One of the goals I had last year was to do some research on Unchartered territory, the micro-cap segment of the stock market. So here I am.
After taking a dip in this segment and uncovering a few multi-baggers in quick time (blame it on pure luck, nothing on my skill) like Taal enterprises, Nandani creations, Duropack, etc. I realized that the volatility of this segment is not for the faint-hearted.
So before I start this section, please note that the microcap segment has the risk of destroying your capital permanently. Only touch them with surplus money.
What does it do?
If you like to read companies’ reports and have a good amount of time on your hand, you can read them in detail here - Geekay Wires LTD Annual report.
Otherwise, let me break down the gist in my way.
Products - Wider application in infra work.
Sales growth and Profit growth:
Phenomenal
Last 5 yrs’ annual results:
Notice a dip in 2020,2021 (COVID effect? temporary)Pledging - ZERO
Debt - 68cr (a bit on the higher side, but for smaller companies, there isn’t a better way to raise capital). This is one risk point.
Dividend - though the dividend percentage is great, I don’t count that match considering the company has debt on its books. Still, if it can sustain, the downside will be protected.
What’s the trigger?
Infra push in India. (The whole world is positive about it)
Quality of clients. (Good enough to sustain)
Expansion plan (On track)
Risk:
Apart from the obvious risk of investing in micro-cap stocks, and the obvious economic downturn risk which is not in our control. There is another risk of these stocks catching a frenzy sooner or later.
And since the liquidity (number of shares available for selling/buying) are not great, sometime capital may get stuck for longer than expected.
Having said that, another thing that I noticed in the micro-cap segment is the flow of information, unlike popular stocks, the information available in this area is very less.
If you like this post, please share for reach.
Also, Since the information is scarce in this area, I would try adding more info on the thread ongoing basis. Let’s add more research items on thread.