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Dear Reader,
If you were investing in small cap stocks in the year like 2016 and 2017 and stopped investing now due to recent carnage in broader markets, believe us you are making a bigger mistake. Do not allow your emotions to take control of your equity investment decisions, instead inculcate habit of investing in discipline manner.
If you analyse BSE Small Cap Index YoY returns, you will realise that small cap index not only recovered but also delivered astonishing returns in short span of time once tide turns favourable. In last 16 years, small cap index delivered significantly higher returns in single year every four years. In past, we experienced fierce rally in small caps in years like 2007, 2009, 2014 and 2017. During good times when overall economy is doing well, small cap stocks use to deliver mind boggling returns turning multibaggers in period of 12 to 24 months.
BSE Small Cap Index went up by 69% in 2014 and during the same year numerous small and mid cap stocks turned multi-bagger. Scenario was similar in 2017 when BSE Small Cap Index rallied by 58%, since Jan 2018 broader market went into bear grip with significant sell off in many small and mid caps due to expensive valuations and series of negatives developments followed by slowdown in economy.
3. Roto Pumps (Hidden Gem released on 05th Aug'12)
Regards,
Team - Saral Gyan
If you were investing in small cap stocks in the year like 2016 and 2017 and stopped investing now due to recent carnage in broader markets, believe us you are making a bigger mistake. Do not allow your emotions to take control of your equity investment decisions, instead inculcate habit of investing in discipline manner.
Small caps being most volatile tend to offer best investing opportunities during turbulent times. Retail investors usually make mistake by buying stocks at higher levels due to greed factor and later exit due to panic and fear of further erosion of capital. This phase has happened earlier also and good quality small and mid caps have always bounced back, not only recovering all losses but also delivering much higher returns from previous highs. Good sentiments as well as bad sentiments do not last forever.
If you analyse BSE Small Cap Index YoY returns, you will realise that small cap index not only recovered but also delivered astonishing returns in short span of time once tide turns favourable. In last 16 years, small cap index delivered significantly higher returns in single year every four years. In past, we experienced fierce rally in small caps in years like 2007, 2009, 2014 and 2017. During good times when overall economy is doing well, small cap stocks use to deliver mind boggling returns turning multibaggers in period of 12 to 24 months.
Coming back to the current situation, the small cap index is down by 35% from its peak made in January 2018. The liquidity crisis in NBFCs, the DHFL and IL&FS defaults, series of rating downgrades by rating agencies, lenders dumping stocks of debt laden companies and recent slowdown in economic growth have not only taken the steam out of small caps but also made companies available at significantly discounted valuations compared to large caps. Fear and misinformation has shattered investor’s confidence and hence quality businesses are back to cheap valuations after a long time. Post steep fall in stock prices over last 20 months, many small caps are now offering once in a decade investment opportunity!
However, the greed to get multibagger returns by investing in small and mid caps in year like 2016 & 2017 turned out to fear these days. Inspite of attractive valuations of many small and mid size companies backed by sound business fundamentals, no body wish to look at this space now. Investors who were willing to pay much higher price for small and mid cap stocks in 2017 are shying away to invest in these stocks which are now available at lower than halve the prices of 2017.
The reason is the carnage in stock prices of many well-known small and mid cap companies. Individual small and mid cap stocks are touching 52-week lows every other day and individual damage to most of the stocks in this category is to the tune of 50-60%, some even more than that. Such severe and fast erosion of capital in small and mid caps have butchered investors interest towards this category. Retail investors have taken the back foot and lost their faith and conviction towards investing in small and mid caps due to existing pain in their portfolios.
However, we are quite excited about opportunities emerging in small and mid cap space during this year. The fall in stock prices of many small and mid caps by more than 50% from their peaks has not happened for the first time. This has happened in past in years like 2008-2009 and 2011-2012 and companies with good business fundamentals have always bounced back strongly later delivering multi-bagger returns. When overall market sentiments are negative like we are witnessing now, quality businesses also face the heat. As bad stocks go down, good stocks go down with them too. But good companies make a stronger come back with earning revival once economy cycle starts its upturn.
We have been saying this time and again - don’t try to time the market. We firmly believe that to get the best returns in the long term, investors should invest in a staggered and disciplined manner irrespective of market conditions. Investing through ups and downs of the market lets your investment grow and averages the purchasing cost. Equity investment is a serious business meant for long term investors. Trying to get in when the market goes up and getting out when there is a correction does not help you to create wealth.
