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Showing posts with label Small Cap Investments. Show all posts
Showing posts with label Small Cap Investments. Show all posts

Tuesday, June 25, 2019

BSE Small Cap Index & Sensex - Yearly Returns since 2003

BSE Small Cap Index & Sensex - YoY Returns starting April 2003

Small Cap stocks are known to deliver impressive performance when bulls rule the markets, but they get battered during a bearish regime. For instance in 2009, Sensex was one of the best performing markets vis-a-vis its peers. This was on account of the positive impact of the stimulus released by the Government and the election results, which led to confidence among investors and corporate India that a stable government at the centre will be able to bring in a lot of reforms. This saw the index posting a superb return of 81% while the BSE Small Cap Index actually delivered an impressive 123% during the same time horizon.

This could be attributed to the fact that during market upturns small cap companies normally outperform their larger peers, since the latter would have already reached their peak in terms of the potential to grow in the future, while the former actually gets to unlock its growth potential as there is a long way for them to reach the maturity stage.

Below is the table illustrating the % returns delivered by Sensex as well as BSE Small Cap Index every calendar year since 1st April 2003.
BSE Small Cap Index and Sensex YoY Returns
Similarly, if we look at performance of various indices in 2014, Sensex has given returns of 29.9%, however BSE Small Cap Index has given whopping returns of 68.8% during the same period. In fact, 2014 was one of the best year for small cap companies after 2009 as many little known companies with good fundamentals turned multibagger during this year itself. In fact, many of our recommended stocks in 2011, 2012 and 2013 like Cera Sanitaryware, Wim Plast, Acrysil, Kovai Medical, Mayur Uniquoters, TCPL Packaging, Camlin Fine Sciences etc turned 4-Bagger to 10-Bagger stocks during 2014 and 2015.

Looking at current scenario, Sensex has made all time high of 40,312 recently on 4th June and closed at 39,435 today. However, Small Cap Index closed at 14,109 today and is still down by almost -30% from its all time high of 20,183 made on 15th Jan 2018. Money has moved from small caps to very selected large caps during last 1.5 years, this has pushed the Sensex to life time high leaving small cap companies to their 52 week lows. Negative sentiments towards small caps have  not only brought down companies with poor fundamentals down but also the fundamentally good businesses at historically low valuations. Hence, buying right set of small caps with robust business fundamentals now can be an excellent wealth creating multibagger opportunity in long run.


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. If you are looking for multibaggers, stock must have high growth rates along with expanding PE ratios. The price we pay for the stock is important as it will determine whether there is enough scope left for a PE expansion to take place. 

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.

Tide to turn favourable for Small Cap Stocks

If you analyse the bear phase of stock markets cycle since 1990, you will find that such bear phase has not lasted for more than 18 months. Small cap index which made all time high of 20,184 in Jan 2018 with end of its bull run corrected by -35% from its peak in Feb 2019 and we believe bottom in broader markets is already in place with lows made in Feb 2019 post Pulwama attack.

Moreover, whenever BSE Small Cap Index has delivered significantly high negative returns in a particular year during last 16 years, it has delivered double digit positive returns the very next year. The divergence between Sensex / Nifty and BSE Small Cap & Mid Cap Index will not last for long going forward considering valuations gap emerging between large caps in comparison to mid & small cap stocks.

Greed which was seen in broader market (small & mid caps) in the year 2016 and 2017 has turned to fear these days. This is the time to do opposite of the herd, its time to be greedy when others are fearful. If you are not investing in equities during these opportune times and taking the back seat, you are making a bigger mistake.


Remember, in the long run, you do not make decent returns on your investments by following the herd i.e. when everyone is buying stocks; instead you get handsome returns on our investments by investing in stocks at significantly low prices as no one else is buying, and by selling to them when they come back in herd due to greed in future.


Be a disciplined investor who keep on investing in systematic way irrespective of market conditions and not an emotional investor who usually buy stocks during bull phase when stock prices are moving higher because of greed and sell them in panic during bear phase due to severe fall in stock prices, making mistake of buying high and selling low.

Download Potential Multibagger Stock 2019 Report for Free!

Monday, June 17, 2019

Multibagger Small Caps & The Retail Investors

Multibagger Small Cap Stocks & The Retail Investors

Most of the retail investors keep themselves away from investing in small and little known companies which they never heard of and find themselves comfortable investing in companies which they are aware and keep a close watch on price movement instead of looking at important parameters like recent performance of the company, its quarterly results, debt on books, earning per share, dividend yield, PE ratio, ROE ratio etc along with future prospects considering macro and micro environment for the industry to which stock belongs to.

The aversion towards this category will be more evident in the present context when there is gloom, both at the domestic and global front. The prevailing negative sentiments have made stock market investing a nightmare for all those who have parted with their hard earned savings into this sector, fondly called the barometer of the economy.

However, at this juncture, we would like to differ from the general view and recommend risk taking investors not to follow the herd but rather they can consider taking a small exposure into the small cap stocks.

Small cap stocks offer a lot of potential to generate additional return in your portfolio. Experts and Guru's of stock market should put in extra effort to create more awareness about benefit of investing in small cap stocks during choppy markets. Actually there is a need to calm down the investors during market downturns and advise them on the positives of investing into this category when markets are range bound.

