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Sunday, July 19, 2015

Hidden Gems - 2014 & 2015 Performance Update

Investing in High Quality Small Caps with Strong Fundamentals 

On 2 January 2002, Crompton Greaves had a market cap of Rs 115 crore and its stock was at Rs 1.80. Today, on 19th July'15 the stock price is trading at Rs 198 and the company's market cap is Rs 12,397 crore. Crompton Greaves has given returns of 10900% in last 13 years. Rs 1 lakh invested Crompton Greaves in Jan 2002 is Rs. 1 Crore and 10 lakhs today with CAGR of 43.6% in last 13 years.

Lets take another example of little known company Mayur Uniquoters which is our 8-Bagger stock. We recommended this stock 2 years back at price of Rs. 56 (adjusted price after 2 bonus issues and stock split in last 2 years, actual recommended price was Rs. 448) and today it’s at Rs. 411 giving absolute returns of 635%. You might be surprised to know that Mayur Uniquoter is a 136-Bagger stock for investors who invested in it 6 years back. Investment of Rs. 1 lakh in Mayur Uniquoters in Jan 2009 is valued at Rs. 1 Crores and 36 lakhs today. That's too excluding dividend payouts. Mind boggling, isn't it? It's a fact! Company has posted strong growth YoY and rewarded share holders in big way, Company was trading at Rs. 3 (bonus / split adjusted price) with market cap of merely 13 crores in Jan 2009, today market cap of the company is 1,902 crores.

Mayur Uniquoters is still a great value stock considering its consistent performance and leadership position in artificial leather industry and robust demand for its products by esteemed clients from auto and footwear industry.

Do you own such stocks which can give you similar returns in future?

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 per cent 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.

If these factors scare you but you still want to gain from the upside potential of such stocks, Saral Gyan Hidden Gems and Value Picks is an ideal choice for you.

It’s a fact that 27 Hidden Gems out of 40 released by our equity analysts in last 5 years (till Dec'14) have given more than 100% returns.

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.

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.

Saral Gyan team do take care of above concerns by doing in-depth research and analysis of small cap companies before releasing Hidden Gems research reports with buy recommendation. Its sincere efforts, dedication and passion of our equity analysts that 27 out of 40 Hidden Gems released by us during last 4 years have given more than 100% returns to our members. In fact 17 out of these 27 stocks have given returns in the range of 200% to 1900%.

Below is the performance update of Hidden Gems released in 2014 compared to returns given by small cap index:
We are pleased to share with our readers that 4 Hidden Gems out of 12 released in 2014 have already achieved their target price giving more than 100% returns to our members in period of 6 to 12 months. Hidden Gems stocks - 2014 average returns as on date is 58.4% compared to small cap index returns of 29%, hence outperforming small cap index by 29.4%.

Similarly, if we look at performance of Hidden Gems stocks released in first 6 months of 2015, we are glad to share that our Hidden Gems continue to outperform small cap index by wide percentage points. 
Hidden Gems - 2015 as on date average returns is 20% compared to small cap index average returns of 4.6% since beginning of this year, outperforming small cap index by 15.4%.

If you have patience and want to add extra power in your portfolio, start investing some portion of your savings in fundamentally strong small and mid cap companies - Hidden Gems & Value Picks.   

The stocks we reveal through Hidden Gems & Value Picks are companies that are either under-researched or not covered by other stock brokers and research firms. We keep on updating our subscribers on our past recommendation suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.

We also take this as an opportunity to share our Wealth-Builder portfolio returns. Under our Wealth-Builder service, we encourage our members to replicate our Wealth-Builder portfolio by investing in selective high quality small and mid cap companies. These companies are reporting 20-30% + annualized growth and got their due share of re-rating and delivered exceptional returns to our members so far. Since 1st Jan 2013, Nifty has given returns of 44.7%, Sensex returns is 45.4% where as Wealth-Builder portfolio has given returns of 224% returns to our members. In case you have not yet started building a portfolio of high quality and fundamentally strong growth stocks for long term wealth creation, please find below the Wealth-Builder portfolio allocation & performance update for your reference.



We believe, investing in Wealth-Builder portfolio with regular portfolio review from our end can help you achieve market beating, very good returns over a longer team and help you take care of yourself and your family needs, which ultimately lead to a healthy and wealthy life after retirement. 

Time has shown that smart investors have made their fortune by investing in equities in long term. None other asset class can match giving you such extra ordinary returns. Yes, its important for you to invest in right set of companies at right price with medium to long term perspective. If you think to invest in stocks for period of 3 months or 6 months, we suggest you to stay out of stock market because you are not investing, you are betting on volatility of stock market which could be risky. 

Its our mission to ensure that you reap the best returns on your investment, our objective is not only to grow your investments at a healthy rate but also to protect your capital during market downturns. 

We are pleased to inform you that we are celebrating this season giving maximum discounts and valuable freebies to our members under our ongoing Saral Gyan 5th Anniversary Offer, this is a limited period offer and closes on 31st July'15.

Discounts & valuable freebies which make our 5th 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 - To be released in July'15 
3. Special Report - 5 Stocks - Potential 5-Baggers in 5 Years - Released on 3rd May'15 
4. 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'15.

Saral Gyan 5th Anniversary Offer
SARAL GYAN
SUBSCRIPTION SERVICE
5TH ANNIVERSARY OFFER
DISCOUNTED PRICE
PAY ONLINE 
CARD / NET BANKING 
Hidden GemsRs. 7500 6750 / $ 150 135 
Value PicksRs. 5000 4500 / $ 100 90
Wealth-BuilderRs. 15000 13500 / $ 300 270
Combo 1: HG + VP + WB + 15%Rs. 30000 21000 / $ 600 420
Combo 2: HG + VP + 15%Rs. 15000 11000 / $ 300 220
Combo 3: HG + VPRs. 12500 10000 / $ 250 200
Combo 4: HG + 15%Rs. 10000 8500 / $ 200 170
Combo 5: VP + 15%Rs. 7500 6750 / $ 150 135

Simply choose the subscription service / combo subscription 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 you are not comfortable in subscribing online, click here to know about our other payment options and bank details. 

Note: Saral Gyan 5th Anniversary Offer is for limited period and closes on 31st July'15. Subscription cycle for all new subscribers joining on or before 31st July 2015 will be July 2015 - June 2016. 

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

Wish you happy & safe Investing. 

Regards, 

Team - Saral Gyan