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The Equitymaster Research Digest

A Microcap Went Up Like a Rocket, A Hidden Treasure Met Target Price
Apr 5, 2016

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After falling almost 12% in the first two months of 2016, the BSE Sensex recovered 10% in the past month. So what are we doing now? Exactly what we would expect you to do if our roles were to be reversed. We are checking if the sharp up move in prices have made any stock valuation ripe for booking profits. My team members Rahul and Richa sent you two urgent mailers yesterday about stocks that could help you pocket some gains right away.

Now, not many of you know that my colleague Rahul Shah has a very good sense of humour. He rarely shows that in his writing though. But when he wrote to the subscribers of Microcap Millionaires yesterday that he had caught Mr Market napping in February 2015, he was not joking. Instead he was recounting the story of a little known microcap stock that had risen like a rocket in the past month.

This little known tiny company was trading at a huge discount to its book value, 50% to be precise, almost all of last year. When Rahul and his Microcap Millionaires team looked at the stock's long term fundamentals, they had a strong feeling Mr Market is really sleeping at the wheel. While the company's profits were volatile, it had never made a loss in the 18-long years. What more, its balance sheet was pristine with hardly any debt on it. The more they looked at other factors, the more they got convinced the stock is worth at least book value if not more.

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