10 Small Cap Stocks that offer Significant Growth Potential

18 Jan

About two years back, I had recommended some decent midcap stocks most of which appreciated big time even before the current bull run started. I have been, since, trying to dig out some value picks in the mid cap segment but unfortunately, most of them ran up big time – much beyond their fair valuations. Let me concentrate on some pure small cap stocks this time with their underlying businesses holding very good growth potential and stock appreciation for the future.

Important: You may note that many of the stocks listed below, while still offering value, have run up a bit as well. The markets are at near all-time-highs and hence some of these stocks can go down sharply at some point. Hence it would be ideal to buy them in the ranges mentioned or take a staggered approach. Further, never put a lot of money into small caps stocks – not more than 10%-15% of your overall equity portfolio

 

Small Cap Stock Picks

(Company Name, Price on 18/01/2015, Buy Price Range)


1. Chaman Lal Setia Exports (80, 50-60)

2. Gujarat Foils (70, 48-55)

3. Goodricke Group (152, CMP and at dips)

4. Goodyear India (624, 450-480)

5. Hinduja Global Solutions (629, CMP and at dips)

6. JVL Agro Industries (20, 15-18)

7. Jyoti Structures (39, CMP)

8. Noida Toll Bridge Company (35, 24-28)

9. Nucleus Software Exports (199, At dips below 160)

10. Stylam Industries (83, At dips below 60)

 

Criteria for Selection

Some of the criteria used to pick the small cap stock mentioned here are:

  • Industry (Excluded Oils, Chemicals, Steel, Textiles etc)
  • Promoters (How trustworthy are they?)
  • Age & Stability of the company
  • Growth Numbers (Top and Bottom line)
  • Dividend Yield (As applicable)
  • Debt on Book (Zero or Manageable debt)

As you know, the biggest challenge for most small cap companies is managing the debt as they usually avail high interest loans. A big chunk of their profit flows out as interest repayment and that’s probably the main parameter that would define the growth potential of many of them.

Disclosure: As of writing of this post, I am invested in JVL Agro Industries. I plan to invest in at least 3-4 of the above listed companies as and when their stock quotes reach the ranges mentioned.

Disclaimer: I am not a qualified finance adviser or portfolio manager. Please consult the experts before taking any investment decision in the equity market. You may have to do further research on these stocks on financial portals, websites of these companies as well as mandatory filings by them before taking any positions.

Good luck with your equity investments!

“Food (or Sadya) for Thought” during this Onam!

7 Sep

kerala under massive debtKerala is one of the most gifted states in terms of natural resources, most educated manpower, high health standards, highest life expectancy, women empowerment, rich art & literature heritage and what not? Unfortunately, the state of affairs in “God’s own country” right now is not as green as it looks from 10000ft above the ground reality.

Today, the state is more known for serious issues such as alcohol addiction, high number of suicides, frequent hartals / bandhs, ‘quotation” gangs who commit political murders etc. Most of these problems are caused by frustration among the educated but unemployed youth while the expectation around consumerism and quality life style is quite high for most of these people. Even worse, it has been a borrower state for decades now (no self-reliance) and has a massive debt of 1.15 Lakh Crores (internal + external) at the moment which is said to be at 30% of its GDP! Unfortunately the state’s revenue is not really coming from core sectors such as manufacturing or agriculture but primarily via tax revenues, tourism and money transfer from abroad. Some haste decisions such as the recent alcohol ban – which was taken purely for political gains – is going to aggravate financial trouble for the state with guaranteed spike in unemployment rate as well (The unemployment rate already hovers around 16% – for people below 60 – which is highest among all states in India despite lakhs of people migrating and working in the gulf countries).

So, where did all these problems in Kerala arise? How come each child born here has a high debt burden along with something good numbers such as great high life expectancy and other health indices?