Let us share some valuable insights to make you understand why we believe buying the right set of small and mid caps now can be a massive wealth creating once in a decade opportunity. To make our readers understand bull as well as bear phase of markets, we have covered long term monthly charts of some of our own small and mid cap stocks recommendations (released under Hidden Gems and Value Picks) over last 9 years which at one point of time were down by 50% to 70% from their peak but turned out to be mega multibagger stocks in longer run delivering upto 64X returns.
Below are the Monthly Chart (since Jan'10) of 8 Multibagger Small Cap Stocks released under Hidden Gems service.
The reason is the carnage in stock prices of many well-known small and mid cap companies. Individual small and mid cap stocks are touching 52-week lows every other day and individual damage to most of the stocks in this category is to the tune of 50-60%, some even more than that. Such severe and fast erosion of capital in small and mid caps have butchered investors interest towards this category. Retail investors have taken the back foot and lost their faith and conviction towards investing in small and mid caps due to existing pain in their portfolios.
However, we are quite excited about opportunities emerging in small and mid cap space during this year. The fall in stock prices of many small and mid caps by more than 50% from their peaks has not happened for the first time. This has happened in past in years like 2008-2009 and 2011-2012 and companies with good business fundamentals have always bounced back strongly later delivering multi-bagger returns. When overall market sentiments are negative like we are witnessing now, quality businesses also face the heat. As bad stocks go down, good stocks go down with them too. But good companies make a stronger come back with earning revival once economy cycle starts its upturn.
We have been saying this time and again - don’t try to time the market. We firmly believe that to get the best returns in the long term, investors should invest in a staggered and disciplined manner irrespective of market conditions. Investing through ups and downs of the market lets your investment grow and averages the purchasing cost. Equity investment is a serious business meant for long term investors. Trying to get in when the market goes up and getting out when there is a correction does not help you to create wealth.
Let us share some valuable insights to make you understand why we believe buying the right set of small and mid caps now can be a massive wealth creating once in a decade opportunity. To make our readers understand bull as well as bear phase of markets, we have covered long term monthly charts of some of our own small and mid cap stocks recommendations (released under Hidden Gems and Value Picks) over last 9 years which at one point of time were down by 50% to 70% from their peak but turned out to be mega multibagger stocks in longer run delivering upto 64X returns.
Below are the Monthly Chart (since Jan'10) of 8 Multibagger Small Cap Stocks released under Hidden Gems service.
1. Camlin Fine Sciences (Hidden Gem released on 27th Mar'11)
Above is the monthly chart of Camlin Fine Sciences which we recommended as Hidden Gem on 27 Mar’11 at 6.05*. The stock made life time high of 155 in Jan 2018 and later crashed to lows of 36.70. At current price of around 60, it is still a 10-Bagger for investors who bought it during lows of 2011 or 2013 but those who invested later during 2015 – 2017 period are bearing losses as of now. Current situation is more or less similar like that of 2013. Investors who bought Camlin Fine Science stock at highs of 2011 were holding it bearing losses till 2013. However, initial pain of 2 years rewarded the investors of 2011 later in year 2014-2015.
2. Kovai Medical (Hidden Gem released on 27th Oct'11)
Now look at monthly chart of KMCH since Jan 2010, Kovai Medical stock price made a high of Rs. 176 in Feb 2010 and low of Rs. 89.50 in 2012 when overall market sentiments were negatives. It witnessed correction of nearly 50% over next 2 years. Later in 2014, stock rallied more than 400% in matter of 12 months. Kovai Medical price fell by 56% from high of 1480 in Jan 2018, a 8-Bagger stock even after severe fall in stock price for those who invested in the company in 2012.
3. Roto Pumps (Hidden Gem released on 05th Aug'12)
Let us look at monthly chart of Roto Pumps since Jan 2010, stock which turned 10-Bagger in matter of 16 months. Roto Pumps which witnessed correction of 60% in stock price in 2011 from high of 2010, rallied by more than 900% later in 2014. At current levels, Roto Pumps is a 13-Bagger stock for investors who bought it at lows of 2011.
4. Acrysil (Hidden Gem released on 25th Nov'12)
Above is the monthly chart of Acrysil from Jan 2010. Acrysil stock price fell by 48% over 2 years from its peak of 2010. With improvement in fundamentals and start of bull cycle, stock delivered 588% returns within one year. It is still a 9-Bagger stock for investors who bought it in 2012 or 2013 and a 4-Bagger for those who invested at high in Jan 2010 and later experienced negative returns for nearly 4 years.
