This does not constitute investment advice. Returns mentioned herein are in no way a guarantee or promise of future returns.
Stock market investments are subject to market risks.
In Unusual and Little Known
Multiply your money in the next 4-5 years...
And these are just a few of the MANY we wish to
reveal to you over the next 1 year!
Consider the following investment scenario for a moment...
On the 15th of this month, you receive a recommendation from Equitymaster for a relatively unknown and under-researched small cap stock.
This stock may not be talked about much in the media, your stock broker may not have enough information on it, and it may not be the focus of any discussion with friends.
But still, largely because it is Equitymaster that's recommending the company, you decide to play it safe and invest a tiny-winy portion of your money in it. You know, just in case.
And then, silently the company continues to grow behind your back.
As you grow older, the company also grows old with you... moving up in value and price -- doubling, tripling, and quadrupling during this period.
Then one day in the not so distant future, when you've probably even forgotten that you own shares of this "once unknown" company, it surfaces as one of the leaders in its industry...
1,000% or More Effortlessly!
Is something like this really possible?
Yes, it certainly is!
In June 2002, Shriram Transport Finance Co. Ltd. was a little known small cap stock available for just Rs 11.8 a share.
Not many people expected it to grow the way it has, and therefore not many bothered to invest in it.
But by cashing in on the increased need for commercial transportation and coming up with a business model that set it apart from all its competitors, the company succeeded in growing its business rapidly.
As a result, its stock price increased from Rs 11.8 in 2002 to Rs 528.5 in June 2012. And those who invested in Shriram Transport in 2002 ended up making a whopping 4,397% on it till 2012.
And this is not a one-off case either. Take a look at the table below...
Now before we proceed, let me clear two things:
First, none of the above stocks were penny stocks. The stock prices of June-2002 have been adjusted to account for bonuses and stock splits over the years, which might make them appear like they were penny stocks.
And second... none of these stocks were Equitymaster's recommendations. I'm merely giving them as examples to show what's possible with small cap stocks in the long run.
Later on in this letter I will actually share with you some small cap stocks that WE recommended, which have made amazing returns such as 247%, 432%, 850% and 288%... in just around 2-3 years!
But getting back to the original point...
that set up huge profit windfalls for their investors?
Though not many people knew, all these companies were already leaders in their own sub-niche or the small area of the industry they operated in. And they were much better prepared than their peers for managing explosive growth in the years to come.
Hence when the demand for their product grew, they were able to provide a much better service than all of their competitors and quickly established themselves as the go-to guy in their niche.
And the rest as they say, is history.
It's true! Most of the companies you saw in the table above are pretty well known in India today. But at one time they were not so well known.
They all started out small, established themselves as the leader in one main area where their expertise lay, and then diversified into other areas.
Imagine how much you would make if you found out all such high-potential small companies early, and invested in them while they're still in their infancy?
Given the uncertain nature of small caps, we cannot and should not expect every small cap stock to be an out-and-out winner.
But we know that small caps are fast movers, and that the movement quickly shows in their stock price..
So assuming you manage to pick 5 'reliable' small cap stocks, even if just 2 out of the 5 manage to endure the market uncertainties and turn multi-baggers, you will be rich!
In fact, one such exciting small company is up for grabs right now...
This company is one that manufactures a small but extremely important component required in the manufacturing of steel.
As you may know, the global steel consumption has been on a rapid rise lately. And this demand is only going to get even greater from here on.
So the best way to solve this problem is to produce more quantity of steel more efficiently and cheaply.
And the component that this company produces helps to do just that.
This company is the fifth largest manufacturer of the component in the world, and the largest player in India.
It has clients in over 50 countries. And over the last five years, its net profit has grown at 23% annually.
Simply stated, its business is highly profitable and growing fast, and we see no reason it shouldn't remain this way long term into the future as well.
What's more, you can get into the stock at an attractive price as of now.
Additionally, as an icing on the cake, this company pays dividends consistently too.
So it's a mix of returns and dividends for you when you invest in this stock.
Grab this stock now, and you could double your investment for the next 4-5 years.
I know you are very eager to find out more.
Well, your wait is about to get over.
We've included full details about this company in our new report titled, "Steady Income Smallcaps".
contained in that report. . .
You see, the special report also contains details of two more opportunities that could grow your wealth in the next 4-5 years.
Here's a brief preview of these two opportunities:
This is a small private sector bank you and many other investors have probably never heard about.
But big institutions like LIC and a couple others have already acquired a large stake in it.
And this shows how confident they are about the future prospects of this bank.
This bank was started 107 years ago in a sleepy and dusty town of Tamil Nadu. Since then it has grown to be ranked among the most profitable and shareholder friendly banks in India today.
