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Thursday, November 15, 2018

Are you Fearful of Market Crash? Its time to be Greedy!

Dear Reader,

Since beginning of 2018, we have seen severe correction in broader indices. As on date, BSE Small Cap & BSE Mid Cap Index is down by 28.5% & 19.1% respectively from their all time high made in January this yearSteep fall in broader indices have hurt sentiments and created panic for many of retail investors who got into market last year or during this year. Its important to know, whether you would be able to hold on your equity investments in case stock market tanks further or think to exit? 

Remember, its always wise to be greedy when others are fearful! Fall in stock prices of small and mid cap companies by 30% to 50% from their peaks use to happen during panic times, if a particular company delivers 3x to 5x or even 10x type of returns on your investments in period of 3 to 5 years, it can easily fall by 30% to 50% or even more from its 52 week high during tough times which arises due to profit booking, series of negative news flow and severe sell off due to panic across markets. Below are some of the major reasons of severe fall in stocks prices of small & mid cap stocks since beginning of 2018:

i) Rejig in Portfolio by Mutual Funds to meet guidelines defined by SEBI
ii) Introduction of Additional Surveillance Measures by SEBI to curb volatility   
iii) Auditors exit from various companies on fear of stringent action from authorities   
iv) Unfavourable macros with increasing crude oil prices and depreciating rupee 
v) Trade war fears between US and China, rising interest rates, continuous selling by FIIs
vi) Panic in market due to liquidity concerns, IL&FS default on debt repayments

Its important to understand that long term gains come in equities with such short term pain. We have seen such a severe correction in small and mid cap stocks after 2011. With fall in stock prices during this year,  valuations of many small 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. This is not the time to sell in panic, but to accumulate good companies available at discounted valuations. Moreover, once the market bottoms out and form a base, we can see renewed buying interest in small & mid caps. Bad sentiments will not last for ever, its time for long term investors (2-3 years) to start accumulating good quality stocks which after a long time are becoming available at attractive valuations.

Post recent correction in small and mid cap stocks, we have reviewed all our past recommendations released under Hidden Gems and Value Picks and short-listed 6 Hidden Gems and 6 Value Picks stocks which offer good long term investment opportunity and have potential to give excellent returns on your investment during next 2 – 3 years. 

We have released our "Special Report - 6 Hidden Gems Stocks to Buy / Accumulate" on 30th Sept 2018 and mailed it to our Hidden Gems members. Similarly, we also released our "Special Report - 6 Value Picks Stocks to Buy / Accumulate" on 02nd Oct 2018 and shared it with our Value Picks members.

While short listing 6 stocks under each service i.e. Hidden Gems and Value Picks, we evaluated each company on the basis of I-B-M-V-E-D parameters (Industry, Business, Management, Valuations, Earnings Growth & Debt Management) and rated every parameter using a rating scale – E,V,G,F,P (E=Excellent, V=Very Good, G=Good, F=Fair, P=Poor)

One of the important key to successful investing is to pick the right business at decent valuations. We finalized these 12 stocks with a long term view (2-3 years) and find them superior over other Hidden Gems and Value Picks stocks in terms of valuations, earning visibility, debt management (Loan book growth, NPAs, Capital Adequacy & Other Imp Financial Ratio’s in case of NBFC / HFC) and integrity of promoters towards their business and interest of minority shareholders.

The 6 Hidden Gems stocks which we finalized have a market capital below 600 crores and seen a price correction between 25% to 50% from their 52 week high without any major change in business fundamentals. We believe these stocks will outperform giving much better returns compared to broader indices in medium to long term. Our members can add these stocks in their portfolio with long term view (2 to 3 years). We suggest our members to start investing in these 6 Hidden Gems stocks with initial allocation of 2-3% and increase allocation gradually to 4-5% in staggered way in case stock prices of these companies falls by another 10% to 20% or more during ongoing market correction.

The 6 Value Picks stocks which we finalized have a market capital between 500 crore to 5000 crores and seen a price correction between 40% to 48% from their 52 week high without any major changes in business fundamentals. We believe these stocks will outperform giving much better returns compared to broader indices in medium to long term. Our members can add these stocks in their portfolio with long term view (2 to 3 years). We suggest our members to start investing in these 6 Value Picks stocks with initial allocation of 2-3% and increase allocation gradually to 4-5% in staggered way only in case stock prices of these companies falls by another 10% to 20% or more during ongoing market correction.

Important parameters which we looked into while finalizing stocks are as under:

1. Industry – Operating in Industry / sector which is expected to grow > 10% CAGR during next 3 years
2. Business – Leadership position in the business or one of its business segment in certain geography
3. Management – Prudent & trustworthy management keeping interest of minority share holders
4. Valuations – Reasonable / attractive valuations compared to peer group companies
5. Earnings – Consistent past performance & strong earning visibility with planned / recent expansion
6. Debt Management – Company is able to generate cash flows with low or reducing debt on books

If you wish to receive our Special Reports - 6 Hidden Gems Stocks to Buy / Accumulate, you can subscribe to our Hidden Gems service and for our Special Report - 6 Value Picks Stocks to Buy / Accumulate, you can subscribe to our Value Picks service. To get access to both the reports, you need to opt for combo plan of both the services.

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 and Value Picks.

Moreover, if you have invested in stocks and believe that your investments are not performing well, subscribe to our Wealth-Builder service and get your portfolio reviewed by us. We will review fundamentals of the companies you are holding and guide you which stocks to hold and which to exit. We will also review your equity investments across sectors and companies to ensure that your portfolio allocation is right and outperforms major indices giving you better returns in medium to long term.

We are pleased to inform you that you can subscribe to our services at discounted prices under our ongoing Dussehra Diwali Offer of the YearAttractive discounts & valuable freebies which make this festive season special for our readers are as under:

1. Discount up to 30% on combo pack subscription (valid up to 15th Nov'18 only)
2. Rs. 1 Lakh Diwali Muhurat Portfolio of 10 Stocks (Released on 07th Nov'18)
3. Special Report - 6 Hidden Gems Stocks to Buy / Accumulate (Released on 30th Sep'18)
4. Hidden Gems Flash Back Report (to be released in Nov'18)
5. Special Report - 6 Value Picks Stocks to Buy / Accumulate (Released on 02nd Oct'18)
6. Value Picks Flash Back Report (to be released in Nov'18)
7. Existing Portfolio Health Check Up under Wealth-Builder Subscription
8. Saral Gyan eBook - "How to Grow your Savings?" worth Rs. 599 for Free.

Below table indicates subscription services and discounted prices valid up to 15th Nov'18.

Saral Gyan Dussehra Diwali Offer 2018
SARAL GYAN
SUBSCRIPTION SERVICE
DUSSEHRA - DIWALI 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 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.

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

Wish you happy & safe Investing.

Regards,
Team - Saral Gyan