The Best 4 Small-cap Stocks to Buy - The 5 Minute WrapUp by Equitymaster
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The Best 4 Small-cap Stocks to Buy

Jun 3, 2019

Editor's note: Dear reader, small-cap stocks are back in the news. With Modi's election victory, sentiment has turned positive for this segment of the market. I recommend you listen to our small cap expert Richa Agarwal. She has picked the top 4 small-cap stocks in the market.


Richa Agarwal, Research analyst

I have a question for you.

The BSE Small Cap Index has given a superb annual compounded return of 17.8% over the last 10 years.

If you had to take a guess, adding another year, what do you think its returns are over the last 11 years?

The unfortunate answer is 5.1%.

What is the reason for this unfortunate twist of fate?

Thing is, most people think small caps are either a good place or a bad place to be.

They have an opinion about them one way or the other. Some think of them as a dangerous place to be avoided at all costs.

Others think of them as a wondrous place to get rich quickly.

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My opinion?

The most common mistake is to classify small caps one way or the other. They swing both ways.

There are times when small caps are the best place in the world to make money.

Then there are other times when they are the not such a great place to be.

The reason is valuations - or in other words, the price level of stocks.

For example, at the start of the year 2008, small caps were not a very nice place to be.

Stock prices were soaring and investing in them was fraught with risks. The small cap market of the time was a bad place to be indeed.

No wonder then that the small cap index has delivered a measly 5.1% since then 11 years back.

But just one year later, at the start of 2009, stock prices had fallen big time and small caps were trading at attractive valuations.

Thus, the superb returns of 17.8% over the 10 years since then.

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In Modi's New India Invest in These Kind of Companies

Have you ever thought why people are subscribing to Netflix, Hotstar, and Amazon Prime instead of buying a DVD?

Why people are listening to music on Spotify, Saavn, and Gaana instead of buying a CD?

Why people are shopping through Amazon and Flipkart instead of going to stores?

Why people are using Uber and Ola instead of using their own cars?

These companies are making huge profits by scaling their business everywhere and killing competitors.

And investors love such companies.

That's why there is quite a shift from the traditional way of doing business.

Want to know which Indian companies are using the same strategy to grow their business?

Click here...
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Today, despite the post-election rally over the last few days since the Modi government swept the nation in its fervor, small caps are quite an attractive place to make money. That's because the index is still down quite a bit since its high at the start of 2018.

The falling stock prices have meant that many small caps I refused to touch last year in my small cap recommendation service Hidden Treasure have now turned into strong buying opportunities.

Hidden Treasure is now replete with recommendations!

In fact, I have written to you about how I have 4 fundamentally strong small cap stocks in the 'Buy' zone for you to get in now before they begin to soar.

I believe the market is offering many strong opportunities in small cap stocks right now.

Now is indeed a wonderful time to buy small cap stocks.

Warm regards,

Richa Agarwal
Richa Agarwal
Editor and Research Analyst, Hidden Treasure

PS: Our small cap expert Richa Agarwal believes this is the time to buy small caps before they run up. Get Richa's 4 best small cap stocks report now.

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