Dear Reader,

A small investment of Rs. 10,000 a month over a period of 10 years can help you create a corpus of Rs. 25 lakhs. Total amount invested over period of 10 years by you will be Rs. 12 lakhs and you will have profit of Rs. 13 lakhs. Not Good? This might look less to you as we are assuming returns of 13.5% per annum. If we assume returns of 27% per annum, your corpus will be Rs. 50 lakh and your profits would be more than 3 times of your actual investments that too when you are investing a nominal amount of Rs. 10,000 on monthly basis. Impressive! Right?

You might think that investing in mutual funds could be one of the way to start SIP (Systematic Investment Plan). However, returns may not be that high which you can generate by directly investing into good quality small and mid cap stocks. Hence, we suggest our members to start SIP by directly investing in stocks every month. What you are suppose to do is to invest your savings in a particular stock once in a month instead of putting it into mutual fund. Next month, same amount would be invested in another stock which at that point of time gives you good medium to long term investment opportunity. This could be an ideal choice for salaried employees as well as businessmen / entrepreneurs, as it will help you to directly invest in fundamentally strong small and mid cap companies to build a diversified portfolio of high quality small and mid cap stocks over a period of time to achieve wealth creation.

Investing in stocks is a great way to build your diversified investment portfolio. It is a simple and time tested approach for accumulation of wealth in a disciplined manner. Simply get some savings from your monthly income and invest in equities for long term. It not only allows you to save every month in a disciplined way but also help you ride through ups and downs of stock market.

Invest some portion of your monthly income in good companies without  timing the stock market and you will definitely get rewarded in long run.

Just take care of Basic Principle of Investing in Equities:

1. Invest in stock market with a long term view (3 - 7 years or more).

2. Invest in companies which are fundamentally strong with scalable business.

3. Follow disciplined approach by Investing regularly in equities.

4. Build a diversified portfolio by investing in small & mid cap companies.

5. Avoid frequent buying / selling of stocks, Its trading not Investing!

6. Review performance of your holding companies at least once a year to decide whether to buy / sell or hold.

Hidden Gems - SIP Returns @ 256.2% Vs Small Cap Index Returns @ 73.2%

It gives us immense pleasure to share that average returns of Saral Gyan 64 Hidden Gems stocks (Our Unexplored Multibagger Small Caps) released since inception (from Sept 2010 to Dec 2016) during last 6 years is 256.2% compared to 73.2% returns of BSE Small Cap Index. Monthly investment of Rs. 10,000 in Hidden Gems till Dec'16 during last 6 years not only allowed you to save Rs. 6.4 lakh but also appreciated your investment by more than 2 times making your total Hidden Gems stocks portfolio of Rs. 22.8 lakh with overall profit of Rs. 16.4 lakh. However, if you would have invested the same amount in Small Cap index, you would be sitting with overall gains of Rs. 4.68 lakh.

Below is our Multibagger Stocks - Hidden Gems performance scorecard since inception  (from Sept 2010 to Dec 2016) which illustrates value of Rs. 10,000 invested every month in Hidden Gem (Unexplored Multibagger Small Cap Stocks) stock of the month vis a vis value of Rs. 10,000 invested in BSE Small Cap Index during last 6 years as on 26th May'17.
We are glad to inform you that 42 Hidden Gems stocks out of 64 during last 6 years have given more than 100% returns to our members. Moreover, 32 stocks out of these 42 have given returns in the range of 200% to 1800%.

Note: Total 64 Hidden Gems stocks were released (till Dec'16) during last 76 months, we have not released Hidden Gems for the months not displayed in the table above.  

We also suggested our members, which earlier recommended Hidden Gems stocks can be added more in their portfolio based on company's strong fundamentals. Ex: Mayur Uniquoter, Cera Sanitaryware, Wim Plast, Camlin Fine Chemicals, Acrysil, Kovai Medical, Superhouse, De Nora, Atul Auto, Control Print and Stylam Industries were some of the stocks which we recommended to our members to accumulate later also at higher price from our initial recommended price. Now profits can be seen as these stocks have given multibagger returns.