The causes are mostly known to all. Kerala has been a Communist state for many years now and one of the most liberated states due to the same reason where people are more or less equal in terms of their social status, rights to everything in life. I must say that the communism initially was very successful in combating social imbalance and injustice but things changed after a couple of decades of progressive work by the communists and similar revolutionary establishments. Currently, the same passion with which people fight for their rights, is not shown when giving back to the state by showing and committing to their responsibilities. This is exactly why there’re numerous trade union driven strikes, hartals and hence none of the industries would survive in Kerala. Well, trade unions are rampant in many other states too but then their agricultural sector wasn’t affected as badly as it did in God’s own state. In Kerala, even the farmer community wouldn’t be able to do agriculture due to shortage of manpower and those labour class who suddenly decided that they wouldn’t do any job for ‘bourgeois’ in that key sector. At the same time, the same average labour class is willing to do any kind of construction or agriculture related job for much cheaper wages (considering the cost of living) and poor conditions abroad – I am talking about that section of the Malayalees in Gulf countries.

Where does Kerala head from here?

Well, mounting debts may not be a big issue for many other states (some may have even higher debts) in India that have proven track record of agricultural and manufacturing output. But a state like Kerala where the money comes from very limited sectors and tax routes; it is a very serious issue. Soon, the government wouldn’t be able to provide salaries to its employees, repair roads or complete basic (survival) development projects. The state is already in doldrums and it can only get worse from here if corrective actions are not taken immediately by some strong governance, ruthless law making and strict action against offenders.

So, what is the need of the hour?

A few immediate changes are required in the mindset of people as well as the government so that the state can get back on track. The state is entering a point of no return when it comes to its finances and such a situation can result in severe law and order situation and many social issues.

To begin with, for heaven’s (i.e. God’s own country) sake please stop Hartals and Bandhs immediately by force or the right law making. There is no point in observing a state-wide bandh or hartal for the death of a local leader (of any party for that matter) or when Saddam Hussein is executed. Keralites cannot afford to inject huge losses to the state’s exchequer by these forced shut downs several days every year.

Next, it’s high time the state modernized its agriculture sector. In the history of this state, most of the communist revolutions and strikes happened around agriculture sector and farmers. Due to this reason, it was never allowed to grow in terms of implementing modern technologies to fight manpower issues hence resulting in poor outputs except in some crops and spices. Kerala now has reached such a bad state where the basic labour has to come from Bihar, Bengal and UP but at the same time output is not optimal either. Modernizing the agriculture sector with the right technologies is the only way forward for this state as there is not a lot of scope for big things in the manufacturing sector. Self-reliance in food matters is the most important aspect for any state!

Another big issue to tackle is the dangerous consumerist traits that most Keralites exhibit. Most of the visible issues such as alcoholism and suicides are related to high expectations from life and ridiculous levels of consumerist attitude while the money just doesn’t exist. It’s common in Kerala that, those people who can’t even afford a 1-bedroom home always dream of and tend to build a two-storied 3000sqft home. Wedding would be extravagant with tons of gold that the bride wears – no matter how much her father had borrowed. As a highly-literate state, it is high time Kerala bid good bye to such show-off life style. Things wouldn’t change with awareness campaigns alone but enforced harsh laws to address this issue (e.g. very heavy taxes and penalties on big houses etc)

Then there are these very dangerous evils called campus politics and religion based politics. Both these things have drooped to such a bad state where campus elections are fought with vengeance whereas the religious politics is sure to hamper the development ideas that a coalition government might have. Hence the bad politics has to come to an immediate end in Kerala. If any state in India can achieve it, it’s Kerala and it’s time to say ‘NO’ to (bad influence of) campus politics and all religious parties – be it Muslim League, SNDP, NSS or Kerala Congress.

While large scale manufacturing and heavy industries may not be easily possible in such a dense and small state, the manufacturing and industrialization definitely need to leap forward with some big drastic steps. Kerala needs to prove to the outside world that no company will be closed down due to petty strikes called by trade unions and hence a new revolution is realistically possible here. Without having some new industries – other than fisheries, tourism and spice exports – there is no future for this state. Well, it has the bad history of closing down many companies in the 1970s and 80s due to union strikes, but with that part already taken care of (from my first point), it can be a new beginning for Kerala.