Below is the table illustrating the % returns delivered by Sensex as well as BSE Small Cap Index every calendar year since 1st April 2003.
Small Cap stocks are known to deliver impressive performance when bulls rule the markets, but they get battered during a bearish regime. For instance in 2009, Sensex was one of the best performing markets vis-a-vis its peers. This was on account of the positive impact of the stimulus released by the Government and the election results, which led to confidence among investors and corporate India that a stable government at the centre will be able to bring in a lot of reforms. This saw the index posting a superb return of 81% while the BSE Small Cap Index actually delivered an impressive 123% during the same time horizon.

This could be attributed to the fact that during market upturns small cap companies normally outperform their larger peers, since the latter would have already reached their peak in terms of the potential to grow in the future, while the former actually gets to unlock its growth potential as there is a long way for them to reach the maturity stage.

Similarly, if we look at performance of various indices in 2014, Sensex has given returns of 29.9%, however BSE Small Cap Index has given whopping returns of 68.8% during the same period. In fact, 2014 was one of the best year for small cap companies after 2009 as many little known companies with good fundamentals turned multibagger during this year itself.


Looking at current scenario, Sensex has made all time high of 40,312 recently on 4th June and closed at 38,961 today. However, Small Cap Index closed at 14,173 today and is still down by almost -30% from its all time high of 20,183 made on 15th Jan 2018. Money has moved from small caps to large caps during last 1.5 years, this has pushed the Sensex to life time high leaving small cap companies to their 52 week lows. Negative sentiments towards small caps have  not only brought down companies with poor fundamentals down but also the fundamentally good businesses at historically low valuations. Hence, buying right set of small caps with robust business fundamentals now can be an excellent wealth creating multibagger opportunity in long run.


There are a lot of reasons why investors should not directly get into small cap stocks as some of them can be illiquid and concerns may arise about the way the company is being professionally managed. Moreover, these companies have limited media coverage and they are largely unknown among investors, which means the information in public domain will be very limited.

Investors who want to invest in small cap stocks should go by advise of professionals who have the expertise to spot these hidden gems. We believe that with BSE Small Cap Index trading nearly 30% below its all time high, this is the right time to get into small cap stocks. However, this category is recommended only to investors who are ready to take the extra risk to get the additional upside in their portfolio and also have the patience to wait to reap the benefits.

Sunday, July 7, 2013

Last 29 Hidden Gems Stocks Performance Update

Dear Reader,

We are delighted to share that our Hidden Gems service continue to rank on top in Google search engine with no. 1 position through out the year. Hidden Gems is one of the most admired service in small cap space and all credit goes to you, we would not have achieved this milestone without your continuous appreciation and support.

We never spent on advertisements over internet but you made this happen with your word of mouth publicity. If you search for "Hidden Gems stocks" which is one of our most admired annual subscription service or "Multibagger Small Caps", our website www.saralgyan.in continue to features on top in Google search engine. We are thankful to all our readers.
We also take this as an opportunity to share the past performance of Hidden Gems released by our team during last 2.5 years. We always suggested our members to invest equal amount of sum in our Hidden Gems stocks on monthly basis. This strategy not only avoid taking extra exposure in couple of small cap stocks but also add diversification in your small cap stock portfolio. Another benefit is systematic investment plan which ensures that you save fix amount from your monthly income and invest systematically in our Hidden Gems every month.

Over a period of time, our equity analysts team will review the performance of previously released Hidden Gems and update you to continue nurturing the best seeds (well performing companies) and cut down the weeds (companies not meeting our expectations) to maximize returns on your investment.

Lets review how SIP approach have benefited our Hidden Gems members during last 2.5 years. Below is the table which illustrate % returns and value of Rs. 10,000 invested (every month) in Hidden Gem stocks vis a vis % returns and value of Rs. 10,000 invested in BSE Small Cap Index during last 2.5 years.

You can see that average returns of Saral Gyan Hidden Gems during last 2.5 years is 12.7% compared to -22.7% of BSE Small Cap Index. Investment of Rs. 10,000 in 29 Hidden Gems during last 2.5 years not only allowed you to save Rs. 2.9 lakh but also appreciated your investment giving overall profit of Rs. 36,830 on 2.9 lakh, making your total Hidden Gems stocks portfolio of Rs. 3.27 lakh. However, if you invested the same amount in Small Cap Index, you would be sitting with an overall loss of Rs. 65,800 with your portfolio value of Rs. 2.24.

In fact, actual returns of Hidden Gems are much higher than 12.7% as illustrated above. We have suggested partial profit booking at higher level in many of our best performing Hidden Gems and exit in non performing companies. Our team suggested 75% profit booking in WPIL at Rs. 430, full profit booking (100%) was suggested in Sri Adhikari Brother Ltd at Rs. 102, 50% profit booking was suggested in De Nora Ltd at Rs. 175, 50% profit booking was suggested in Cravatex at Rs. 700, 75% profit booking was suggested in Camlin Fine Chemicals at Rs. 24 and similarly exit was suggested in few of non performing stocks like National Plastic at Rs. 17 and Bharat Gears at Rs. 57 to protect capital of our members.