You might be wondering -- if this bank is really so good, why is it still a small cap?
Well, this bank had made a conscious decision to remain small.
And it is this very strategy that has paid off BIG time for the bank and its shareholders... and allowed it to remain profitable throughout its history!
In fact, in the last 10 years, the stock has multiplied by around 17 times!
What impressed us about this bank is the management's faith in its conservative business model. Its reluctance to chase market share like its peers is its plus point.
In not spreading its business to risky financial products like personal loans and credit cards, this bank has consciously chosen to stay apart and focus on its main strengths, which are:
We believe this bank could benefit highly from micro lending and rural banking.
Apart from this, the bank is also a trusted financer for small and medium-sized companies in the region, and has built long-term relationships with many of them. This has further given the bank the potential to penetrate into new under-banked locations in association with its clients.
A stable management at the helm has ensured long-term vision and good execution capabilities.
And just like in the previous stock, this bank has also issued dividends, in fact nonstop for over 100 years now!
To sum up, we believe this stock has the potential to multiply your money over the next few years too.
Our third company has a presence in multiple industries.
First off, it is at the forefront of what we can call a second revolution in India's agriculture.
Its fertilizers business offers some very good products to raise farm output.
And it is also working on an initiative that aims at radically changing the way crops are produced and sold in the Indian and export markets.
But the big thing is undoubtedly its chemicals business. Here, the company leads the market in some chemical categories and has seen strong growth in the past.
Some of its best-selling chemicals find key usages in the mining and pharma industries.
All this helped the company grow its sales and profits strongly in the past. In fact, its sales have multiplied by around 2.7 times in the past five years. Net profits have multiplied 2.4 during this period.
Further, its operating margins have averaged around 20% during this period, amongst the highest in the industry.
So we expect this stock to be a 2-bagger over the next 4-5 years.
And this company too, like the other two, is a consistent dividend-payer.
And we'll give you the report for free.
Yes, I said FREE!
All we ask in return is that you try our Small Cap recommendation service, Hidden Treasure, WITHOUT RISK for 60 days.
The usual price of Hidden Treasure is Rs 5,000 per year.
But if you sign up for Hidden Treasure before 11.59 PM on 15th September, we'll give you 3 years of Hidden Treasure for just Rs 4,950.
Which means that you'll be getting the 2 additional years of Hidden Treasure subscription absolutely FREE if you sign up now.
So why are we doing this now?
Because we want to help you pick the right small cap investments... reliable companies like the ones we discussed earlier... and also track them for the next 3 years.
And the current market has quite a few opportunities like that. Hence, we decided to make you this offer.
But you don't just have to take our word for it and believe our service is good.
There's also a 60-day, 100% moneyback guarantee on this offer.
So, you can sign up at this highly discount price and test-drive Hidden Treasure for a full 60 days.
If you don't like it, get in touch with us before the 61st day, and we'll refund the entire fee you paid. That's a promise!
But you must act quickly.
This offer will close on 11.59 PM on 15th September.
After that, you will no longer get the 'Steady Income Smallcaps' report... and the subscription price of Hidden Treasure will also go back to the usual Rs 5,000 for 1 year.
But first, what exactly is Hidden Treasure?
For Ridiculously Low Prices
Did you ever find yourself thinking, "I wish I had invested in Pidilite while it was still young?" Or even in Titan for that matter?
These were once-unknown-small companies that have grown rapidly in the last decade to become household names in India today.
But there was no way you could have known that sooner... until now...
Through Hidden Treasure we're providing you opportunities like that today.
The stocks we reveal through Hidden Treasure are companies that are either under-researched or not covered by other stock brokers and research firms.
There's no other authentic source of LONG-TERM recommendations on such companies. And whatever else is available is biased.
I understand that small caps may not comprise a big portion of your portfolio. But that doesn't mean you don't need to think about them at all.
This small part of your portfolio does the KEY job of maximizing your returns...
In Choosing Your Small Cap Stocks
We launched Hidden Treasure in February 2008 with a view to provide profitable Small Cap recommendations.
But "profitable" doesn't necessarily mean 327% returns in one week.
We have always said and still say that you should look at small caps from the long-term perspective.
The stocks we recommend through Hidden Treasure are strong companies and we recommend them not because we believe they will flourish in a month or two, but over a minimum period of 4 to 5 years.
We reveal reliable small companies through Hidden Treasure as and when they're available at a bargain... which gives you the opportunity to snap them up early and set yourself up for huge gains when these stocks soar.
However, considering the risks that small companies carry, you should realistically not expect each and every recommendation to be an out and out winner.
Plus, whenever the market crashes, small caps are the first to bear the brunt of it. So risk taking IS required to a certain extent when investing in small caps.
