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10 stocks you wish you had bought - Views on News from Equitymaster
 
 
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  • Jun 3, 2009

    10 stocks you wish you had bought

    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 27% since hitting its all time high in January 2008. But do you know that the index is still 259% 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 US$ 10 bn to double fast.


    Source: Yahoo Finance

    But what about a company that has a market capitalisation of just around US$ 0.1 m , or at an exchange rate of 45 to the dollar, just about Rs 37 lac?

    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% in the last 10 years, there are numerous stocks that have churned out returns of more than 10,000% over this period.

    Here are some of them.

    10 best performing stocks over the past 10 years
    Company Name Stock price (June 1999) Stock price (June 2009) Change Market cap (June 1999, Rs m)
    Unitech Ltd. 0.3 93 30900% 3.7
    Kotak Mahindra Bank Ltd. 3.1 660 21200% 113.9
    Matrix Laboratories Ltd. 0.9 209 23128% 3.0
    Gujarat N R E Coke Ltd. 0.2 54 26975% 2.0
    Mercator Lines Ltd. 0.4 73 20206% 1.8
    Praj Industries Ltd. 0.6 115 18225% 2.5
    Anant Raj Inds. Ltd. 0.8 133 17009% 8.2
    Aban Offshore Ltd. 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)

    Seeing this table, you will know pretty rapidly that the best way to make money in the market is to invest for the long term. What this 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 stockmarkets 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.

    This is exactly what we do through our Hidden Treasure service. For instance, rather than tracking the US$ 10/20/30 bn market cap companies, we follow the ones with market caps of US$ 50/100/150 m.

    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.

     

     

    Equitymaster requests your view! Post a comment on "10 stocks you wish you had bought". Click here!

    8 Responses to "10 stocks you wish you had bought"

    Karthik

    Jun 6, 2009

    I presume that the 1999 prices are adjusted for bonus shares, stock splits etc. An footnote in this regard would have helped. For instance, Unitech shares would have multiplied manifold in number considering the liberal bonuses and stock split. As per NSE historical data, Unitech was quoting around Rs.40/share in June 1999. So the 1999 price of Rs.0.30/share is adjusted price.

    Like 

    Raj

    Jun 5, 2009

    I wonder many times about these studies on what they mean...Bottom line, you need to be really lucky !!!!

    Take for example, for next five years subscribe to Hidden treasure it would give you circa 60 recommendations. Not everything will work becasue of the nature of sector they cover, the success of (i mean positive return) is say probably 50%. But one or two of these may give real good return..No doubt about it and such will make to these type of charts.

    But, What is chance of you hitting those shares as you will not buy every share they recommend (unless very affluent in which case, he would never touch equitymaster..my guess).

    Even if one buys a good proportion of the stocks recommended, the stocks that come into such charts and the stocks in red in your protifolio will even out and be happy if you get a good double digit rate or return....

    All in all, if one were to take a pragmatic view, i do not visualise any difference between small, mid and large...If equitymaster were to provide a view say In mid select (for any year), the person has bougth every stock reommended in the year (Mar - Apr) and a subscriber has invested 25,000 Rs in each of the recommendation and held them for one or two years ..what is the return...I think such number will be realistic to achive or else it is only day dream and theory of such returns.

    But all said, these guys are a lot better to other folks in the market..Thats for sure...at leaset they are not near excuberances..

    Like 

    rkajmani

    Jun 4, 2009

    Whether equitymaster can publish the list of such shares recommended by it which have turned multibagger, in full details i.e their date/rate of recommendtion and todays price gain percentage

    Like 

    Ank

    Jun 4, 2009

    Well Great Research!! Guys they just listed the facts here and how can u people expects recommendations from equitymaster ....Just like that what these companies were in 1999 and now where it stands fundamentally.......and you do your own research to find out companies like the above listed 10 companies..

    Cheers

    Like 

    Bala

    Jun 4, 2009

    What I got was - For same investment in small caps, you would be able to get multiple times yr investment rather than 20-30% increase in large caps...there is risk but with good research it can ne mitigate to some extent...! am i sounding like equitymaster sales team...?!!!(lol)

    Like 

    schinnappa

    Jun 4, 2009

    No logic, but mathematics is involved. it is all too well known that, smaller the number higher the percentage, given the same increase in terms of absolute figures.

    Like 

    cmeft

    Jun 3, 2009

    Did Equitymaster recommend these shares at the prices quoted in 1999? At what price has Equitymaster recommended these shares? Only then can we draw a conclusion on your research.

    Like 

    gg

    Jun 3, 2009

    "But what about a company that has a market capitalisation of just around US$ 0.1 m , or at an exchange rate of 45 to the dollar, just about Rs 37 lac?
    It doesn’t take much to double or triple, right?"

    Not the kind of logic I would expect to see on equitymaster...

    Like 
      
    Equitymaster requests your view! Post a comment on "10 stocks you wish you had bought". Click here!
     

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