It gives us immense pleasure to share that 9 Hidden Gems out of 29 during last 3 years have given more than 100% returns to our members. During last 3 years, we identified below small caps which doubled investments in period of 8 to 15 months: 

1. Sri Adhikari Brothers (Maximum Returns - 161%, As on 07 July'13 Returns - 96%),
2. De Nora Ltd (Maximum Returns - 280%, As on 07 July'13 Returns - 69%),
3. Camlin Fine Sciences (Maximum Returns - 152%, As on 07 July'13 Returns - 52%),
4. Cravatex (Maximum Returns - 128%, As on 07 July'13 Returns - -13%),
5. WPIL (Maximum Returns - 151%, As on 07 July'13 Returns - 86%),
6. Wim Plast (Maximum Returns - 131%, As on 07 July'13 Returns - 93%),
7. Cera Sanitaryware (Maximum Returns - 261%, As on 07 July'13 Returns - 218%),
8. Indag Rubber (Maximum Returns - 113%, As on 07 July'13 Returns - 34%), &
9. Mayur Uniquoters (Maximum Returns - 126%, As on 07 July'13 Returns - 93%).

We are hopeful that we will continue to unearth best Hidden Gems from universe of small caps by doing authentic, indepth and unbiased research work and support our members to make educated investment decisions based on facts.

Thats not all, many of our Value Picks have outperformed market giving similar returns. Value Picks like Yes Bank, Indusind Bank, Godrej Consumers, Tata Coffee, Amara Raja Batteries, Indiabull Financials etc have given returns in the range of 75%-250% in period of 18-36 months.

Start Investing some portion of your savings in Hidden Gems & Value Picks of Stock Market to reap decent returns on your equity investments in long run.

Now you can avail huge discount by availing 3 year subscription (limited period offer, valid upto 15th July 2013 only) during Saral Gyan 3rd Anniversary celebration.  To know more about our 3 Year Subscription offer, click here.

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

Saturday, September 29, 2012

Why Share Price is not Important?

Why is a stock that cost Rs. 50 cheaper than another stock priced at Rs. 10?

This question opens a point that often confuses beginning investors: The per-share price of a stock is thought to convey some sense of value relative to other stocks. Nothing could be farther from the truth.

We do receive many queries over mails about investing in low priced penny stocks. Investors many time looks at low price stock to decide whether to buy or sell. There is a myth that if price is low, there are better changes for the scrip to go up.

Suzlon Energy which made all time high of Rs. 440 (adjusted price) on 09 Jan'12 is now available at Rs. 18. Investors ignoring fundamentals and looking at high / lows of scrip invested in Suzlon at Rs. 100 and later in the range of Rs. 40-50 thinking its cheap looking at price and finally getting trapped. There are many such stocks like Lanco Infratech, GVK Power etc. No doubt, these are good companies but valuations based on fundamentals are not attractive for investment. Why share holders will stay invested in such companies knowing the fact that these companies are debt ridden and would not be able to generate free cash flows atleast for next 4 to 8 quarters.
In fact, except for stock price to be used in some calculations, the per-share price is virtually meaningless to investors doing fundamental analysis. If you follow the technical analysis route to stock selection, it’s a different story, but for now let’s stick with fundamental analysis.

The reason we aren’t concerned with per-share price is that it is always changing and, since each company has a different number of outstanding shares, it doesn’t give us a clue to the value of the company. For that number, we need the market capitalization or market cap number.

The market cap is found by multiplying the per-share price times the total number of outstanding shares. This number gives you the total value of the company or stated another way, what it would cost to buy the whole company on the open market.

Here’s an example:

Stock price: Rs. 50

Outstanding shares: 5 Crores 

Market cap: Rs. 50 x 50,000,000 = Rs. 250 Crores

To prove our opening sentence, look at this second example:

Stock price: Rs. 10

Outstanding shares: 30 Crores 

Market cap: Rs. 10 x 300,000,000 = Rs. 300 Crores

This is how you should look at these two companies for evaluation purposes. Their per-share prices tell you nothing by themselves.

What does market cap tell you?

First, it gives you a starting place for evaluation. When looking a stock, it should always be in a context. How does the company compare to others of a similar size in the same industry?

The market generally classifies stocks into three categories:

• Small Cap under Rs. 1000 Crores 


• Mid Cap Rs. 1000 - Rs. 10000 Crores


• Large Cap - Rs. 10000 Crores

Some analysts use different numbers and others add micro caps and mega caps, however the important point is to understand the value of comparing companies of similar size during your evaluation.

You will also use market cap in your screens when looking for a certain size company to balance your portfolio.

Don’t get hung up on the per-share price of a stock when making your evaluation. It really doesn’t tell you much. Focus instead on the market cap to get a picture of the company’s value in the market place.

Monday, September 3, 2012

Small Cap Stocks & The Retail Investors

When the word "Small Cap" is mentioned in the investor community, lack of interest and confidence is observed which shows the disillusionment that investors have towards this category.

Most of the retail investors keep themselves away from investing in small and little known companies which they never heard of and find themselves comfortable investing in companies which they are aware and keep a close watch on price movement instead of looking at important parameters like recent performance of the company, its quarterly results, debt on books, earning per share, dividend yield, PE ratio, ROE ratio etc along with future prospects considering macro and micro environment for the industry to which stock belongs to.

The aversion towards this category will be more evident in the present context when there is gloom, both at the domestic and global front. The prevailing negative sentiments have made stock market investing a nightmare for all those who have parted with their hard earned savings into this sector, fondly called the barometer of the economy.

However, at this juncture, we would like to differ from the general view and recommend risk taking investors not to follow the herd but rather they can consider taking a small exposure into the small cap stocks.

