When overall sentiments are not favourable and lot of negative news are floating around stock market affecting macro factors at global and domestic level, one needs to be brave enough to pick great companies to get rewarded in long term. During such uncertain times, smart investors start hunting for good stocks as long term investment opportunities.
We completely agree with big bull of Indian stock market Mr. Rakesh Jhunjhunwala, who recently said that its best time to invest with long term horizon (4-5 years) to get 5 to 10 times returns from stock market. He added that he won't be afraid to borrow and invest in current market which simply indicates how lucrative it is to invest in Indian equities at current scenario.
Our stock analysts have identified 5 stocks from small cap universe (market cap less than 500 crores) which are expected to multiply your investment by 5 times in next 5 years delivering CAGR of 38%.
Few important parameters which our team has looked into while finalizing the stock selection are as under:
1. Market leader in the business / segment in which the company is operating in.
2. Scalable business with significant moat (sustainable competitive advantage).
3. Prudent management and consistent increase in share holding of promoters.
4.Zero or negligible debt on books with healthy cash flows.
5. CAGR above 15% with increase in operating and net profit margins in last 5 years.
6. Consistent dividend payment with dividend yield above 2% in last 5 years.
7. Increasing EPS, single digit PE ratio with ROE and ROCE above 20% in last 5 years.
8. Zero or negligible share holdings of Institutions (FIIs & DIIs) to get first mover advantage.
Each parameter is equally important and plays a vital role to ensure that you get healthy returns on your investment with limited downside risk in long term.
A company worthy of our investment must be able to grow its profits consistently, despite competition and tough economic conditions. We emphasize on competition and tough economic conditions because every company has competitors and sooner or later faces tough conditions. During such times, companies fight harder to win customers which usually lead to a fall in prices and thus margins. Only a company with a wide, unbreachable moat – a competitive edge – can maintain and grow its profits even during tough economic conditions. As Warren Buffet said, “The wider a business moat, the more likely it is to stand the test of time.”
Companies without a moat will not usually pass the gold standard of an excellent financial track record. What we need to check is whether this moat is sustainable in the future. If the company has sustained it for 5 years, it most likely will in future.
We are glad to inform you that our special report “5 Hidden Gems – 5 Baggers in 5 Years” will release on 25th July 2012 by our equity analysts. This special report will be emailed to all our paid subscribers so that they can invest in these stocks at current levels and hold them for next 4 to 5 years to reap maximum returns.
Below is an illustration of expected returns (CAGR of 38%) from these stocks in next 5 years to grow your investment by 5 times. Even if we take a very conservative approach and assume that only 1 company achieves CAGR of 38% and other 4 achieves CAGR of 20% in next 5 years, your investment will grow by 3 times in next 5 years which is very much possible considering strong fundamentals and cheap valuations of these small cap companies.
So what are you waiting for? Start investing in Hidden Gems and Value Picks of stock market to reap decent returns on your investment. You will also receive our special report, “5 Hidden Gems – 5 Baggers in 5 Years” releasing on 25th July to get stellar returns on your investment.
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