As we made most of these reports public, you can access read / download our research reports by clicking on the Read / Download link:

1. SAB TV NETWORK >>> Rec. Date: 05 Sep'10 >>> ROI: 890% >>> Read / Download

2. DE NORA >>> Rec. Date: 07 Nov'10 >>> ROI: 225% >>> Read / Download

3. CAMLIN FINE >>> Rec. Date: 27 Mar'11 >>> ROI: 1243% >>> Read / Download
4. WIM PLAST >>> Rec. Date: 30 Aug'11 >>> ROI: 1522% >>> Read / Download
6. CERA SANITARY >>> Rec. Date: 24 Dec'11 >>> ROI: 1760% >>> Read / Download
7. SUPERHOUSE >>> Rec. Date: 29 Feb'12 >>> ROI: 212% >>> Read / Download
8. MAYUR UNIQ. >>> Rec. Date: 31 Mar'12 >>> ROI: 560% >>> Read / Download

9. PREMIER EXPLO. >>> Rec. Date: 22 Jul'12 >>> ROI: 490% >>> Read / Download
10. ROTO PUMPS >>> Rec. Date: 05 Aug'12 >>> ROI: 420% >>> Read / Download
12. ACRYSIL >>> Rec. Date: 25 Nov'12 >>> ROI: 352% >>> Read / Download

13. BAMBINO AGRO >>> Rec. Date: 25 Dec'12 >>> ROI: 363% >>> Read / Download

14. TCPL PACKAGING >>> Rec. Date: 31 Jan'13 >>> ROI: 755% >>> Read / Download

15. ATUL AUTO >>> Rec. Date: 28 Feb'14 >>> ROI: 197% >>> Read / Download

16. RANE BRAKE >>> Rec. Date: 31 May'14 >>> ROI: 440% >>> Read / Download

17. DYNEMIC PROD. >>> Rec. Date: 29 Jul'14 >>> ROI: 214% >>> Read / Download

18. ASIAN GRANITO >>> Rec. Date: 29 Sep'14 >>> ROI: 261% >>> Read / Download

19. CONTROL PRINT >>> Rec. Date: 30 Nov'14 >>> ROI: 58% >>> Read / Download

20. PLASTIBLENDS >>> Rec. Date: 31 Jan'15 >>> ROI: 110% >>> Read / Download

21. MOLD-TEK PACK >>> Rec. Date: 22 Mar'15 >>> ROI: 171% >>> Read / Download
22. VISAKA IND >>> Rec. Date: 05 Jul'15 >>> ROI: 179% >>> Read / Download

23. CHEMFAB ALKAL. >>> Rec. Date: 06 Sep'15 >>> ROI: 178% >>> Read / Download

24. ULTRAMARINE >>> Rec. Date: 11 Oct'15 >>> ROI: 115% >>> Read / Download

25. STYLAM IND. >>> Rec. Date: 08 May'16 >>> ROI: 240% >>> Read / Download
We are confident that we will continue to hunt best Hidden Gems from universe of small caps by doing authentic, in-depth and unbiased research work and support our members to make educated investment decision.

Through Hidden Gems and Value Picks, we are providing you opportunities to invest in such small / mid cap stocks today. Infosys, Pantaloon, Dabur, Glenmark were the small cap stocks in past and today are the well known companies falling under mid and large cap space.

The stocks we reveal through Hidden Gems & Value Picks are companies that are either under-researched or not covered by other brokers and research firms. We keep on updating our subscribers on our past recommendations suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future growth outlook.

Time has shown that smart investors have made their fortune by investing in equities in long term. None other asset class can match giving you such extra ordinary returns. Yes, its important for you to invest in right set of companies at right price with medium to long term perspective. If you think to invest in stocks for period of 3 months or 6 months, we suggest you to stay out of stock market because you are not investing, you are betting on volatility of stock market which could be risky.

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 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% from all time highs made in 2007 - 2008. This is because they have high debt level which means higher interest payments. In case of liquidity crisis and global slowdown, it would be extremely difficult for such companies 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! In fact you can expect much better returns than any other asset class in medium to long term. 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 high quality stocks with strong fundamentals, leave it to us. Simply subscribe to Hidden Gems (Unexplored Multibagger Small Cap Stocks) and Value Picks (Mid Caps with Plenty of Upside Potential) and start building your portfolio of high quality small and mid caps to get rewarded in medium to long term.

The stocks we reveal through Hidden Gems & Value Picks are companies that either under-researched or not covered by other stock brokers and research firms. We keep on updating our members on our past recommendation suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.

Dear Reader,

We have released the portfolio of carefully selected 13 small and mid caps  from universe of small and mid cap stocks which can benefit investors in the year 2013. We are confident that these stocks can outperform major indices like Sensex and Nifty. We have shared portfolio of 13 small & mid cap stocks for 2013 with all our members.

We are glad to share the past performance of recently released Diwali Muhurat Portfolio (released on 11th Nov'12) which is outperforming Sensex by 4.9%. Since 11th Nov'12, Sensex has given returns of 5.5% (18,684 to 19,714), where as during the same period, Diwali Muhurat Portfolio has given absolute returns of 10.4%. One of our Value Pick stock, Tata Coffee which we included in our Diwali Muhurat Portfolio is giving as on date returns of 46%.


