistently. Increasing ROE and ROCE every passing year with low / negligible debt on books is one of the key aspect in spotting multibagger stocks.

3. Low Debt and Free Cash Flows

Its important to learn the lesson from financial crisis of 2011 and now of 2019 that companies with high debt simply get slaughtered. While debt is not bad in case if the company is able to borrow at a lower rate and deploy it in its business at a higher rate as the operating leverage works in its favour, however excessive debt with high interest and repayment obligations can crunch the stock in times of downturn. So, as a long-term investment philosophy, it is best to steer clear of high-debt companies.

Recent episode of stock prices falling liking nine pins of ADAG companies (Reliance Power, Reliance Infra, Reliance Com, Reliance Capital), Essel group companies, Jain Irrigation etc indicates how unbearable high debt burden on books can destroy investors wealth in shortest span of time.

4. Asset Light Business Model - No High Capex Requirements

We know the demerits of investing in stocks like Suzlon and GMR Infra which have an insatiable appetite for more and more capital. To feed their perennial hunger, these companies dilute their equity by making FPOs, GDRs & FCCBs resulting in total destruction of shareholders wealth. This is the simple reason why we do not see multi-bagger opportunities from sectors like metals, infrastructure and utilities because of the capital intensive business model which leads to very high leverage and low return ratios.

Companies should be lean and mean requiring minimal capital but generating huge returns with free cash flows which can be used not only to reward shareholders but also to expand business in future. It is not necessary that company should be a zero-debt company as some amount of leverage can actually improve shareholders returns.

5. The Scale of Opportunity & Non-cyclical Business

Multi-bagger stocks are created because they are able to scale the opportunity rapidly. Titan Industries is a great example. In 2003-04, Titan was a small company with market capital of 500 crores. As on date, its a large cap with more than 1 lakh crores market cap. The fact that India is a booming marketplace of 132 crores consumers means that most products and services have a head start at trying to scale up their activities.

One key factor that creates value in the stock market is consistent growth across economic & market cycles. While markets values growth, it also pay higher premium on consistency in growth. Most of multi-baggers of past like Asian Paints, Titan, Page Industries, United Spirits, Marico, Aurobindo Pharma are typically high growth companies in non-cyclical businesses. It is extremely rare to find a multi-bagger in a typical commodity business like steel, aluminium or oil.

6. Valuations & Future Growth Prospects

Most investors are obsessed about valuations, refusing to buy any stock that is expensive. However, one must remember that expensive is a relative term. If a stock is compounding at 25% on an annual basis, paying a price to earning multiple (P/E ratio) of 30 may be very reasonable. A stock like Nestle or HUL, for instance, has always been expensive. However, a great company with an impeccable pedigree may not always be a good stock to buy. This could be due to the fact that most of the triggers are already in the price and future growth potential does not justify the valuations. The PEG Ratio (which is PE ratio divided by sustainable growth) is a simple way to measure valuation relative to growth.

But it is equally important to consider other parameters like financial ratios and brands that the company has created which can go a long way in determining potential valuation. A particular company may look expensive to an investor who have a 2 years horizon but may be a screaming buy for investor who wish to hold it for next 5 to 7 years.

There is no guarantee that the above mentioned parameters would always help investors identify multi-baggers, but these parameters will surely help investors to invest in right set of companies and avoiding those which may end up being value destructors. Moreover, we can learn by following key traits of successful investors who have created enormous wealth in past.

A Myth - Low Price Penny Stocks are Potential Multibaggers

Some people think all low priced stocks are potential multibaggers. But this is a myth. Price of a stock on a standalone basis does not give any information about the future potential of a company. In fact, low price penny stocks are highly risky and you should be very careful before making a decision to invest in them.

Lanco Infratech was a well-known company from Infrastructure sector. At the beginning of 2010 the stock was around Rs 55. Now it is hovering at just Rs 0.42 and trading is suspended in the stock. Those who purchased the stock during 2010 are in 99% loss! Rs. 1 lakh invested in Lanco Infratech in Jan 2010 is valued at merely Rs. 1,000 today, a complete wealth-destroyer! Those who bought this stock at levels of Rs. 30 and later again at Rs. 10 or Rs. 5 to average out thinking that stock has came down from all time highs of Rs. 85 are still waiting to get their buying price back. There are many such stocks like Suzlon Energy, GMR Infra, GVK Power and Infrastructure etc which have continuously destroyed wealth of investors over a period of last 6 to 9 years.