Small cap stocks offer a lot of potential to generate additional return in your portfolio. Experts and Guru's of stock market should put in extra effort to create more awareness about benefit of investing in small cap stocks during choppy markets. Actually there is a need to calm down the investors during market downturns and advise them on the positives of investing into this category when markets are range bound.

Small Cap stocks are known to deliver impressive performance when bulls rule the markets, but they get battered during a bearish regime. For instance in 2009, Sensex was one of the best performing markets vis-a-vis its peers. This was on account of the positive impact of the stimulus released by the Government and the election results, which led to confidence among investors and corporate India that a stable government at the centre will be able to bring in a lot of reforms. This saw the index posting a superb return of 81% while the BSE Small Cap Index actually delivered an impressive 126% during the same time horizon.

This could be attributed to the fact that during market upturns small cap companies normally outperform their larger peers, since the latter would have already reached their peak in terms of the potential to grow in the future, while the former actually gets to unlock its growth potential as there is a long way for them to reach the maturity stage.

There are a lot of reasons why investors should not directly get into small cap stocks as some of them can be illiquid and concerns may arise about the way the company is being professionally managed. Moreover, these companies have limited media coverage and they are largely unknown among investors, which means the information in public domain will be very limited.

Hence in this scenario, investors who want to invest in small cap stocks should go by advise of professionals who have the expertise to spot these hidden gems. We believe that with BSE Small Cap Index trading at 55% below its all time high, this is the right time to get into small cap stocks. However, this category is recommended only to investors who are ready to take the extra risk to get the additional upside in their portfolio and also have the patience to wait to reap the benefits.

Saral Gyan offers Hidden Gems - Unexplored Multibagger Small Cap Stocks Research reports. The research done by our equity analysts in small cap companies is authentic and unbiased and help investors to make an educated investment decision based of facts. Its result of dedication and passion of our equity analysts that when all indices gave negative returns in last one year, Saral Gyan Hidden Gems gave average positive returns of 35%.

Monday, July 23, 2012

Power of Investing in Stock Market

Power of Investing in Equities - Unbelievable but it’s a fact!

Just Imagine...

How much can you make in 32 years by just investing Rs.10,000 initially in any of financial instruments?

Take a wild guess ???

Let us look at the real example…

If you have subscribed for100 shares of "X" company with a face value of Rs. 100 in 1980.
  • In 1981 company declared 1:1 bonus = you have 200 shares
  • In 1985 company declared 1:1 bonus = you have 400 shares
  • In 1986 company split the share to Rs. 10 = you have 4,000 shares
  • In 1987 company declared 1:1 bonus = you have 8,000 shares
  • In 1989 company declared 1:1 bonus = you have 16,000 shares
  • In 1992 company declared 1:1 bonus = you have 32,000 shares
  • In 1995 company declared 1:1 bonus = you have 64,000 shares
  • In 1997 company declared 1:2 bonus = you have 1,92,000 shares
  • In 1999 company split the share to Rs. 2 = you have 9,60,000 shares
  • In 2004 company declared 1:2 bonus = you have 28,80,000 shares
  • In 2005 company declared 1:1 bonus = you have 57,60,000 shares
  • In 2010 company declared 3:2 bonus = you have 96,00,000 shares
In 2010, you have whopping 9.6 million shares of the company.

Any guess about the company? (Hint: Its an Indian IT Company)

Auy guess about the present valuation of Rs 10,000 invested in 1980?

The company which has made fortune of millions is "WIPRO" with present valuation of 342 Crore (excluding dividend payments) for Rs. 10,000 invested in 1980.

Unbelievable, isnt it? But its a Fact! Investing in companies with good fundamentals and proven track record can give far superior returns compared to any other asset class (real estate, precious metals, bonds etc) in a long run.

Will Wipro provide similar returns in next 32 years? Probably not, its already an IT giant.

You need to explore companies in small and mid cap space with good track record and stay invested to create wealth  in a long term.
At Saral Gyan, team of equity analysts keep on exploring good companies with sound fundamentals in small & mid cap space. Saral Gyan team offers Hidden Gems (Unexplored Multibagger Small Cap Stocks) and Value Picks (Mid Cap Stocks with Plenty of Upside Potential)

Also Read: 4 Hidden Gems which Doubled Investors Money in 1 Year

Subscribe to Hidden Gems and add power of small caps stock in your equity portfolio. Save upto 50% on subscription cost, Hidden Gems subscription charge will be revised to Rs. 7500 effective 1st Aug 2012. Subscribe @ Rs. 5000 and make direct saving of Rs. 2500. Hurry! Last 7 Days.

To read more on Hidden Gems payment options and facilities, Click Here!

Monday, July 16, 2012

6 Steps to Explore Best Stocks for Investment


Below are the 6 Important Steps to Explore Best Stocks for Investment

Step-1: Find out how the company makes money
Step-2: Do a Sector Analysis of the Company
Step-3: Examine the recent & historical performance of the Stock
Step-4: Perform competitive analysis of the firm with its Competitors
Step-5: Read and evaluate company’s Financial statements
Step-6: Buy or Sell

Step-1: Find out how the company makes money

Before you decide to invest in a company’s stock, find out how the company makes money. This is probably the easiest of all the steps. Read company’s annual and quarterly reports, newspapers and business magazines to understand the various revenue streams of the firm. Stock price reflects the firm’s ability to generate consistent or above expectation profits/earnings from its ongoing/core operations. Any income from unrelated activities should not affect the stock price. Investors will pay for its earnings from its core operations, which is its strength and stable operation, and not from unrelated activities. Thus, you need to find out which operations of the firm are generating revenues and profits. If you do not know that you are bound to get a hit in future.