Diwali Muhurat Portfolio was shared with all our members on 11th Nov'12 and we will review the performance of same before Diwali 2013. Hence, suggest our members to continue holding these stocks for time period of 1 year.

If you missed the opportunity, you can choose to receive portfolio of 13 small & mid cap stocks for 2013 by subscribing to any of our services. Click here to know more about our annual subscription services.

Our selection process includes lot of research and data analysis. We first identify the sectors that are likely to do well in next 12 months. Having that done, we further refine our search to select companies from that sector. We create a portfolio worth Rs. 1 Lakh comprising 13 stocks so that it can help investors to create a model portfolio with lump sum investment upto 1 Lakh.

We have given the different allocation to each of the scrips keeping in mind the risk versus returns ratio. We have also fine tuned the portfolio with mid-cap and small cap scrips from different sectors so that the investors can invest in a complete mix of stocks to balance their portfolio. Saral Gyan Portfolio of 13 for 2013 includes best of Hidden Gems and Value Picks recommended by our equity analyst’s team during last one year.

We continue to follow our simple but effective approach by evaluating each stock on the basis of below mentioned criteria’s.

(i) Top Quality management with high integrity:

This is an absolutely non-negotiable condition. If the management is not honest, will they want to share the goodies with you? No, they will look for the first opportunity to siphon off the profits and pull the wool over your eyes.

(ii) The scale of opportunity must be big:

Multi-bagger stocks are created because they are able to scale the opportunity rapidly. Titan Industries is a great example. In 2003-04, Titan‘s market cap was 500 crores. In 2011-12, it is close to 25,000 crores. The fact that India is a booming marketplace of 120 crores consumers means that most products and services have a head start at trying to scale up their activities.

(iii) Low debt; free cash flows:

We learnt from the great crisis of 2011 that companies with high debt on their books simply get slaughtered. While debt per se is not bad (if the company is able to borrow at a lower rate and deploy it in its business at a higher rate, the operating leverage works in its favour), excessive debt with high interest and repayment obligations can crunch the stock in times of downturn. So, as a long-term investment philosophy, it is best to steer clear of high-debt companies.

(iv) High ROE – Efficient users of capital:

Some company’s management is able to squeeze that little extra of every buck. A ROE of at least 25% is necessary to make into the hallowed list of model portfolio.

(v) No High Capex Requirements – No Serial Diluters of Equity:

We know from (bitter) experience the demerits of investing in stocks like Suzlon & GMR which have an insatiable appetite for more and more capital. To feed their perennial hunger, these companies dilute their equity by making FPOs, GDRs & FCCBs resulting in total destruction of shareholders’ wealth. Companies should be lean and mean requiring minimal capital but generating huge returns there from.

(vi) Reasonable growth expectations:

“If you get a tax-free return of 18% for your portfolio, you must be very happy”. So, stop craving for that overnight multi-bagger. You’ll only end up losing your precious capital that way. Instead, look for well established small, mid and blue chips companies that are growing at a reasonable rate of return (15 – 25%). With time and the magic of compounding, you will have your muti-bagger in your portfolio.

(vii) Valuations:

Most investors are obsessed about valuations, refusing to buy any stock that is “expensive”. However, one must remember that “expensive” is a relative term. If a stock is compounding at 25% on an annual basis, paying a price of 30 times earnings may be very reasonable. A stock like Nestle, for instance, has always been “expensive”. However, if an investor had gone ahead and bought the stock, he would have had an incredible multi-bagger on his hands. On the other hand, in trying to buy a “cheap” stock, one may get saddled with unsavory companies. After all, there is a reason why such stocks are “cheap”.

Of course, one should be careful not to buy in euphoric or bubble times when the pricing may be extravagant and not at all reasonable.

(viii) Concentrated Portfolio:

We like Warren Buffett approach, a believer in the concept of a concentrated portfolio. If you believe in the prospects of a stock you should be prepared to put a substantial chunk of money in it – or nothing at all. There is no point in buying a bit of this and a bit of that because that dilutes your returns.

Of course, we are no match for Warren Buffett and we do not have his conviction levels. So, we’ll stick to 13 stocks to begin with, which means that from 5% to 12% of the wealth will be invested in each stock.

(ix) Diversification:

Last but not the least; a proper portfolio must be diversified across sectors. A bit of Finance, a bit of consumption, some autos, a pinch of chemical etc will make a balanced portfolio.

Portfolio rebalancing is the process of bringing the different asset classes back into proper relationship following a significant change in one or more.

More simply stated, it is returning your portfolio to the proper mix of stocks, bonds and cash when they no longer conform to your plan. An example might help.