Another general misconception among the investors that high priced stocks can't generate multibagger returns. They often think that high-priced stocks are overvalued. In terms of valuation, a 50 rupees stock may not be cheaper than that of a 1000 rupees stock. There is no co-relation between the valuation and market price of a stock. To understand whether a company is small or large, you must look at market capital of the company and not at stock price. To judge valuation you must have to look at Price to earning ratio, Price to book ratio, Price to sales ratio etc.

Let us understand this with an example, Tide Water Oil share price was Rs. 1450 on 1st Jan'12 (stock split and bonus issue adjusted price, actual price was 5800). Today the stock price is at Rs. 4850 giving absolute returns of 235% i.e. nearly 3.5 times in 7 years against double digit return of Sensex in the same period. We suggested Buy on Tide Water Oil and many of our subscribers might not have invested in it thinking that they can buy hardly 2 shares by investing Rs. 12,000 but now those 2 shares are actually 8 shares post stock split and issue of bonus share and share price is near the recommended price.

There are many examples like above by which we can illustrate that there’s nothing called high price. Multibagger returns is not dependent on the current market price of a stock, so don't be afraid of investing in high priced stock. You need to look at fundamentals like future growth prospects of the company, PE ratio, PB ratio, ROE, ROCE, debt on books, cash reserves along with other parameters to judge a stock whether it is undervalued or overvalued. We agree with you that judging valuation is not an easy task. So, take expert’s advise when ever required.

So, do ensure that you check out the fundamentals and valuations while investing in stocks instead of looking at stock price. Please get out of the misconception that low priced stocks will fly high faster giving you extra-ordinary returns. Always remember that stock price is just a barometer, actual valuations of a company can be determined by its fundamentals.

Is 2019 / 2020 a Year of Multibagger Opportunities?

Small Cap stocks are known to deliver impressive performance when bulls rule the markets with many stocks delivering multibagger returns, but they get battered during a bearish regime. For instance in 2009, Sensex was one of the best performing markets vis-a-vis its peers. This was on account of the positive impact of the stimulus released by the Government and the election results, which led to confidence among investors and corporate India that a stable government at the centre will be able to bring in a lot of reforms. This saw the index posting a superb return of 81% while the BSE Small Cap Index actually delivered an impressive 123% during the same time horizon.

Similarly, if we look at performance of various indices in 2014, Sensex delivered returns of 29.9%, however BSE Small Cap Index has given whopping returns of 68.8% during the same period. In fact, 2014 was one of the best year for small cap companies after 2009 as many little known companies with good fundamentals turned multibagger during this year itself.

However, in the present context when there is gloom, both at the domestic and global front, the aversion towards this category is more evident. The prevailing negative sentiments have made stock market investing a nightmare for all those who have parted with their hard earned savings into this sector over last 2 years,  fondly called the barometer of the economy.

At this juncture, we would like to differ from the general view and recommend risk taking investors not to follow the herd but rather they can consider taking exposure into the small cap stocks. The carnage in small and mid cap stocks prices experienced over last 18 months has not happened for the first time, we have experienced similar situation during market crash in 2008 - 2009 and later during 2011 - 2012.

BSE Small Cap Index has not delivered negative returns for 2 consecutive years in past 16 years

We believe this is a blessing in disguise because for the first time in many years, several small companies having robust business fundamentals are available at cheap valuations. Do you know in last 16 years, small cap index have not given negative returns for 2 consecutive years. In 2018, BSE Small Cap Index has given negative returns of -23.4% and since beginning of this year, index is down by another -7%. Below is the table which indicates BSE Small Cap Index returns YoY since 1st April 2003 (the data is available from April 2003 onwards only in BSE).
BSE Small Cap Index Yearly Returns 2003 - 2019
Whenever, BSE Small Cap Index delivered significantly high negative returns in a particular year during last 16 years, it has delivered double digit positive returns the very next year. The divergence between Sensex / Nifty and BSE Small Cap & Mid Cap Index will not last for long going forward considering valuations gap emerging between large caps in comparison to mid & small cap stocks.

