Its always wise to be greedy when others are fearful. Fall in stock prices of small and mid cap companies by 40% to 60% 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 7 years, it can easily fall by 40% to 60% or even more from its 52 week high during tough times which arises due to profit / loss booking, series of negative events / news flows 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:
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 IL&FS default on debt repayments
vii) Concerns in market due to severe sell off in large caps stocks like Zee, Tata Motors
viii) India’s economy registering lowest growth of 5.8% in the Q4 FY19 in last 5 years
ix) Contagion risk arising due to recent default of Rs 1,000 crore by DHFL
x) Ongoing NBFC sector crisis due to credit squeeze, over-leveraging, excessive concentration and massive mismatch between assets and liabilities.
Whenever, 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. While Nifty and Sensex which are hovering near their life time high, Small & Mid Cap Index have underperformed by wide margin and is down by 27% and 16% respectively from their peak made in Jan 2018. The divergence between Sensex / Nifty and Small & Mid Cap Index will not last for long going forward considering valuations gap emerging between large caps in comparison to mid & small cap stocks.
- Sir John Templeton
We 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)
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.
Start building your equity portfolio by making educated investment decisions, subscribe to our Hidden Gems, Value Picks, Wealth-Builder annual subscription services. Avail attractive discounts by subscribing to our combo packs. Below are the details of our annual subscription charges, simply click on SUBSCRIBE! link to subscribe to our services online using debit / credit card or net banking facility.