Talking stocks: Buy smallcaps when fundamentals are good

Image result for Talking stocks: Buy smallcaps when fundamentals are goodEvery week, an expert selected by ET answers queries from our readers on investments in stocks.


By G Chokkalingam MD, Equinomics Research & Advisory

I have 5000 shares of Noida Toll Bridge companyBSE 1.44 % purchased a year back from Rs 22 to Rs 12, average cost Rs 15. What is your suggestion on hold or sell?
Never aggressively chase the small cap stocksfor the sake of averaging unless you are absolutely confident of its fundamentals. It is very difficult to take a call for an analyst in this case as the company is involved in a major legal issue and the risk or reward is tied to the final judgement on its toll bridge.

If it loses the case, a major part of its intangible asset can vanish. If it wins the case, it can more than recover your costs. Having lost a major portion of your investments, you may consider taking the risk of holding it further.

I have 110 shares of Transport CorporationBSE 0.00 % India. Please advise whether to continue holding or exit out of it?
Transport Corporation trades at stretched valuation of around 29 PE on current year earnings. Hence, book profits.

Please suggest me I am holding 500 shares of MandhanaBSE -4.96 %Industry at Rs 27. What should I do?
Book loss ­ annual net loss, total borrowings and inventories & receivables together independently exceed annual sales.Therefore, risk is very high even at current market price.

I hold KarurVysya Bank at Rs 100, BEL at Rs 160, Albert DavidBSE -0.05 %at Rs 320.Please advise if I need to hold, sell or add more.
Sell Karur Vysya BankBSE 0.63 % and shift to Karnataka BankBSE -0.48 % -while both have more or less similar business size and Net NPA levels, KarnatakaBank is the cheapest stock in the old private sector banking space trading at 1.2x trailing adjusted book value as compared to 2.5x valuation enjoyed by Karur Vysya Bank.

BEL trades at around 24 PE on FY19 expected earnings ­ sell it if it moves more than 5 per cent. Hold Albert David -a small niche pharmaceutical company with net cash, trading at attractive valuation of around 11 PE on FY19 estimated earnings.


About the author

Loknath Das

Powered by