Investors who want to invest in small cap stocks should go by advise of professionals who have the expertise to spot these hidden gems. We believe that with BSE Small Cap Index trading nearly 33% below its all time high, this is the right time to get into small cap stocks. However, this category is recommended only to investors who are ready to take a little extra risk to get the additional upside in their portfolio and also have the patience to wait to reap the benefits.

multibagger small cap mid cap stocks and long term investing report
In our recently released report - Multibagger Small / Mid Caps & Long Term Investing, we have shared valuable insights to make equity investors understand why we believe buying the right set of small and mid caps now can be a massive wealth creating opportunity in the long run. Under this report, we have covered long term monthly charts of many of our own small and mid cap stocks recommendations (released under Hidden Gems and Value Picks) over last 9 years which at one point of time were down by 50% to 70% from their peak but turned out to be multibagger stocks in longer run delivering 5 times to 64 times returns.

Click here to receive our Multibagger Small / Mid Caps & Long Term Investing report directly in your inbox, a must read for investors who started investing in equities during last couple of years.

Do not stop investing in small caps looking at these turbulent times, its time to do the opposite, this phase has happened before and small and mid caps have always bounced back. Good sentiments as well as bad sentiments do not last forever. Be a discipline investor and keep investing in multi-bagger stocks in systematic way for long term.
We are pleased to inform you that we are celebrating Saral Gyan 9th Anniversary this July by offering maximum benefits on our subscription services. Discounts & valuable freebies which make our 9th Anniversary special for all our readers are as under:

1. Maximum discount up to 30% on combo pack subscriptions
2. Hidden Gems Flash Back Report - Released on 30th April 19
3. Value Picks Flash Back Report - To be released in Aug'19
4. 5 Stocks - Potential 5-Baggers in 5 Years Report Update - To be released in Jul'19
5. Existing Portfolio Health Check Up under Wealth-Builder subscription 
6. Saral Gyan eBook - "How to Grow your Savings?" worth Rs. 599 for Free.

Below table indicates subscription services and discounted prices valid up to 31st July'19.
Saral Gyan 9th Anniversary Offer 
SARAL GYAN
SUBSCRIPTION SERVICE
9TH ANNIVERSARY OFFER
DISCOUNTED PRICE
PAY ONLINE 
CARD / NET BANKING 
Hidden GemsRs. 10,000 9,000
Value PicksRs. 6,000 5,400
Wealth-BuilderRs. 20,000 18,000
Combo 1: HG + VP + WB + 15%Rs. 40,000 28,000
Combo 2: HG + VP + 15%Rs. 20,000 15,000
Combo 3: HG + VPRs. 16,000 13,000
Combo 4: HG + 15%Rs. 14,000 11,500
Combo 5: VP + 15%Rs. 10,000 8,500

Simply choose the subscription service / combo pack you would like to opt and click on SUBSCRIBE! link in above table to make online payment using your debit / credit card or net banking facility. In case if you are not comfortable in making online payment, click here to know about our other payment options and bank details.

Click here to know more about Saral Gyan 9th Anniversary Offer.

Wish you happy & safe Investing. 


Regards, 
Team - Saral Gyan

Wednesday, July 17, 2019

Multibagger Small Cap Stock 2019 Report - Free Download!

Dear Reader,

potential multibagger small cap stock 2019We released Techno-Funda Stock Pick 2019  (Potential Multibagger StockReport on 12th Dec 2018. The stock selected under this report is a small cap company having multi-bagger potential with market capital of less than 500 crores and is available below our recommended price. We are glad to inform you that the company (our Techno-Funda Stock of 2019) has declared its March quarter results reporting stellar growth in top line as well as bottom line. At current valuations, we find limited downside risk with significant upside. Stock has the potential to deliver multi-bagger return over next couple of years.

With continuous fall in stock prices during this year,  valuations of many small caps and mid caps become attractive to reasonable. In fact, many good companies are available at valuations which look very attractive considering the earning growth these companies are expected to deliver over next 2 years and as the tide will turn we will see same set of companies will turn out to be multibaggers. This is not the time to sell in panic, but to accumulate good companies available at discounted valuations. Moreover, we believe broader market has already bottomed out in Feb 2019 post Pulwama attack and is now forming a base, hence we can see renewed buying interest in small & mid caps once sentiments improves. Bad sentiments will not last for ever, its time for long term investors (2-5 years) to start accumulating good quality stocks which after a long time are becoming available at attractive valuations.