I just want to make sure you understand that.
By Subscribing to Hidden Treasure. . .
For starters, on the 15th of every month we will notify you of an exciting small cap opportunity.
One of the biggest reasons for us to recommend this stock was the resilience we thought the company's business model had - to face the economic slowdown.
We believed that this resiliency to slowdown, which was on the basis of the important role it plays in its clients' overall scheme of things, gave the company a significant advantage over the long run.
We also believed that after a near about 70% fall from its all time high levels, the stock presented itself as a very attractive investment proposition to investors (the stock was then trading at just around 3 times its trailing 12-months earnings).
While the company proved our 'resiliency' assumption right in growing its sales and profits by 62% as compared to the previous year and 39% in a bad year like 2008-09 (and then by 30% and 19% respectively in 2009-10), the stock rose by 247% till we recommended a sell on it.
In fact, the stock rose even further after we recommended a SELL on it.
But we believe in getting out when it's still safe and not try to time the markets as that could sometimes have devastating results since these are small cap stocks we are talking about.
Also, while sharp gains like these in such a small time period might make anyone happy, it does not excite us much.
Why? For the simple reason that we see such sharp moves as simply aberrations and not a norm.
You see, in some situations the markets get into action and bump up the stock price sooner than expected. In other cases, a market crash leads to the stock price falling rapidly.
What you need to understand is that while small caps can make you a lot of money in the short term, they can also lose you a lot in a similar timeframe.
Thus the idea is to buy into quality small cap stocks with an aim to hold them for 5 to 10 years. It is in this long timeframe that you really benefit from the growth of small companies that you invest in.
We had recommended this small-size IT services and solutions company in November 2008.
The company, providing technology solutions to multiple industries like banking, financial services, insurance, telecom, healthcare and retail was doing reasonably well then.
One of the foremost reasons this stock appeared as a golden opportunity to us was that it was then trading at 63% of the company's net current asset value, which provided a big margin of safety for investors.
Another important reason for us to recommend the stock was the strength of its business model to weather the downturn. The company had been plugging the gaps in its offerings through a string of acquisitions, all at fair valuations.
And this stock too has given a 432% return since we recommended it!
And that's not all!
...and another that gave 288% till we gave a SELL on it.
We've been in this industry for a LONG time. In fact, we were the first Indian entity in the finance domain to venture onto the Internet.
And now, we have completed over 16 years online.
accurate more often than not . . .
You see, most investors take the return on stock investment to be the key yardstick while deciding whether or not to buy a stock.
But legendary investors like Benjamin Graham and Warren Buffett have always maintained that 'evaluation of risks' should be given as much importance as 'estimation of returns'.
It is in this direction that our research team has developed the Equitymaster Risk Matrix or ERM which helps quantify the risk attached to a stock. The ERM is an integral part of our stock selection process.
Look, we all know that no two large, mid or small cap companies have exactly the same degree of risk. Even if they operate in the same sector, their business dynamics, managements and valuations are different.
That's why it is important to evaluate the risk involved in each case separately.
Now the ERM is a matrix designed to evaluate the key risks attached to a business, it financial history and its management. It ranks not just the company but also the sector in which it operates based on its relative risk profile.
our subscribers money. . .
When markets were at their nervous best in late 2008 and early 2009, our Buy recommendations on Zylog, eClerx, and KPIT Cummins were backed by our confidence in the low risk profile of these companies as shown by ERM.
As expected, these stocks went on to multiply our subscribers' wealth several times.
And it was THIS risk matrix that helped us identify the best stocks to recommend to our subscribers when several of them were looking attractive.
It did so by acting as one of the tools used for eliminating the bad stocks, so that we recommend only the good stocks.
But that's not all...
Again, it is the same ERM that we rely on to quantify the risks we believe subscribers need to be cautioned about while recommending a 'Sell'.
Given the complex operating environment that Indian business are aspiring to be a part of, we believe the ERM can offer immense value to investors seeking to maximize their long term returns by without taking on too much risk.
Sometimes we make mistakes too
Like we made a mistake in recommending MIC Electronics in July 2009...
The key reason for our belief in the company was its prominent presence in the fast growing LED lighting space, where it is a market leader in India. The company had grown strongly in the past and its balance sheet also appeared good.
However, despite our good expectations, the company has failed to capitalise on the growth opportunity. In fact, it recently lost a major order from one of its key clients.
Of late, we have also had some issues with the company's disclosure levels.
Over that, the management's silence on the several issues facing the company has been deafening.
Given this, we recommended our subscribers to sell the stock, at a loss of 45% from our recommended price.
