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Thursday, June 17, 2010

Value Investing in MidCap and SmallCap universe...

Here is some interesting stats with regards to Indian market. It has been observed over a span of 10 years that the mid and small cap stocks is the place where there has been the greatest increase in market capitalization. ie. Maximum potential for making money by increase in share price.

This is listing of stocks as per market capitalization..
- If you had bought the top 50 stocks by market capitalization (that would generally mean the blue chip stocks) you would have made the least amount of money.(26.7 %CAGR)
- If you had bought the cheapest stock ie stocks which are below the rank of 301 .. you would have made the most money (48% CAGR)

what are the important factors that we can infer from this stats..
1. Large Cap/Blue chip stocks are well known names and their growth paths are well documented and a fair bit of growth projections are already priced in.
2. Small cap stocks are generally the least known ones and here is the place where you can find multibaggers which are not discovered .. over a period of 10 years these stocks will be discovered and we can expect great returns.
3. This is just a general categorisation based on price (Market Cap) .. so we can also concur that its important to get the right price .. infact discounted prices are more easily available at the bottom of the heap rather than at the top of the heap.

Conclusion: Add a pinch of fundamental analysis and if you can find deep discounted stocks which have a history of growth, dividend paying and not yet discovered ..(no FII/DII Investment) you can sleep in peace for a decade and still you will come out with flying colours beating the NIFTY hands down. Of course all this has happened over a period of steady growth enjoyed both by large cap and small cap companies.


My Own World.......In My Own Words said...


I would like you to have a look into "Arman FInancial and Ganesh Polytex" One seems to be specualative driven and the other Growth Driven... Could you please throw light on these scrips so that many investors (beginners) like me will be saved from duping/fraud companies...

Looking forward to your posts.



What'sUp Prahalad said...


I have evaluated Arman and Ganesh and both of them are a clear Avoid..

There is no value left in the table for investors who buy these stocks.. also the downside risk exist.


=happy investing