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)
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!
Updates
June 01, 2015:
1. Chaman Lal Setia Exports: Hold
2. 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.
Hi, what are the parameters made you suggest Jyoti structures. It has debt to equity ratio of more than 1 and the running year EPS is negative.
You are right. The last two three quarters of this 40 year old EPC company has been bad. However, the recent QIP and higher margin executions, I hope they get enough cash to operate and turn around soon.
In worst case… i.e. if the turn around doesn’t happen in the next two or three quarters, it might end up like Suzlon. It’s a calculated risk! And almost, all small cap companies, debt burden on book is the main concern.
sir.
LLOYD ELECTRIC is trading at very very cheap valuations compared to its competitors.
Look at the following figures.
Company Name PE
Whirlpool 70.81
Symphony 78
Hitachi Home 390
Blue Star 38
IFB Industries 94.22
Lloyd Electric 6.16
what is your opinion sir, whether lloyd electric also will get rerated may not be those cray numbers as other companies at atleat a PE of 15 to 20 ?
promoters are raising stake, brand builing is happening through advertisng (lloyd is world cup sponser). sale through flipkart and snapdeal.
FII are buying stake, recently in jan 2015 orange mauritius bought 6% at Rs138 .
sales increasing, foriegn subsideries also dooing good bussiness.
will it get better valuations in future?
Is it a good bet?
Thanks
The problem I see with the company is how dubiously they move their money around other listed businesses like Fedders Lloyd and the debt on the balance sheet. Compared to their peers their operating cashflow shows negative numbers and no fund houses are investing in this company. Hence, I would avoid investing in this. I may buy something like Whirlpool or Hitachi on correction.
What is your take on Kokuyu Camlin? How much will it go? It is now at 101.7. Do you think it can be a possible multibagger? Or do you suggest me to sell Camlin and invest in to something else?
No idea about Camlin
Sir,
At current scenerio of the market , what are the small and midcap stocks you suggest to buy. I came to know this site today only. If I have found out in 2013 ,I would
have earned some amount.
Please suggests some stocks for long term investments so that I can earn small amount.
Thanking You
Piyush Modi
The markets are currently highly overvalued. However, some of the stocks that I feel are fairly priced from growth/valuation point of view are:
Midcaps
=======
Atul Auto
Aurobindo Pharma
Avanti Feeds Ltd
Cera Sanitaryware
Kaveri Seed Company
Mayur Uniquoters
Zensar Technologies Ltd
Large caps
==========
Axis Bank Ltd
HCL Technologies
HDFC (Not Bank)
ICICI Bank Ltd
Reliance Industries Ltd
State Bank Of India
Tata Motors DVR
Do your own research before investing in any of them. I have vested interest in the stocks that I talk about 🙂
SIR,
MAY I KNOW YOUR VIEW ON FCEL ?
I BOUGHT 2000 SHARES @ 19.
DO NOT KNOW ANYTHING ABOUT FCEL EXCEPT ITS KISHOR BIYANI’S COMPANY.
WILL IT GET BETTER VALUATION IN FUTURE ?
THANKING YOU
NITINRAJ
No idea. I do not follow this stock.
Hi
Any idea about the following stocks
Cummins CMP-998 Tgt 1300 Duration-1yr
BrookLab CMP-89 Tgt 120 and above
HaldynGlass
SAINTGobain
CadilaHealthCare CMP 409 Tgt 700
Castrol CMP 490 Tgt 700 {as industry picks up this will grow}.
Wipro 580 Tgt 700.
Banaras Beads {unique monopoly}.
Nelco {defence player in long run}.
Mercator , SCI {Shipping turnaround}.
Tata Chemical 480 Tgt 600 {solid player in chemical turnaround}.
Crompton Greaves Tgt 230
Buy BHEL 170? for LT. {2-3 yrs}
Ujjas Energy.
Should i exit in
Mannapuram Finance buyed at 25 CMP @40.
Its urgent please share your thoughts also you can recommend one.
No idea buddy. I like names like Cummins, Cadila and have shortlisted them for long term investment. Used to track Manappuram, Castrol, BHEL etc but not any more.
Sir pls give 10 stocks of 2016
Sir pls reply
I haven’t found anything new than what’s listed (long term) in the comment section. I have recently bought ‘Ballarpur Industries’ as a risky-reward bet. They are selling off their loss making Malaysian arm and hence should turn positive, I believe. But please do your research.
Could you please share your views on Muthoot Capital
Sir,
I M NEWCOMER IN THIS FIELD. PLEASE HELP.
Sir I want to know the next multibagger shares I am newcomer in equity market I can invest only 8000/ month thanking you sir
Perhaps, you should invest in Mid/Small cap mutual funds in a SIP manner. That may work out better for you in the long run than risky multibagger stocks.
Can you pl suggest the name of a small cap, mfg co with flavor of FMCG,DE 0.30%,ROE 39% and ROCE 49% as on 31.3.2016,Dividend pay out ratio 15%,started giving div wef 2014,Av ROE 25% for last 5 years…thanks and regards
Sounds like a techie and screener fan. Please spell it out 🙂
Hello Ajith,
Can you please suggest few small cap stocks for longter investment and also please educate me on how to pick small cap stock,
Thanks in Advance.
Hello Ajith,
Can you please suggest few small cap stocks for longter investment and also please educate me on how to pick small cap stock,
Rahul, I don’t see any reasonably fairly valued Small Caps at the moment. All good ones have run up like crazy. Will post, if I spot any. It’s a continuous learning for me as well, so there’s no real formula that I use other than seeing the growth numbers and relatively low valuations vs potential. I use sites like screener.in to check these numbers.