Finally, the government should first take measures to improve the financial situation of the state even before deciding to discontinue revenue generating businesses. I am referring to the recent alcohol ban policy here. It may sound unethical to expect that the state should make revenue at the cost of its citizens’ and families’ health and peace (which what the politicians are tapping into), but it’s better than everyone dying out of hunger, right?

Dear country men and political leaders of Kerala, As you celebrate the Onam festival this year, please spare some time to realize where you are heading! Most of the things are in your hand while the new central government definitely can be of good help if some good planning and change of attitude is guaranteed from your end.

(The writer is a Keralite too although living outside the state for quite a few years now)

Tequila Iced Tea Recipe

6 Jul

It’s FIFA World Cup time and we soccer loving Indians have tough time staying awake for the second match of the day that’s happening post midnight. Some good tea or coffee can help keep your eyes wide open but then they might actually spoil your sleep after the match is over!

Well, I have the right solution which is my latest cocktail experiment – the Tequila Iced Tea!

This simple recipe has the goodness of the tea that can refresh you by right levels and negate a bit of kick that the alcohol adds. And it’s not as bad as a Long Island Tea in terms of the hangover nor it takes away the taste and aroma of tequila – in fact it enhances it, I thought.

tequila iced tea

Ingredients

  • Tequila – 1.5 oz (about 45ml)
  • Lipton Iced Tea Lemon flavoured, chilled – 180ml
  • Lime slices – 2 to 3
  • Fresh mint leaves – 3 to 4
  • Sugar syrup – 1 teaspoon (optional for the calorie concerned)
  • Ice cubes – 5 to 6

(Please note that if the iced tea is not lemon flavoured, you will have to add a tablespoon of lime juice and sugar syrup. The other option is to add half an ounce of sweet and sour mix)

Preparation

As easy as 1-2-3! Shake tequila, sugar syrup and iced tea well. Pour into a 250ml highball glass with lime slices, ice cubes and mint leaves. Stir with a straw and…

…Cheers!

It’s not hard on you and keeps you fresh for the cause.

Oh well, I hope to hold on till the end of Costa Rica – Holland encounter with this one in my hand!

My Stock Portfolio

7 Jun

Ever since I posted my article on Midcap recommendations, I have been getting emails from a few readers asking for stock recommendations, mutual fund ideas, SIP investments etc.

As it is practically impossible to answer all queries by email, I thought of making it simpler by publicly posting my stock portfolio in this post (which I will keep updating)

Note: Before attempting to invest in any of these stocks, I strongly urge you to read through the rest of this post – especially the Disclaimer section.

My Equity Portfolio

* Last updated on 03-Feb-2015

1. Long Term Basket (5+ Years)

* Last action: Booked Profit on Lupin

Stock Name Investment Horizon Status
Axis Bank Long Term PROFIT
Cairn India Long Term LOSS
Hero Motocorp Long Term FLAT
ITC Long Term PROFIT
NMDC Long Term LOSS
ONGC Long Term LOSS
State Bank of India Long Term PROFIT
TCS Long Term PROFIT


2. Medium Term Basket (6 Months to 5 Years)

(# Some of these stocks may be moved to Long Term basket later)
* Last action: Booked Profit on Reliance

Stock Name Investment Horizon Status
Bharti Airtel Medium Term FLAT
DCM Shriram Ltd Medium Term FLAT
JVL Agro Industries Medium Term LOSS
Sharon Bio Medicines Medium Term LOSS
Tata Steel Medium Term FLAT


3. Short Term – Swing Trade Basket (Few Days to Weeks)

* Last action: Booked Loss on Unitech, Entered Astra Microwave, Deepak Fertilizers

Stock Name Investment Horizon Status
Astra Microwave Short Term FLAT
Deepak Fertilizers Short Term FLAT
Tata Tele Service Short Term LOSS


My Investor profile

I am retired Software professional who took an early retirement from the IT industry to pursue a few simpler interests in life. I have been an investor in the equity market for many years but stopped the same just about an year before my retirement due to change in risk profile. However, seeing the new majority government in action at the center (and my own need to build wealth post retirement), I decided to get back to the stock market again to ride the bull run. I intent to build a portfolio of 5-10 stocks in the coming weeks with special focus on mid caps with good valuation that I intent to keep from 6 months up to 5 years. At the same time, I plan to allocate a bigger chunk towards well known large caps and blue-chip companies with very long term view (5-25 years). There’s also some swing trade or short term positions that I hold from time to time.

