3 Trending Stocks to Crash up to 50%?

In the fast-paced world of stock markets, investors are constantly on the lookout for opportunities that can yield significant returns.

However, with high reward comes high risk, and not all stocks are poised for growth.

As we approach the final stretch of 2024, a growing number of analysts are warning that certain stocks could see a sharp crash, potentially dropping as much as 50%.

These stocks, often hyped due to their recent momentum or inflated valuations, may be vulnerable to factors like economic downturns, poor earnings reports, or industry-wide disruptions.

A lot of investors are lured into buying stocks of companies that are trending in the news due to their strong price momentum and high growth prospects.

While there is no theory to prove that investing in high momentum stocks is a bad idea, however investors must be watchful about signs of reversal in the trend.

There could be multiple signs to signal a trend reversal such as insider selling, large qualified institutional placements, quarterly results coming in below expectations, etc.

In this article, we will explore three such highly trending stocks where everyone promoters and institutions are reducing their stake gradually which may suggest a potential trend reversal to the downside.

Read on...

#1 PG Electroplast

PG Electroplast Limited (PGEL) is the flagship company of PG Group.

PG Electroplast was formally set up in 2003 and is a leading, diversified Indian electronic manufacturing services provider.

It specializes in original design manufacturing (ODM), original equipment manufacturing (OEM) and plastic injection moulding, catering to 50+ leading Indian and global brands.

The company's wholly owned subsidiary, PG Technoplast Pvt Ltd manufactures air conditioners, coolers, and components for various consumer durables.

PGEL derives 61% of its revenues from manufacturing products which includes room air conditioners, washing machines and air coolers, 25% revenues from plastic moulding business, and the balance 13% revenues from electronics division where it assembles printed circuit boards for a wide range of applications.

The company boasts of a vast clientele with marquee clients such as LG Electronics, Carrier, Jaguar, Kohler, Whirlpool, Godrej, AO Smith, Acer, Voltas, Blue Star, etc.

PGEL operates 11 manufacturing units across Greater Noida, Uttar Pradesh, Roorkee, Uttarakhand, Bhiwadi, Rajasthan and Ahmednagar, Maharashtra.

It has a capacity of 0.25 mn indoor AC units, 0.2 million outdoor AC units, 25,000 window AC units and 0.12 mn washing machine units per month.

Coming to the financials, PGEL witnessed a strong growth in net sales for half year ended September 2024 at 75%. EBITDA growth for the half year came in at 80.9% with margins coming in at 9.4% in H1FY25 versus 9.1% in H1FY24.

Insiders are gradually selling their stake in PGEL. Promoter holding has come down from 53.6% to 53.4% QoQ, FII's trimmed their stake to 10.7% from 11.1% in previous quarter and DII's also reduced their stake by 0.1% from 9.9% to 9.8% QoQ.

Going ahead, management remains optimistic about future growth, citing strong product business momentum and a robust order book, despite supply chain challenges.

Shares of PG Electroplast Ltd are up 235% in the last year due to exceptional operational performance.

#2 Angel One

Angel One Ltd is a diversified financial services company.

It is primarily engaged in the business of stock, commodity and currency broking, institutional broking, providing margin trading facility, depository services and distribution of mutual funds, lending as a NBFC and corporate agents of insurance companies.

The company's financial products and service offerings include broking services, research services, investment advisory, margin trading facility, loan against shares, distribution of third party financial products and investor education.

Angel One has a total client base of 22.2 mn customers and boasts of an average daily turnover of Rs 44.4 tn.

The company's market share in India's demat accounts and in National Stock Exchange's active client base is around 15%.

Angel One derives 68% of its revenues from gross broking business, 18% from interest on deposits, 8% from ancillary transaction services, 4% from depository business, and balance 2% from others.

In April 2024, the company raised Rs 15 bn through qualified institutional placement for Rs 2,555 per equity share. This money was raised for future growth requirements.

Coming to the financials, Angel One reported revenue growth of 57.4% while the operating profits were up 49.4% for H1FY25. EBITDA margins deteriorated slightly from 41.2% in H1FY24 to 39.1% in H1FY25.

Angel One also saw selling from insiders with promoter stake going down from 38.3% to 35.6% YoY, FII stake going down from 15.4% to 12.3% sequentially, and DII stake going down to 12.7% from 14% in previous quarter.

Going ahead, the management anticipates a rebound from regulatory impacts within one to two quarters, supported by robust customer acquisition rates.

Angel One stock is up 3% in the last one year on the back of robust financial performance.

#3 Bikaji Foods International

Bikaji Foods International is one of India's largest fast-moving consumer goods (FMCG) brands. The company's product range includes five principal categories: bhujia, namkeen, packaged sweets, papad, and western snacks.

Its core markets are Rajasthan, Assam, and Bihar. Its focus markets include Uttar Pradesh, Punjab, Haryana, and Delhi in north India and Karnataka and Telangana in south India. The company also has a strong presence in 25+ countries across the world.

The company has 300+ product baskets under the Bikaji brand. Bikaji derives 68% of its revenues from ethnic snacks category, 15% from packaged sweets, 5% from papad, 8% from western snacks, and balance 4% from other businesses.

The company has 11 operational manufacturing facilities in Bikaner (Rajasthan), Guwahati (Assam), Tumakur held through its subsidiary Petunt Food Processors, and one facility in Muzaffarpur (Bihar) held through the other subsidiary Vindhyawasini Sales.

Bikaji is present in 0.95 m outlets across the country and has 6 depots, 38 super stockists, 416 direct and 1,956 indirect distributors that work with its super stockists, located across 23 states and 4 union territories in India.

Coming to the financials, net revenue for H1FY25 grew 15.6% on the back of strong festive demand in the country. Operating profit also grew by 29.2% during the first half with margins improving slightly from 14.1% in H1FY24 to 15.3% in H1FY25.

Bikaji Foods International saw its promoter reducing stake to 74.9% from 75.1% sequentially. FIIs also trim their stake marginally to 7.4% from 7.5%. DIIs cut their stake to 12.8% from 13.3%.

Going ahead, management noted some urban slowdown, particularly in small pack performance, but remains optimistic due to strong gifting and sweets sales.

Shares of Bikaji Foods International are up 50% in the last year. Also, the stock is down 5.1% in the past 1 month.

Conclusion

In conclusion, while the allure of high-growth stocks with strong momentum can be tempting, investors must approach these opportunities with caution.

The potential for sharp declines, especially in stocks that are overvalued or facing unfavourable market conditions, highlights the importance of due diligence.

Recognising early signs of a trend reversal, such as insider selling, institutional pullbacks, or disappointing earnings reports, can be crucial in avoiding substantial losses.

By focusing on the potential red flags early in the high momentum and trending stocks, investors can avoid accidents in their portfolio thereby improving their long term returns.

Investors should remain vigilant, conduct thorough research, and keep abreast of market trends to make informed decisions.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...