Before you get all charged up on reading that we're about to talk about the 10 stocks that are the best in India, wait! How can we be talking of the 'best' stocks when we have seen the 'worst' all around us, for so many months now?
You know for a fact that the BSE-Sensex is still down 25 per cent since hitting its all time high in January 2008. But do you know that the index is still 259 per cent up since its levels 10 years back?
So just by staying invested in the markets, you would have multiplied your money 3.5 times over.
And this is just about the broader index, which is made up of large cap stocks that anyways do not rise in multiples. After all, it's difficult for companies with market capitalisation of $10 billion to double fast.
But what about a company that has a market capitalisation of just around $0.1 million, or at an exchange rate of 45 to the dollar, just about Rs 37 lakh?
It doesn't take much to double or triple, right?
Yes, it doesn't. Or what would justify the fact that while the Sensex has returned 259 per cent in the last 10 years, there are numerous stocks that have churned out returns of more than 10,000 per cent over this period.
Seeing the table below, you will know pretty rapidly that the best way to make money in the market is to invest for the long term.
What the table doesn't show is that all these stocks have been volatile like any other stock in the market, and you need to recognise that volatility is part of the ride.
Now, when you commit to the long term, you quickly discover that the stocks that offer the best returns today were not really the well-known, widely owned names of those times. How many of you had heard of Matrix Labs or Praj then? Or for that matter how many really took Unitech seriously?
So, the trait that sets these stocks apart is that they were small companies with very small market capitalisation. And although companies such as Unitech, Matrix Labs and Praj are much bigger in terms of size and market cap today, tracked and owned by big institutional investors, there are quite a few small cap stocks waiting in the wings, doing all they can to become the next multi baggers.
So you now know for the fact that finding small stocks like the ones mentioned above is a clear cut way to make tremendous wealth from the stock markets over the long term.
You just need to invest in small companies that enjoy rising demand for their products, have great business models, firm financial foundations, and straightforward and visionary management teams.
10 best performing stocks over the past 10 years
| Company Name | Stock price (Jun '99) | Stock price (Jun '09) | Change | Market cap (Jun '99, Rs million) |
| Unitech Ltd [ Get Quote ]. | 0.3 | 93 | 30900% | 3.7 |
| Kotak Mahindra Bank Ltd [ Get Quote ]. | 3.1 | 660 | 21200% | 113.9 |
| Matrix Laboratories Ltd [ Get Quote ]. | 0.9 | 209 | 23128% | 3.0 |
| Gujarat N R E Coke Ltd. | 0.2 | 54 | 26975% | 2.0 |
| Mercator Lines Ltd [ Get Quote ]. | 0.4 | 73 | 20206% | 1.8 |
| Praj Industries Ltd [ Get Quote ]. | 0.6 | 115 | 18225% | 2.5 |
| Anant Raj Inds. Ltd. | 0.8 | 133 | 17009% | 8.2 |
| Aban Offshore Ltd [ Get Quote ]. | 6.0 | 956 | 15833% | 37.7 |
| K S Oils Ltd. | 0.5 | 62 | 12220% | 2.5 |
| Era Infra Engg. Ltd. | 1.01 | 119 | 11682% | 3.5 |
Source: Prowess (BSE-500)
This is exactly what we do through our Hidden Treasure service. For instance, rather than tracking the $10/20/30 billion market cap companies, we follow the ones with market caps of $50/100/150 million.
So take this lesson from the market's 10 best stocks, and put it to work in your portfolio by buying small cap stocks.
Of course, you need to adhere to your risk profile (small caps are high risk stocks if your investment horizon is not long) before taking any such action.
No comments:
Post a Comment