“The first rule of investment is ‘buy low and sell high’, but many people fear to buy low because of the fear of the stock dropping even lower. Then you may ask: ‘When is the time to buy low?’ The answer is: When there is maximum pessimism.” 
Sir John Templeton

To encourage investment in equities during current scenario when overall market sentiments are subdued for broader markets - small & mid caps, we decided to share our Techno-Funda Stock Pick 2019 (Potential Multibagger Stock) Report for free. This is a complimentary report for our readers. We are confident that you will find our research work useful in making informed investment decision.

multibagger stock pickPotential multibagger stock report covers both technical as well as fundamental analysis about the company along with positive developments in the company as well as sector. The stock offers significant upside potential and could be a multibagger stock delivering 2x to 5x returns from current levels over next 1 to 3 years.

Techno-Funda Stock Pick 2019 (Potential Multibagger Stock) report is a detailed report which covers company's background, Industry outlook, positive developments, financial performance of the company along with peer group comparison, key concerns & risks, technical analysis, fundamental analysis and Saral Gyan recommendation.

To receive our Techno-Funda Stock Pick 2019 (Potential Multibagger Stock) report, simply fill up the form below. Once submitted, you will receive the report directly in your inbox.



If you are unable to view the form, click here to fill it online to receive our Techno-Funda stock report directly in your inbox.

Making Money by Investing in Fast Growth Multibagger Stocks

“The investor of today does not profit from yesterday’s growth.” Warren Buffett

multibagger stocks 2019
Most of us have relatives who like to fashion themselves as ‘stock-gurus’, with their stories revolving around how they ‘could have been’ millionaires now, if only they had held their nerves. The stock that comes up frequently in these conversations is Infosys. If you had invested Rs. 9,500 to buy 100 shares of Infosys in the IPO (that went undersubscribed in 1993), 1,02,400 shares (adjusted for bonus issues) worth sum of Rs. 6,72,56,320 would be in your kitty.

Infy has given CAGR returns of whopping 42.6% to investors during last 25 years (that too after keeping dividend payouts aside). Infosys got listed in June 1993 at price of Rs. 145 per share and investment of Rs. 9,500 in June 1993 is valued at ~7 crores today. But, is Infosys still the key to riches? As often repeated, past performance is no guarantee of future results. So, how does one find out the next ‘Infy’?

A Fast Grower is a small yet aggressive & nimble firm, which grows roughly at 20-25% a year. This is an investment category which can give investors a return of 10 to as much as 200 times the investment made by them. No doubt, it remains a favourite of Peter Lynch!

In 1950s, the Utility & Power Sector were the fast growers with twice the growth rates to that of the US GDP. As people got more power-hungry gadgets for themselves, the power bills ran through the roof & the power sector surged with booming demand. Post the Oil Shock in 70’s, cost of power generation became high with power tariffs going up; people learnt to conserve electricity. Demand, thus, fell and power sector witnessed a slowdown. Prior to it, similar decline was observed in the Steel Sector & Railroads. First, it was the Automobile Sector, and then the Steel, followed by Chemicals & Power Utility & now the IT Sector is showing signs of slowing down. Every time, people thought, rally in the fast growers of the age would never end, but it did end, with people losing money as well as their jobs. Those who thought differently like Walter Chrysler (founder of Chrysler Corporation), who took a pay cut and left the railroads to build new cars in the turn of the last century, became the next millionaires.

Three phases involved in their life cycles, are:

1. The Start-Up Phase: Majority of the companies either burn up all the cash or run out of ideas by the end of this phase. Maximum casualties have been observed here, making it one of the riskiest phases. However, maximum returns can be made from them, if one enters near the end of this phase.

2. Rapid Expansion Phase: The Company’s core proposition has worked now, with the strategy being replicated by expansion of product/service portfolio or consumer touch points.

3. Mature Phase: Growth slows down, either due to high debt or low cash, owing to the massive expansion witnessed in early stage. Fall in demand or legal restrictions might also contribute to faltering growth.

The trick is to track, which phase the organization is in, at the moment. If the firm is in late start-up phase with possibility of moving to rapid expansion phase, buy the stock when it is still cheap. Once firm’s earnings start falling with its products witnessing poor demand, it’s time to bid goodbye to the stock.

Peter Lynch 2 Minutes Drill to Shortlist Potential Multibaggers

The key parameters involved in Peter Lynch’s ‘two minute drill’ are:

1. P/E Ratio: avoid stocks with excessively high P/E
2. Debt/Equity Ratio: should be low
3. Net Cash per Share: should be high
4. Dividend & Payout Ratio: should be adequate
5. Inventory levels: lower the better

Stay away from companies which are being actively tracked, followed & invested in by large institutional investors. News about buy back of shares or internal stakeholders increasing their stakes should be construed as positive.