Warren Buffet once said that “if you do not understand how a company makes money, do not buy its stock- you will always end up loosing money”. He never invested even a single penny in technology stocks and yet made billions and billions of dollars both during tech bubble and bust.

Step-2: Do a Sector Analysis of the Company

First is to figure out which sector the stock is in. Then, figure out what all factors affect the performance of the sector. For example, Infosys is in IT services sector, NTPC is in Power sector and DLF is in Real Estate sector. Half of what a stock does is totally dependent on its sector. Simple rule-Good factors help stocks while bad factors hurt stocks.

Let’s take an example of airlines industry. The factors that affect it are fuel prices, growth in air traffic and competition. If fuel prices are high, tickets would be expensive and hence fewer people will fly. This will hurt the airlines sectors and firms equally. This would make the sector less attractive because there would be less scope for growth of the firms.

The idea is to find out the good and bad factors for the sectors and figure out how much they will affect the stock and how. What we are really looking at are reasons that will make stock price good or bad or a company look more or less valuable, even though nothing about the company changes. This will give you a broader view whether the stocks will do well or poorly in the future.

Step-3: Examine the recent & historical performance of the Stock

By performance we mean both operational and financial performance of the company. Take out some time to find out how the company has done in its business over the years. Were there issues with its operations such as labor strike, frequent breakdowns, higher attrition or lagging deadlines? If any company has a history of serious problems, it does not make a good buy because chances are high it may have similar problems again. History is a good predictor of future! It is also extremely important to find out the historical financial performance of the company – growth in revenues, profits (earnings), profit margins, stock price movements etc.

Step-4: Perform competitive analysis of the firm with its Competitors

This is most important step in analyzing a stock. Unfortunately, most of the retail investors do not bother to do this. It takes time to do this step but it worth trying if you don’t want to loose your money. Many investors buy a stock because they have heard about the company or used the products or think companies have excellent technologies. However, if you do not evaluate or compare those features of the company with other similar firms, how will you figure out whether the firm is utilizing them effectively or is better/worse than others? We also need to find out whether company is growing rapidly or slowly or has no growth. We would like to cover couple of financial ratios here in brief and explain how to use them to figure out a good stock.

P/E: Price-to-earnings ratio is the most widely used ratio in stock valuation. It means how much investors are paying more for each unit of income. It is calculated as Market Price of Stock / Earnings per share. A stock with a high P/E ratio suggests that investors are expecting higher earnings growth in the future compared to the overall market, as investors are paying more for today's earnings in anticipation of future earnings growth. Hence, as a generalization, stocks with this characteristic are considered to be growth stocks. However, P/E alone may not tell you the whole story as you see it varies from one company to another because of different growth rates. Hence, another ratio, PEG (P/E divided by Earnings Growth rate) gives a better comparative understanding of the stock.

PEG = Stocks P/E / Growth Rate
We do not want to go into the calculation part as values for P/E are available on internet for most of the companies.
A PEG of less than 1 makes an excellent buy if the company is fundamentally strong. If it is above 2, it is a MUST SELL. If PEG for all the stocks are not very different, one with lowest P/E value would be a great BUY.

Step-5: Read and evaluate company’s Financial statements

This is the most difficult part of this process. It is generally used by sophisticated finance professionals, mostly fund managers who can understand different financial statements. However, there are few things that even you should keep in mind. There are three different financial statement- balance sheet, income statement and cash flow statement. You should focus only on balance sheet and cash flow statement.

Balance Sheet: It summarizes a company’s assets, liabilities (debt) and shareholders’ equity at a specific point in time. A typical Indian firm’s balance sheet has following line items:

• Gross block
• Capital work in progress
• Investments
• Inventory
• Other current assets
• Equity Share capital
• Reserves
• Total debt

Gross block: Gross block is the sum total of all assets of the company valued at their cost of acquisition. This is inclusive of the depreciation that is to be charged on each asset.

Net block is the gross block less accumulated depreciation on assets. Net block is actually what the asset is worth to the company.

Capital work in progress: Capital work in progress sometimes at the end of the financial year, there is some construction or installation going on in the company, which is not complete, such installation is recorded in the books as capital work in progress because it is asset for the business.

Investments: If the company has made some investments out of its free cash, it is recorded under it.

Inventory: Inventory is the stock of goods that a company has at any point of time.

Receivables include the debtors of the company, i.e., it includes all those accounts which are to give money back to the company.

Other current assets: Other current assets include all the assets, which can be converted into cash within a very short period of time like cash in bank etc.

Equity Share capital: Equity Share capital is the owner\'s equity. It is the most permanent source of finance for the company.

Reserves: Reserves include the free reserves of the company which are built out of the genuine profits of the company. Together they are known as net worth of the company.

Total debt: Total debt includes the long term and the short debt of the company. Long term is for a longer duration, usually for a period more than 3 years like debentures. Short term debt is for a lesser duration, usually for less than a year like bank finance for working capital.