Say you have determined that given your risk tolerance, time horizon and financial goals that your portfolio should look like this:

• Stocks 60% Rs. 60,000

• Bonds 35% Rs. 35,000

• Cash 5% Rs. 5,000

• Total 100% Rs. 100,000

We’ll use a starting total portfolio value of Rs. 100,000 so the math is easy and the Rupee and percentages match.

How Things Change?

A couple of your stocks catch on fire and before you know it, your portfolio looks like this:

• Stocks 67% Rs. 80,000

• Bonds 29% Rs. 35,000

• Cash 4% Rs. 5,000

• Total 100% Rs. 120,000

You might be asking, ‘What’s the problem? You are up Rs. 20,000 – isn’t that a good thing?’ Of course, it’s a good thing, however the problem is it has moved the investor away from the ideal asset allocation and possibly exposed him or her to more risk than is acceptable.

This is where the conservative investor will step in and bring the portfolio back to the original allocation.

How to Rebalance?

You can do this several ways:

i) You could sell off some of the stock that had the recent run up and invest the profits in bonds and cash until the original percentages are achieved.

ii) Another alternative would be to look at your other stock holdings and sell any underperformers to generate the cash to invest in the other two asset classes.

iii) The third alternative would be to invest new money into your portfolio in the bonds and cash portion to bring those percentages up to proper levels.

It would be tempting to leave the portfolio alone, however the purpose of establishing an allocation is to achieve the best return with an acceptable level of risk. Doing nothing violates that premise and exposes the investor to unacceptable levels of risk.

As a rule of thumb, when your assets drift 5% or more away from your allocation, you should re-balance. This can occur naturally over time or following an abrupt rise or decline in one or more asset classes.

Look at Your Stocks

Re-balancing is not just a big picture exercise. Within the stocks portion of your portfolio, you may need to rebalance those relationship also.

For example, you might determine the stock portion of your portfolio should look like this:

• Large-cap growth stocks 50%

• Utility stocks 30%

• Technology stocks 10%

• Other stocks 10%

If several technology stocks takeoff in a big way, you face a dilemma. Do you sell off some of your winners and buy more of the other categories to rebalance your portfolio?

The other alternative is to put more money into the other stock categories to bring their percentages up and the portfolio back into balance.

The Price of Inaction

What is the price of doing nothing? If you are risk adverse, a portfolio that becomes more heavily weighted in volatile technology stocks will keep you up at night.

Consider what happened to many investors during the technology stock boom of the late 1999-2000 or real estate boom of 2007-2008. Not only did they let the technology stocks or reality stocks grow out of any reasonable allocation, many also sold off other stock to buy more such companies.

When the market crashed in March of 2000 / Jan of 2008, the investors who had let technology / real estate balloon to a hugely disproportionate percentage of their portfolio had nothing to fall back on.

Portfolio rebalancing is an important part of sticking to your game plan. You should look at your portfolio at least once is six month in terms of rebalancing and more frequently if you have had a significant gain or loss in any asset class.

How many different stocks should you own? There is no absolute answer to that question – every investor will come up with an answer that suits his or her particular situation.

However, many investors find holding around 15 - 20 individual stocks spread over five to seven different industries gives them a well-diversified portfolio.

If you are just starting out, don’t panic and think you have to get to this level all at once. This is a goal, not a starting point.

Even then, the most successful individual investor of all times, Warren Buffett is not sold on the value of spreading your money over a large number of stocks. However, since we’re not Warren Buffett, the prudent thing to do is protect yourself with a diversified portfolio.

What your stock portfolio looks like depends on several things:

• Your financial goals

• Your risk tolerance

• Your time horizon

These factors will drive how conservative or aggressive your mix of stocks is.

If your strategy is conservative, your portfolio will favor stocks from industries that tend toward slow, but steady growth in all types of business cycles, such as:

• Consumer staples stocks

• Utility stocks

A more aggressive approach might target these investments:

• High growth stocks

• Technology stocks

The conservative investor will want to focus more on larger, well-established companies, while a more aggressive investor might look for some percentage of investment to go toward smaller, emerging companies with larger potential for growth, but at a higher risk.

Of course, stocks are just one part of a diversified portfolio. Spreading your money over different asset classes to include bonds and cash as well as stocks gives you a better risk profile.

The more conservative investor will place more assets in bonds and cash, while the aggressive investor will do the opposite and fund stocks over bonds and cash.

Don’ get hung up on meeting an arbitrary number for filling out your portfolio of stocks. The important consideration is to find a balance that meets your financial goals and works with your risk tolerance. As long as your portfolio is diversified by industry and asset class, you are taking the right steps toward building a sound financial future.