Checks specific to Fast Growers:

1. The star product forms a majority of the company’s business.
2. Company’s success in more than one places to prove that expansion will work.
3. Still opportunity for penetration.
4. Stock is selling at its P/E ratio or near the growth rate.
5. Expansion is speeding up Or stable

One must judiciously walk the tightrope between the unquestioning belief that made the stock to be held for so long and the fear of the end from nose-diving prices due to a one-off bad year. The key is to always keep revisiting the story & ask some pertinent questions like ‘What would really keep them growing?’, ‘What is their next offering? or ‘Are their products & services still in vogue?’ It is here, that one must track the point of time when the phase 2 of the firm’s expansion comes to an end. This is usually the dead-end for organizations as success is difficult to be replicated. Unless, innovation happens, downfall is imminent & thus, an exit is necessary. P/E of these stocks is drummed up to unrealistically high levels by the madness of crowd towards the end. One must keep one’s eyes & ears open to signs, which mark the end of the road for these fast growers. A great case in point is Polaroid which had its P/E bid up to 50, only to be rendered obsolete later by new technologies.

A sure shot sign of a decline is a company which is everywhere! Such a company would simply find no place to expand any further. Sooner, rather than later, such a company would see its ‘Manhattans’ of earnings reduced to ‘plateaus’ of little or no growth, simply because no space is left to expand further.

1.The quarterly sales decline for existing stores.
2. New stores opening, though results are disappointing: weakening demand, over supply.
3. High level of attrition at the top level.
4. Company pitching heavily to institutional investors talking about what Peter Lynch calls ‘diversification’.
5. Stock trading at a P/E of 30 or more, when most optimistic estimates of earning growth are lower than 15-20%, thus, unable to justify the high price.

Fast Growers, which pay, are ephemeral & one misses them more often than not. It is a High Risk & High Gain Category of Stocks. One must remember along the classic risk & return principle, that when one loses, one loses big! So, if you are in the quest for magnificent returns, a Fast Grower can be your bet provided you know when to bid Goodbye!

Owning Multibagger Stocks which can multiply Investments in Future

multibagger small cap mid cap stocks
The number of small-cap stocks is large and finding a quality stock that can give high returns over a long period is tough even for equity analysts. One reason is that such stocks usually have a short history and are not tracked by many analysts and brokerage houses. Then there are risks such as low liquidity, governance concerns and competition from larger players.

Scores of once small companies have over the years grown big, giving investors a 30-50 percent annual return over 10-15 years and creating fortunes for investors. However, more often than not, we find ourselves at the wrong side of the fence and regret our inability to spot such stocks on time.

Buying Strategy for Small Caps

1. Go for companies with low debt ratio (preferably less than one)

2. A high interest coverage ratio (above 3x) and a high return on equity are big advantages

3. Avoid companies with huge liabilities in the form of foreign currency convertible bonds / external commercial borrowings

4. Look at the quality of the management, its governance standards and how investor-friendly the company is.

5. Mid-cap and small-cap companies can be future market leaders, so be patient with your investments

Those who wish to invest in small-cap stocks should do so only if they have a long investment horizon and tolerance for volatility. Small-cap stocks suffer the steepest falls in a bear market and rise the most in a bull market. An investor should stay invested for at least three-five years to allow their portfolio to gain from at least one bull run. If you are looking for multibaggers, stock must have high growth rates along with expanding PE ratios. The price we pay for the stock is important as it will determine whether there is enough scope left for a PE expansion to take place. 

Benefits of Investing in Small Caps

1. Huge growth potential: The first and the most important advantage that a small cap stock gives you is their high growth potential. Since these are small companies they have great scope to rise as opposed to already large companies.

2. Low Valuations: Usually small cap stocks are available at lower valuations compared to mid & large caps. Hence, if you invest in good small cap companies at initial stage and wait for couple of years,  you will see price appreciation not only because of growth in top line and bottom line but also due to rerating which happens with increase in market capital of the company.

3. Early Entrance Advantage: Most of the fund house and institutions do not own small caps with low market cap due to less liquidity which make it difficult for them to own sufficient no. of shares. This gives retail investors an opportunity to be an early entrant to accumulate such companies shares. When company grows in market cap by delivering consistent growth and becomes more liquid, entry of fund houses and institutions push the share prices up giving maximum gains to early entrants.  