One need to ask-How much debt does the company have? How much debt does it have the current year? Find out debt to equity ratio. If this ratio is greater than 2, the company has a high risk of default on the interest payments. Also, find out whether the firm is generating enough cash to pay for its working capital or debt. If total liabilities are greater than total assets, sell the stock as the firm is heading for disaster. This debt to equity ratio is extremely important for a company to survive in bad economy. What is happening now-a-days should make this extremely important. Companies having higher debt ratio have got hammered in the stock market. Look at real estate companies- their stocks are down by almost 90%. This is because they have high debt level which means higher interest payments. In the current liquidity crisis and global slowdown, it would be extremely difficult for them to survive. Remember, a weak balance sheet makes a company vulnerable to bankruptcy!

Step-6: Buy or Sell

Follow all the steps from 1 to 5 religiously. It will take time but worth doing it. If you do it, you won’t have to see a situation where you loose more than 50% of stock value in a week! Buying or selling will depend on how your stock(s) perform on the above analysis.

If you find it difficult to follow above steps to explore investment opportunities, do not worry! Subscribe to our services Hidden Gems and Value Picks and start investing in potential multibagger small and mid cap stocks.

Its dedication and passion of our equity analyts that 4 Hidden Gems out of 12 recommended in 2011 by Saral Gyan gave more than 100% returns on investments to Hidden Gems subscribers. Read complete article - Click here

Sunday, July 15, 2012

Small Cap Investment Opportunities

How does one know the right stock to invest in and that too at the right price which will ensure strong returns in the long term? This will be a question that will be the uppermost in the minds of most investors wanting to allocate part of their funds towards stocks. Especially in light of the heightened volatility in the markets in the past.

For instance, take a look at the period between 2005 and early 2008. During that time, there was a general sense of euphoria prevailing in India what with the country consistently logging in growth rates of 9% plus and the stockmarkets zooming to 21,000 levels. And then this optimism snapped.

The global financial crisis reared its ugly head and sent global economic growth and world stockmarkets including India into a tailspin. Suddenly there was nervousness all around. Forget bad stocks with bad fundamentals, investors in India were loathe to put in their money even in good companies available at attractive prices fearing that prices will fall down further. Then 2009 dawned, signs of recovery began to be noticeable and stockmarkets surged once again. Those who missed out on the current rally are now waiting for the next round of correction to start putting their money to work again.

The idea really is not to time the markets. That is a feat best left to speculators. For long term investors, even at present when overall valuations of companies seem on the moderate side, there will still be some stocks that they can look to add on to their portfolios. These stocks if picked at the right price by proven approaches can turn into multi-bagger opportunities.

At Saral Gyan, team of equity analysts keep on evaluating small cap stocks to explore Hidden Gems. Saral Gyan - Hidden Gems are the stocks with high probability to become multi bagger stocks in future and a path for our investors to create wealth through equity investments in a long run.

Its the dedication and passion of our equity analysts that Saral Gyan 4 Hidden Gems out of 12 of last year gave 100% plus returns to our subscribers whereas overall returns of major indices like Sensex, Nifty including mid cap and small cap index were in negative. Click here to read complete article.

Hidden Gems : Subscribe today before its too late, revised annual subscription charge of Hidden Gems effective 1st Aug 2012 will be Rs. 7500 inplace of Rs. 5000.

So what you are waiting for? Subscribe Now to grow your wealth in long run and enjoy direct saving of Rs. 2500.

Tuesday, July 10, 2012

Hidden Gem July'11 - Returns @ 130% in 12 Months

Dear Saral Gyan Reader,

Once again we are delighted to inform you that during bad times of stock markets, our equity analysts team has recommended the right stock at right point of time.

Hidden Gem July 2011 stock price is doubled giving more than 100% returns, stock touched all time high of Rs. 421.60 today, giving returns of more than 130% on your investment in span of 12 months. Isn't it great to enjoy profits of 130% during turbulent times of stock market.

So which Hidden Gem was recommended in July 2011 by our equity analysts?

Answer is WPIL (BSE Stock code: 505872)

Hidden Gems research report was sent to all our Hidden Gems subscribers on 24th July, 2011.  

We recommended Buy on WPIL at Rs. 182.50 (average purchase price) on 24th July 2011 for target of Rs. 460 with time period of 18-24 months. Today, stock has made 52 week high of Rs. 421.60 and closed at Rs. 415.95 giving absolute returns of 128% to our Hidden Gems subscribers.

Profit Booking Strategy: We recommend our Hidden Gems subscribers to book profits partially by selling 50% of their holding at current market price and keeping rest for long term. Remember, you need not to bother about your remaining quantity, its free for you. Once you  book profits of more than 100% by selling half of your shares, you can hold remaining 50% shares at no cost!

Click here to read/download WPIL (Hidden Gem - July 2011) research report.

Note: Its important to diversify your small cap stock portfolio, you can't just bet on one or two stocks. Our objective is to protect & grow your capital giving 100% to identify best of Hidden Gems but we do not guarantee similar returns from all our recommendations. Few of our Hidden Gems can perform better in a lesser span of time, few may take more time and need to hold for longer period.

Here is an example: We recommended Piccadily Agro to our investors at price of Rs. 35.95 in Dec 2010, stock made high of Rs. 54.90 delivering excellent numbers in 3rd and 4th quarter of FY 2011. But due to poor performance in FY12 on account of high raw material prices and rising interest cost on ongoing expansion, stock tumbled down heavily and is now available at Rs. 24.75. Down by almost Rs. 11 giving negative returns of  almost 30% from our recommended price.