By the way, direct equities form only about 20% of my overall portfolio due to my investment risk profile. I also do trading in equities once in a while but that’s more for fun. I am 99% an investor (and less of a trader) with medium to long term goals. I am also invested heavily in mutual funds (~30%) and that’s what is giving me real good returns from long term point of view. Having said that, I must say that I have the knack of picking the right stocks at the right time but since I exited them too early, I ended up having limited profits from stocks as compared to my funds. I plan to rectify this with my new approach of having buy-and-forget large/mid caps stocks in one basket, medium term picks in another and swing trade/short term picks in yet another as shown in the three tables here.

Disclaimer

The stocks listed here are actually part of my portfolio and it doesn’t necessarily mean a recommendation to your investment goals. Further, here in this forum, I will NOT be discussing why I bought certain stocks, when I bought/sold, target price etc. All financial details, disclosures, news and research reports of the stocks mentioned here are available on portals like Bombay Stock Exchange or Moneycontrol.com. Hence, you are requested to do your own research and adjudge the suitability of the stocks mentioned here for your kind of investments.

The long term portfolio mentioned here may not be of interest to many people who are in the look out of quick bucks from the stock market. However, some of the stocks mentioned in the short to medium term portfolio (second table) may interest some of you.

Further, I am not a qualified Financial Adviser or portfolio manager to help you with your investment needs. Any loss or gain that may be resulted from investing in the stocks mentioned here may not be attributed to me.

Good luck in your equity investments!

Idiots in Indian Department Stores

13 Apr

(Note: This is the edited version of my recent facebook rant)

On a daily basis we get to see a lot of unethical behaviours in public places in India. Department stores – even the up market ones in our cities – are no exception in this regard either.

The following are some of the common scenes at super market check-out counters in Bangalore and perhaps elsewhere in India as well. On your bad day, you get to see all three of these idiots at once – just like I experienced earlier this week.

IDIOT #1 is being attended by the tardy checker. When he has to pay his bill of around 2000 rupees, he first gives 1000 rupees in currency and pulls out two or three SODEXO pass books in the lowest possible denominations. He then starts tearing a few from each book, counts them, re-checks twice and sees that it’s not sufficient. He checks his wallet again for change, finds nothing and ask his wife – who has already proceeded ahead – for another 200! And you know how long it’s going to take further from that moment. That’s a good 5 minutes per customer, Thank you idiot!

IDIOT #2 is a lady, right behind the first character, who seems to be stocking up supplies good enough for 3 months for all famine hit regions in Uganda. While she’s about to shift her things from the shopping cart to the counter, she gets a call on her smart phone which is lying somewhere in her Santa bag. With great difficulty she finds it, swipes thrice to pick the call and in the process forgets the priority job. When the checker reminds her twice, she relents but with the phone in right hand, starts transferring the shopping cart items one at a time using her left hand. Needless to say, in between the call she pauses the left hand task to pick an argument on the phone. At the end, she almost matches the record set by the first idiot. Wait, is she pulling out the Sodexo passes too? What an irresponsible idiot!

IDIOT #3 is nowhere in the scene so far. But when it’s your turn and when the checker has almost started attending you, this idiot appears from nowhere and utters “Only three items saaar, Can I? “. One can understand if it’s an old person or physically challenged individual but hey, that’s not the case! It’s just another idiot who has not even learned what a ‘Queue’ is forget alone the sign boards there in. And in all probabilities, you must have seen the same idiot skipping the queue at the vegetable weighing/tagging counter as well a short while ago. What a PITA (Pain In The …)!

Thank you Idiots for making my day!

sigh…