4. Under–Researched: Small cap stocks are often given the least attention by the analysts who are more interested in the large companies. Hence, they are often under - recognized and could be under-priced thus giving the investor the opportunity to benefit from these low prices.

5. Emerging Sectors: In a developing economy where there are several new business models and sectors emerging, the opportunity to pick new leaders can be hugely beneficial. Also the disruptive models in the new age is leading to more churn and faster growth amongst the nimble footed smaller companies.

Concerns while Investing in Small Caps

1. Risk: The first and the most important disadvantage a small cap stock is the high level of risk it exposes an investor to. If a small cap company has the potential to rise quickly, it even has the potential to fall. Owing to its small size, it may not be able to sustain itself thereby leading the investor into great loses. After all, the bigger the company, the harder it is for it to fall.

2. Volatility: Small cap stocks are also more volatile as compared to large cap stocks. This is mainly because they have limited reserves against hard times. Also, it in the event of an economic crisis or any change in the company administration could lead to investors dis-investing thereby leading to a fall in prices.

3. Liquidity: Since investing in small cap stocks is mainly a decision depending upon one’s ability to undertake risk, a small cap stock can often become illiquid. Hence, one should not depend upon them for an important life goal.

4. Lack of information: As opposed to a large cap company, the analysts do not spend enough time studying the small cap companies. Hence, there isn’t enough information available to the investor so that he can study the company and decide about it future prospects.


Hidden Gems Value Picks Wealth Builder
If these factors scare you but you still want to gain from the upside potential of such stocks, Saral Gyan Hidden Gems & Value Picks is an ideal choice for you. At Saral Gyan, team of equity analysts keep on evaluating small and mid cap stocks to explore the best Hidden Gems and Value Picks of stock market. Saral Gyan - Hidden Gems and Value Picks are the small and mid cap stocks with high probability to become multi-bagger stocks in future and a path for our investors to create wealth through equity investments in a long run. Multibaggers evolve over time. Many successful investors follow plenty of processes to identify these stocks early and continue to ride them till they evolve as multibaggers.

Grow your Wealth by Investing in Potential Multibagger Small Caps

Its a fact that 49 small and micro cap stocks out of 87 recommended by our team under Hidden Gems service during last 9 years turned multi-baggers giving more than 100% returns. Stocks like Cera SanitarywareCamlin Fine SciencesKovai MedicalWim PlastMayur UniquoterRoto Pumps etc are our multibagger stocks have given whopping returns in the range of 400% to 2000%.

We do update our members in terms of profit booking / exits depending upon various factors like overall Industry / Sector outlook, fundamentals of the company, management action plan and annual performance in terms of top line, bottom line, operating margins and other important parameters.

Below are some of the Hidden Gems stocks released by us which became multibaggers during last 9 years. Even after severe correction in small caps over last 1.5 years, as on date returns is in the range of 150% to 1800%.  In fact, we already advised partial / full profit booking in many of these stocks at higher levels. The update of the same was published in our Hidden Gems Flash Back report.

 HIDDEN GEMS STOCKS 
 RELEASE DATE 
 MULTIBAGGER 
OLD REPORT
1. Camlin Fine Sciences
27 Mar 2011 
8-BAGGER 
2. Wim Plast
30 Aug 2011 
5-BAGGER 
3. Kovai Medical
27 Oct 2011 
7-BAGGER 
4. Cera Sanitaryware
24 Dec 2011 
19-BAGGER
5. Mayur Uniquoter
31 Mar 2012 
5-BAGGER 
6. Roto Pumps
05 Aug 2012 
7-BAGGER 
7. Acrysil
25 Nov 2012 
5-BAGGER 
8. TCPL Packaging
31 Mar 2013 
5-BAGGER 
9. Rane Brake Lining
31 May 2014 
3-BAGGER 
10. Dynemic Products
29 Jul 2014 
2.5-BAGGER
11. Mold-Tek Packaging
22 Mar 2015 
2.5-BAGGER 
12. Visaka Industries
05 Jul 2015 
3-BAGGER 
13. Chemfab Alkalies
06 Sep 2015 
2.5-BAGGER 
14. Ultramarine Pi
11 Oct 2015 
2.5-BAGGER 
15. Stylam Industries
08 May 2016 
3-BAGGER 

Post election outcome, Sensex & Nifty made all time high and delivered positive returns of ~15% since Jan 2018 where as broader markets i.e. Small Cap and Mid Cap indices delivered negative returns of 32% and 21% respectively during the same period. Most of the liquidity in small & mid caps has dried up and found its way to large caps over last 1.5 years. At this juncture, large caps looks fairly valued or expensive in terms of valuations, however small & mid cap companies look attractive and can reward long term investors in big way. In fact, some of the worst times to get into the market turned out to be the best times for long term investors and same seems to be applicable now for small & mid caps.