But as there is nothing wrong with the company, this stock will take time to give good returns on your investments going forward.

Hence, it is important to diversify your stock portfolio. If one of your stock investment is not doing well for you, you will find other set of stocks doing reasonably well in your portfolio. You never knows which Hidden Gem will brighten up your life giving you multibagger returns in next 2-3 years. And in case if you find that most of your stocks investments are in red and underperforming major indices, do accept that you are not making the right investment decisions.

Remember, if you really want your money to grow, stocks is the only way to go! In case if you do not have time to do your own research to dig and find out the right investment idea's in small cap space, now you have an option. Simply subscribe to Saral Gyan - Hidden Gems.

Below is the past performance of Hidden Gems of last (upto May) recommended by our equity analysts team:

(click on the image, if above table is not clearly visible)

Refering to above table, one can easily notice that 6 out of 12 Hidden Gems stocks recommended during last year gave more than 50% returns and 3 Hidden Gems gave more than 100% returns. 

Small cap index along with all major indices have fallen significantly during tough times of stock market. In last one year, Sensex has corrected from 18,858 to 17,618 giving negative returns of -6.57% where as Small cap index has fallen from 8,375 to 6,805 giving negative returns of -18.75%.

But during these turbulent times, Saral Gyan Hidden Gems continue to shine giving maximum average returns of +56.4% and as on date average returns of +35% to our Hidden Gems subscribers compared to average index returns of -4.3% of small cap index in last one year, hence outperforming small cap index by whopping 40%.

Our equity analysts team ensured that you get the best returns on your investment during good times and protect your capital during bad times. Its your appreciation and support which made Saral Gyan Hidden Gems one of the most appreciated service.

Do not miss the opportunity to power your stocks portfolio with best of micro/small cap stocks - Hidden Gems. Now you can create Wealth in long term by managing your stock portfolio like a professional with our Wealth-Builder - An offline portfolio management service. Click here to check out our services and annual subscription charges.

Easy Payment options: Now you can pay by your credit card using Pay Pal gateway  also or by online bank transfer using NEFT, click here to know more out payment options.

Saral Gyan - Hidden Gems ranks no. 1 in Google

Our website enjoys no. 1 ranking in Google search engine and credit goes to our Hidden Gems services. You can try it out yourself, simply open Google search engine page and type Hidden Gems stocks and you will see that our website is on 1st position on first page of Google.


Below is the screen image:


Is not it great? We are delighted, because you only make it happen. Popularity of Saral Gyan Hidden Gems is no more hidden now. We do not spend on advertising, no newspaper and TV adds, no hoardings, no great marketing, its just word of mouth publicity which make our website so popular among investors fraternity.

Its a big milestone which we achieved without spending a single penny on advertisement. Infact, we don't want to! We want to grow with our subscribers. We charge you a nominal fee and try our level best to unearth great investment opportunities. We are not like brokerage firms which circulate free buying and selling stock tips and make money through brokerage on your transactions irrespective whether you are making profit or booking losses on your transactions.

Subscribe to any of our service and get Saral Gyan eBook - "How to Grow your Savings?" worth Rs. 499 absolutely free!

In case of any query or clarification, do not hesitate to contact us.

Wish you all happy & safe investing!

- Saral Gyan Team.

Monday, June 18, 2012

Small Cap Stocks - A Star in the Making!

When the word "Small Cap" is mentioned in the investor community, lack of interest and confidence is observed which shows the disillusionment that investors have towards this category.

Most of the retail investors keep themselves away from investing in small and little known companies which they never heard of and find themselves comfortable investing in companies which they are aware and keep a close watch on price movement instead of looking at important parameters like recent performance of the company, its quarterly results, debt on books, earning per share, dividend yield, PE ratio, ROE ratio etc along with future prospects considering macro and micro environment for the industry to which stock belongs to.

The aversion towards this category will be more evident in the present context when there is gloom, both at the domestic and global front. The prevailing negative sentiments have made stock market investing a nightmare for all those who have parted with their hard earned savings into this sector, fondly called the barometer of the economy.

However, at this juncture, we would like to differ from the general view and recommend risk taking investors not to follow the herd but rather they can consider taking a small exposure into the small cap stocks.

Small cap stocks offer a lot of potential to generate additional return in your portfolio. Experts and Guru's of stock market should put in extra effort to create more awareness about benefit of investing in small cap stocks during choppy markets. Actually there is a need to calm down the investors during market downturns and advise them on the positives of investing into this category when markets are range bound.

Small Cap stocks are known to deliver impressive performance when bulls rule the markets, but they get battered during a bearish regime. For instance in 2009, Sensex was one of the best performing markets vis-a-vis its peers. This was on account of the positive impact of the stimulus released by the Government and the election results, which led to confidence among investors and corporate India that a stable government at the centre will be able to bring in a lot of reforms. This saw the index posting a superb return of 81% while the BSE Small Cap Index actually delivered an impressive 126% during the same time horizon.

This could be attributed to the fact that during market upturns small cap companies normally outperform their larger peers, since the latter would have already reached their peak in terms of the potential to grow in the future, while the former actually gets to unlock its growth potential as there is a long way for them to reach the maturity stage.

