Identifying Quality In Small-cap Stocks: Starter Pack

Published by Trinkerr Academy on

The Magic Of Compounding

Trading makes you profits but investing compounds your capital. Financial legends like Rakesh Jhunjhunwala, Peter Lynch and Jesse Livermore have embraced this philosophy.

You build your capital by garnering the profits you earn from trading. But trading is often associated with risks. And risks need to be managed. How do traders do that? By creating a portfolio separately.

Spotting The Right Stocks

Contrary to popular belief, investing isn’t a walk in the park. You need to identify the right stock, at the right time. Companies that have generated thousands of crores in market capitalisation may still fail to appreciate your capital. On the other hand, a budding company with promising fundamentals can possibly be the secret to compounding your investment, say 5, or even 10-fold. Nevertheless, we must never forget to factor in the risk, which is higher in the case of small-cap businesses.

Mohit Jangir’s Strategy

Investing based on market capitalisation boils down to one’s risk profile. For instance, as an active investor, Mohit Jangir tends to keep a tight grip on companies he invests in, which makes small and micro-cap companies all the more appealing. If you aren’t one of the investors that actively tracks companies and their performance, mid-to-large cap companies are where you should look, since they are generally considered a safer bet.

Catching Small Caps Early

A saying about small-cap companies goes like this; ‘Catch them early and hold them for long’. This is the trick to small-cap investing. Vijay Kedia, an investing guru, advises us to look for companies that have moderately experienced promotors yet are ambitious. To make the most of your investments, analyse how companies are growing—crunch the fundamental numbers, look for undervalued ones trading below their true worth. This can lead to better returns than just following the market. Be smart and find promising opportunities with careful research.

In this video, Jangir will be taking you through:

  1. The process of creating a watchlist
  2. Metrics to look at before investing in a stock
  3. How to keep track of your investments
  4. What to look for in a Balance Sheet
  5. Red flags to watch out for in companies

He also demonstrates how to identify promising sectors that are likely to perform well in the near future. Watch the full video for more details.

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