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!
June 01, 2015:
1. Chaman Lal Setia Exports: Hold2. Gujarat Foils: Hold 3. Goodricke Group: Avoid/Exit (Growth outlook not exciting, Exit on any rally) 4. Goodyear India: Buy in the initially recommended range only 5. Hinduja Global Solutions: Hold 6. JVL Agro Industries: Hold 7. Jyoti Structures: Avoid/Book loss (No debt restructuring seen, Interest coverage poor) 8. Noida Toll Bridge Company: Buy in the initially recommended range only 9. Nucleus Software Exports: Book Partial Profit 10. Stylam Industries: Buy in the initially recommended range only August 13, 2015:
1. Chaman Lal Setia Exports: Book Partial Profit (Stock already doubled from the recommended date and tripled from the recommended price!)2. Gujarat Foils: Hold 3. Goodricke Group: Exited (See previous update) (Growth outlook not exciting, Exit on any rally) 4. Goodyear India: Buy in the initially recommended range only, Hold if you already entered 5. Hinduja Global Solutions: Hold 6. JVL Agro Industries: Hold 7. Jyoti Structures: Exited (See previous update) 8. Noida Toll Bridge Company: Hold 9. Nucleus Software Exports: Booked Partial Profit (See previous update), Hold the rest 10. Stylam Industries: Buy in the initially recommended range only, Hold if you already entered (Stock more than doubled from the recommended date/price)
Note: Due to lack of time, I will not be providing any more update on this particular list. The readers are expected to take further research based action on their holdings.