Small Cap Investors: Looking for next multibagger? It may be right in front of you!

With increasing retail participation in Indian equity market, there is a strong inflow into small cap universe. Such is the impact that small caps have beaten large & mid caps, second year in a row. Most people have jumped in this narrow space to search for next multibagger stock. While it is difficult to spot a multibagger from pure data analysis, it can be little easier if you are actively taking a note of economic trends around you. At AI, we are sharing our view & personal experience on this.

When I was in my teens in 1990s, I used to notice a lot of brands. Kids & teens are more receptive to branding as compared to adults. I had heard of sensex in news channels & had a very faint idea about investing. Back then, during the construction of our house, I noticed brands like ACC, Sintex, Fevicol & Asian Paints. Later, it was too late when I realized that each one of these stocks have turned out to be a multibagger & had I invested Rs 1 Lakh in them, I would have become very rich and possibly a crorepati without doing anything (it is the hardest part!). Some stocks like Asian Paints have given over 100 times return until now.

This taught me a very important lesson that all of us are a part of this huge economic game which is being played around us. Each one of us is an active participant and together we make this economy. This draws me to a point that if we are in this game & playing it everyday, why don’t we know which is the next multibagger? This thought changed my views towards shopping forever & helped me grow as an investor. There are two things which are key here, one is large amount of time required to remain invested & second is identifying such trends well in time. We should keep an eye on any new trend that may be unfolding around us. It is possible that we miss few trends especially in B2B (Business to Business) segment since it is never played in front of us. But for us to create a lot of money, only a couple of multibagger ideas are good enough to multiply our wealth. It is also important to note that all new trends may not last long or may not have potential to scale up.

 

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Before you commit money to any such trends, you need to do your due diligence. Remember all that glitters is not gold. Over the years, we have seen trend like CDMA mobile service from Reliance Communication which has only destroyed investor’s money over the years. Renewable energy stocks like Suzlon which was another new trend in 2006, only to die equally fast. At AI, whenever we come across any new trend in Indian economy, we take it for deeper evaluation to understand if this business is really profit making, what is the scale of this business idea, how much margins it can sustain and more qualitative filters to arrive at next multibagger stock idea. While no process is fool proof but with more rigors, probabilities are definitely higher. Keeping this in mind, we have developed our own proprietary small cap stock evaluation tool TCIGS® (Tiny CAPS Investment Grade Scorecard). Click here to find out more on this service.

 

 

We are happy to share that recently, we came across such a trending idea in textile segment. It is a small cap stock but making big strides towards capturing market share from industry leaders. This company operates in high margin kids garment sector under it’s own brand & has company operated outlets which are spreading aggressively across the country. We recommended this stock in our MultiCAP Multibagger portfolio as part of June 2017 report replacing another stock. For more details click here.

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