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Thursday, November 5, 2015

Power your Portfolio by Investing in High Quality Stocks

Investing in High Quality Small & Mid Caps with Strong Fundamentals 

Dear Reader,

Do you know on 2 January 2002, Crompton Greaves had a market cap of Rs 115 crore and its stock was at Rs 1.80. Today, on 05th Nov'15 the stock price is closed at Rs 168.80 and the company's market cap is Rs 10,610 crore. Rs 1 lakh invested Crompton Greaves in Jan 2002 is almost Rs. 94 lakhs today.

Lets take another example of little known company Camlin Fine Sciences which is our 19-Bagger stock. We recommended this stock 4 years back at price of Rs. 6.05 (adjusted price after 2 stock splits in last 4 years, actual recommended price was Rs. 60.50) and today it’s closed at Rs. 113.60 giving absolute returns of 1778%. 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 in last 4 years.

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 28 Hidden Gems out of 41 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 28 out of 41 Hidden Gems released by us during last 5 years have given more than 100% returns to our members. In fact 20 out of these 28 stocks are giving returns in the range of 200% to 1900%.

Now that's the past, let us see how our Hidden Gems of 2015 have performed so far this year considering recent market correction of more than 10% in broader indices from all time highs made in Mar 2015.

Below is the performance update of Hidden Gems released in 2015 compared to returns given by small cap index:
We are pleased to share with our readers that Hidden Gems stocks - 2015 average returns as on date is 35.8% compared to negative return of small cap index returns of -1.1%, hence outperforming small cap index by 36.9%.

Let us review Hidden Gems stocks performance of last year, Hidden Gems stocks of 2014 also outperformed small cap index by wide percentage points giving as on date average returns of 70.1% compared to 22.4% returns of small cap index.
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.

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. Its important for us to ensure that we suggest you to pick the right stock ensuring that you get handsome returns on your investments in medium to long term. 

Also Read - Multibagger Small Caps: SIP Returns @ 350% in 5 Years 

We are pleased to inform that we are celebrating this festive season by offering maximum benefit to our members. On this auspicious day, you can avail attractive discounts and freebies on our subscription services under our Dussehra - Diwali Offer of the Year. Subscribe to our services and get rewarded by making educated investment decision in equities.

Attractive discounts & valuable freebies which make this festive season special for our readers are as under:

1. Discount up to 30% on combo pack subscriptions
2. Rs. 1 Lakh Diwali Muhurat Portfolio of 10 Stocks (to be released on 10th Nov'15)
3. Special Report - 5 Stocks - 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:

Saral Gyan Dussehra - Diwali Offer of the Year 2015
SARAL GYAN
SUBSCRIPTION SERVICE
DUSSEHRA - DIWALI 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

You can subscribe online to our services by simply click on SUBSCRIBE! link. In case if you are not comfortable in subscribing online, click here to check our other payment options and bank details

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

Wish you happy & safe Investing.

Regards, 
Team - Saral Gyan