5. TCPL Packaging (Hidden Gem released on 31st Jan'13)
Above is the monthly chart of TCPL Packaging since Jan 2010. In 2014 with start of bull cycle in broader market, stock delivered 1100% returns in 2 years, turning 12-Bagger stock from initial high of Nov 2010 and 22-Bagger from lows of 2011. TCPL Packaging is down by 60% from its all time high but it is still a 5-Bagger stock for investors who bought it at highs of 2010 and still holding it.
6. Rane Brake Lining (Hidden Gem released on 31st May'14)
Rane Brake Lining is our Hidden Gem stock recommended on 31 May 2014. During recent melt down in broader markets, stock witnessed price correction of 67% over last 2 years. Even when stock is down from all time high of 1450 hitting recent lows of 505, it is a 4-Bagger stock from highs of Nov 2010. Those who invested at high of Nov’10 were sitting on losses in the same stock for more than 3 years.
7. Visaka Industries (Hidden Gem released on 05th Jul'15)
Above is the monthly chart of Visaka Industries since Jan 2010. Between Feb’16 to Jan’18, stock turned 9-Bagger delivering 853% returns in 2 years. Since then stock price has corrected by 68% making recent lows of 265 but is still a 5-Bagger stock for investors who invested in the same company 7 to 8 years back during 2011 – 2012 and a 2-Bagger for those who invested in 2015 - 2016.
8. Stylam Industries (Hidden Gem released on 08th May'16)
Stylam Industries has delivered maximum returns of 6304% in last 9 years. A mind boggling mega 64-Bagger stock which moved from lows of 13.35 (Nov 2011) to high of 855 (July 2017). We recommended Stylam Industries as Hidden Gem on 08 May 2016 and advised to book full profits around 800 levels considering expensive valuations of the company. Its interesting to note that the stock which turned out to be a mega multi-bagger delivering maximum returns of 64 times over last 9 years was down by more than 70% by Nov 2011 from its peak of July 2010.
Below are the Monthly Chart (since Jan'10) of 5 Multibagger Mid Cap Stocks released under Value Picks service.
1. Aurobindo Pharma (Value Pick released on 27th Jan'13)
Aurobindo Pharma, a well known company from pharma sector, was recommended as our Value Pick stock on 27 Jan 2013. Stock which made low of 41.52* witnessing fall of 70% from its peak of Jan 2011 later delivered 1200% returns in matter of 2.5 years. Aurobindo Pharma is still a 15-Bagger stock for investors who invested in the company during lows of 2011.
2. Mindtree (Value Pick released on 23rd Mar'14)
Let us look at monthly chart of our another Value Pick stock – Mindtree recommended on 23 Mar 2014. Mindtree also witnessed severe correction of 61% from its peak of Jan 2010 and tested patience of investors for nearly 4 years. Those who stay invested and sit patiently on the stock were rewarded over next 2 years as stock rallied from 195* to 795* delivering more than 300% returns.
3. Heritage Foods (Value Pick released on 03rd Jan'16)
Above is the monthly chart of Heritage Food of last 9 years. During bear phase of 2011 – 2012, stock price fell by 52% from its peak price of 2010. However, the same company delivered 525% during bull phase in matter of 30 months. Stock made all time high of 884 in Oct 2017 turning mega 28-Bagger stock from lows of Jun 2012.
4. Can Fin Homes (Value Pick released on 29th Feb'16)
Can Fin Homes witnessed severe correction of 67% from its peak during last year. However, the same stock created significant wealth for investors who invested in the company during beginning of this decade. Even after severe correction in stock price over last 2 years, stock is a 12-Bagger for investors who invested in the company at high of 2010 and a 20-Bagger who invested at lows of 2012.
5. Sonata Software (Value Pick released on 10th Jul'16)
Above is the monthly chart of Sonata Software since Jan 2010. The stock price fell by 76% in 2 years from high of 69 made in April 2010. Investors who bought at highs of Apr 2010 were in losses for almost 5 years but those who held it tightly were rewarded handsomely over next 4 years. Sonata Software made all time high of 428.40 in Sept 2018 turning 7-Bagger for those who entered at highs of 2010.
Looking at long term charts of most of the companies with good businesses, you will realise that investors who entered in market by investing in small and mid caps during last 2 to 3 years have pain in their portfolio however those who invested in bad phase of market in 2011 - 2013 like that of today are still holding plenty of multibaggers in their portfolio. That is why its important to invest in equities keeping a real long term view. In fact, during turbulent times, we must increase investments / equity allocation in small / mid size companies which have good business fundamentals with better earning visibility and robust cash flows from their operations to get rewarded in big way in long run.
Wish you happy & safe Investing.
Regards,