What this instance has done is that it has made us even more careful now with respect to our Hidden Treasure recommendations.
So like I said initially, you can't expect every small cap stock you invest in to be a winner. But even if a few of them succeed in enduring the ups and downs and turn multi-baggers, you'll make back whatever you lost in the other stocks... plus a lot more!
And here's what else do you get by subscribing to Hidden Treasure...
Our Hugely Popular Asset Allocation Guide
Now there is a very important thing you need to know while investing in stocks... And that is asset allocation.
Asset allocation is the key to having a well diversified portfolio. It is what protects your investments and ensures their growth irrespective of the changes in the market.
A well diversified portfolio is one where your stocks are properly spread out across different market caps and different sectors.
Our extremely popular asset allocation guide will help you understand the ideal mix of stocks in your portfolio, so that you can minimize your losses and maximize your small cap returns.
And you can get this guide absolutely FREE when you subscribe to Hidden Treasure now.
The Portfolio Tracker is an online utility that helps you track all your equity and mutual fund investments in one place! It's online, and is available to you 24 hrs a day.
You just have to enter the details of stocks or mutual funds owned by you ONCE... and Portfolio Tracker will show you what your entire portfolio is worth AT THAT MOMENT anytime you log into it.
But what makes the Portfolio Tracker the indispensable tool that it is are the intelligent reports that come along with it.
The Portfolio Tracker usually costs Rs 330 for a year. But by subscribing to Hidden Treasure, you get it absolutely FREE.
The Daily Reckoning . . .
Now you can read what knowledgeable investors across the globe read every single day for global market analysis and investment ideas.
At One-Third of the Actual Price!
A year's subscription to Hidden Treasure usually costs Rs 5,000. But if you act now before 11.59 PM on 15th September, we will give you 3 Years of Hidden Treasure subscription for Rs 4,950 only!
Act Now and You Also Get Another Special Report
"Recession Proof Stocks" Absolutely FREE!
The truth is, nowadays the market keeps jumping up and down constantly for one reason or another.
In such a scenario, keeping a constant track of the movements and planning your investments accordingly can be very stressful.
The only solution is to invest in companies which are bound to rise regardless of whether the economy booms or falls!
And if we can find Small Cap companies that meet this criteria, it is even more exciting because we both know that Small Caps have the highest potential for growth.
3 small cap stocks exactly like that are included in our special report titled "Recession Proof Stocks"
So both these special reports together give you 6 small cap stocks you could invest in right away.
Hidden Treasure is not for everybody!
For instance, if you're nearing retirement or have already retired, I don't recommend putting all of your retirement money into small caps.
Small caps are for those who are ready to take some risk to make big returns.
While you can make a lot of money from small caps, you can also lose a lot of it very quickly.
Just one good small cap stock could be enough to make you very rich. But to find that one small cap stock, you might have to go through a few duds as well.
Therefore every small cap investor needs to understand this and plan his or her small cap investments wisely.
And that's what Hidden Treasure can help you with!
Like I already said, you can try Hidden Treasure without risk for a full 60 days.
On 15th December 2011, we recommended a small cap company at a price of Rs 25.5 per share with a target of Rs 55 achievable in 4 to 5 years.
But the stock ran up more than 70% in a span of less than 2 months... and prompted us to give a partial SELL on it!
Now imagine your Hidden Treasure subscription had ended during this 2-month period, you wouldn't have had any idea of this development and would have been left wondering what to do with the stock!
But by having Hidden Treasure for 3 Years, since we track all our open positions continuously, you'll be aware of what is happening with your stocks at all times and won't need to make any guesses on what you should do with them.
So don't squander this opportunity...
This offer will close on 11.59 PM on 15th September. .
P.S.: You can now get 3 Years of Hidden Treasure for just Rs 4,950 (Normal price = Rs 5,000 for 1 year). Furthermore, the 2 Special reports also offers you 6 opportunities you can invest in right away. So I suggest you seize this opportunity with both hands... while it's still open!
P.P.S.: There's a 60-day money back guarantee on this offer. So if it turns out that you don't like Hidden Treasure, we'll gladly give back every rupee you paid.
But this offer itself will be available till 11.59 PM on 15th September only.
P.P.P.S.:Here's what one Equitymaster subscriber has to say about his experiences with investing BEFORE and AFTER subscribing to Equitymaster premium research services...
P.P.P.P.S.: If you have any queries, please do not hesitate to contact us at +91-22-61434055 or Write in to us. We will be delighted to assist you!
* Adjusted share prices have been used for Shriram Transport Finance
**Returns have been calculated as on 29th June 2012 or the date of sell recommendation, whichever is applicable.
***The total number of Equitymaster members is taken as on as on 14th August, 2012