BSE Small Cap Index has not delivered negative returns for 2 consecutive years in past 16 years

We believe this is a blessing in disguise because for the first time in many years, several small companies having robust business fundamentals are available at attractive valuations. Do you know in last 16 years, small cap index have not given negative returns for 2 consecutive years. In 2018, BSE Small Cap Index has given negative returns of -23.4% and since beginning of this year, index is down by another -5.7%. Below is the table which indicates BSE Small Cap Index returns YoY since 1st April 2003 (the data is available from April 2003 onwards only in BSE).
BSE Small Cap Index Yearly Returns 2003 - 2019
Whenever, BSE Small Cap Index delivered significantly high negative returns in a particular year during last 16 years, it has delivered double digit positive returns the very next year. The divergence between Sensex / Nifty and BSE Small Cap & Mid Cap Index will not last for long going forward considering valuations gap emerging between large caps in comparison to mid & small cap stocks.

Tide to turn favourable for Small Cap Stocks

If you analyse the bear phase of stock markets cycle since 1990, you will find that such bear phase has not lasted for more than 18 months. Small cap index which made all time high of 20,184 in Jan 2018 with end of its bull run corrected by -35% from its peak in Feb 2019 and we believe bottom in broader markets is already in place with lows made in Feb 2019 post Pulwama attack.

Greed which was seen in broader market (small & mid caps) in the year 2016 and 2017 has turned to fear these days. Are you also fearful? This is the time to do opposite of the herd, its time to be greedy when others are fearful. If you are not investing in equities during these opportune times and taking the back seat, you are making a bigger mistake.

Remember, in the long run, you do not make decent returns on your investments by following the herd i.e. when everyone is buying stocks; instead you get handsome returns on our investments by investing in stocks at significantly low prices as no one else is buying, and by selling to them when they come back in herd due to greed in future.

Be a disciplined investor who keep on investing in systematic way irrespective of market conditions and not an emotional investor who usually buy stocks during bull phase when stock prices are moving higher because of greed and sell them in panic during bear phase due to severe fall in stock prices, making mistake of buying high and selling low.


We are pleased to inform you that we are celebrating Saral Gyan 9th Anniversary this July by offering maximum benefits on our subscription services. Discounts & valuable freebies which make our 9th Anniversary special for all our readers are as under:

1. Maximum discount up to 30% on combo pack subscriptions
2. Hidden Gems Flash Back Report - Released on 30th April 19
3. Value Picks Flash Back Report - To be released in Aug'19
4. 5 Stocks - Potential 5-Baggers in 5 Years Report Update - To be released in Jul'19
5. Existing Portfolio Health Check Up under Wealth-Builder subscription 
6. Saral Gyan eBook - "How to Grow your Savings?" worth Rs. 599 for Free.

Below table indicates subscription services and discounted prices valid up to 31st July'19.
Saral Gyan 9th Anniversary Offer 
SARAL GYAN
SUBSCRIPTION SERVICE
9TH ANNIVERSARY OFFER
DISCOUNTED PRICE
PAY ONLINE 
CARD / NET BANKING 
Hidden GemsRs. 10,000 9,000
Value PicksRs. 6,000 5,400
Wealth-BuilderRs. 20,000 18,000
Combo 1: HG + VP + WB + 15%Rs. 40,000 28,000
Combo 2: HG + VP + 15%Rs. 20,000 15,000
Combo 3: HG + VPRs. 16,000 13,000
Combo 4: HG + 15%Rs. 14,000 11,500
Combo 5: VP + 15%Rs. 10,000 8,500

Simply choose the subscription service / combo pack you would like to opt and click on SUBSCRIBE! link in above table to make online payment using your debit / credit card or net banking facility. In case if you are not comfortable in making online payment, click here to know about our other payment options and bank details.

Click here to know more about Saral Gyan 9th Anniversary Offer.

Wish you happy & safe Investing. 

Regards, 
Team - Saral Gyan