There are a lot of reasons why investors should not directly get into small cap stocks as some of them can be illiquid and concerns may arise about the way the company is being professionally managed. Moreover, these companies have limited media coverage and they are largely unknown among investors, which means the information in public domain will be very limited.

Hence in this scenario, investors who want to invest in small cap stocks should go by advise of professionals who have the expertise to spot these hidden gems. We believe that with BSE Small Cap Index trading at 55% below its all time high, this is the right time to get into small cap stocks. However, this category is recommended only to investors who are ready to take the extra risk to get the additional upside in their portfolio and also have the patience to wait to reap the benefits.

Saral Gyan offers Hidden Gems - Unexplored Multibagger Small Cap Stocks Research reports. The research done by our equity analysts in small cap companies is authentic and unbiased and help investors to make an educated investment decision based of facts. Its result of dedication and passion of our equity analysts that when all indices gave negative returns in last one year, Saral Gyan Hidden Gems gave average positive returns of 24%, outperforming small cap index by whopping 35%.

Saral Gyan celebrates its 2nd Anniversary (15th - 25th June), avail attractive discounts and save upto 55% on annual subscription cost. To read more - Click here!

Saturday, September 3, 2011

Hidden Gem May'11 Returns @ 55% - Book Partial Profits Now

Dear Member,

Once again our equity analyst team picked up the right stock at right point of time. The small cap stock which was recommended in the month of May as Hidden Gem is now giving returns of 55% to our Investors.

We published Hidden Gem (small cap stock) research report of May month on 29th May and circulated it to all our Hidden Gems subscribers. On 29th May, small cap index was at 8110 (closing price) and currently small cap index is at 7134 (2nd Sept closing price) i.e. down by almost 12% but Saral Gyan Hidden Gem during the same period is giving positive returns of more than 55% to our investors.

We recommend our Hidden Gem subscribers to do partial profit booking by selling 50% of their holding of Hidden Gem - May 2011 stock above Rs. 550 and have cash reserves available.

We expect stock market can retest its recent lows, if Nifty goes below 4750, we may see a target of 4400-4500 on Nifty. Historically stocks tend to make major lows in the month of September and October. We may see a false upmove in September (which is already started) followed by bottom in October.

Below is the performance of last 10 Hidden Gems recommended by Saral Gyan equity analysts:


If you are a long term investor and want to build your equity portfolio, do not miss to allocate 15-20% portion of your stock portfolio in small cap stocks. Small Cap stocks by their nature are more risky compared to mid cap and large cap stocks during falling market but have the potential to give you multibagger returns in a longer period of time.

Small Caps have been the worst hit during recent stock market crisis and this have thrown up opportunities to buy shares of well managed companies that are now available at bargain prices.

Fundamentally strong growth oriented small cap companies play a major role in appreciating your wealth at a faster pace compared to mid and large cap stocks. But being a very large universe of small cap stocks, its too difficult to identify profitable investment ideas in small cap space.

Saral Gyan equity analysts keep on exploring under valued stocks from different sectors in small cap universe and identify one Hidden Gem each month. During recent times, when most of the blue chip stocks are making new 52-week lows, Saral Gyan Hidden Gems continue to shine with their performance. As on date, average returns of last 10 Hidden Gems is +8.92 compared to negative returns of -20.2% of small cap index. Hence, outperforming small cap index by whopping 29%.

How can you access the list of such stocks? Its simple, subscribe to Saral Gyan - Hidden Gems. Click on the links to know more about annual subscription charges and payment options.

Wish you happy & safe Investing!

Regards,

Saral Gyan Team.
Saral Gyan Capital Services. 

Saturday, August 13, 2011

Hidden Gems continue to Shine during Turbulent Times

We received many queries from our readers during recent market correction. The major concern was the capital erosion and returns on their investments turning negative from positives within couple of weeks.

Our equity analysts team expected that Nifty will not go below 5200 which acted as a strong support by bulls and gave a sharp rebound from 5190-5200 levels during last 6 months. But this time that support level was also broken and Nifty tested 4950 during beginning of this week. The fall in share prices due to US downgrade in credit rating was so sharp that most of the mid caps and small cap stocks were tumbled by almost 15% to 30% in couple of days.

But you need not to worry as this is not the time to book losses by selling stocks you have in your portfolio but to add fundamentally strong blue chips, mid as well as small cap stocks at discounted price.

Negative news across the globe created a lot of pessimism and uncertainly during recent times in capital market. We suggest our readers to start accumulating stocks of fundamentally sound small and mid cap companies which are trading at discounted price and offers value for money.

Saral Gyan - Hidden Gems outperform Small Cap Index by whopping 22%


In fact, average returns of our recommended Hidden Gems stocks is positive whereas small cap index is down giving double digit negative returns during the same period.

Below is the performance of last 10 Hidden Gems recommended by team of our equity analysts. Even after such a downfall when most of the blue chips touched their 52 week low prices in stock market, returns of our 6 Hidden Gems out of 10 stocks recommended in last 10 months are giving positive returns. As on date, average returns of Saral Gyan - Hidden Gems is +7.30% compared to negative returns of -14.75% of Small Cap Index.


We suggest our paid subscribers to add Hidden Gems recommended in Dec 2010, Feb 2011 and June 2011 during recent market correction. Considering correction in these stock prices and Q1 results updates, we believe these stocks will outperform all indices giving good returns on your investments in coming quarters.


- Saral Gyan Team.