Donald Francis'  Instablog

Donald Francis
Send Message
Donald Francis is an independent analyst and young investor in the Indian stock market. Donald specializes in the healthcare and banking sector. He blogs regularly at his website aimed at Stock Market for Beginners ( Donald enjoys a regular game of badminton,... More
My company:
ValuePickr Investments
My blog:
Stock Market for Beginners blog
  • ValuePickr Quality Small Cap Stocks Screener 2 comments
    Aug 5, 2010 4:08 AM

    Quality Small Cap Stocks. You might have wondered how one can research such stock ideas in India stock market? Check out how to shortlist quality small cap companies in the Indian stock market


    For some time now I have wanted to research this space extensively. 
    This is the first time that we are coming close to be able to do that, on a regular basis, from now on. Voila! courtesy the ValuePickr stock screener.

    In case you are not familiar with the term, you can find a brief on a stock screener and its capabilities in our Stock Screening Basics section.


    Check out ValuePickr's Quality Small Cap screen selections for the Indian Stock Market, here.


    Setting the Universe

    We wanted to shortlist stock ideas from the small cap stocks unioverse. So a criteria of annual sales between 100-500 Cr, for the current year, is used.

    Secondary or Conditioning Criteria

    We mentioned "Quality" small cap stocks, right. Which means we do not want the filter to pass companies with poor fundamentals. We want companies that have reported negative operating cashflows for last 2 years and have high debt-to-equity OUT. And we want IN, companies that report high Return-on-Equity and pay some dividends.

    You could use probably a few more such fundamentals filters, but the above are deemed sufficient conditions.

    Primary Criteria

    Now this is where the objective of your screen gets defined. What kind of companies are we attempting to uncover? Small cap companies that are increasing earnings year over year for atleast the last 5 years. But thats not enough; we want only those that are available at attractive prices today. The PEG ratio is a good measure that compares the Price to Earnings ratio (NYSE:PE) to the earnings growth rate of the company. In order not to be misled by a year of growth spike, or some one-off extraordinary other income skewing earnings growth last year, we use the 5yr average earnings growth rate, for the comparison.

    And that sets up our Quality Small Cap stock screener nicely! So enjoy the shortlist! Go ahead and dig into these companies. Let me know if you find Gold anywere!

    When looking at the results, it is useful to keep in mind that there are no miracle screens that produce lists of guaranteed winners. A well-designed one however, would provide us with a shortlist of stocks that hold some promise.

    Even the most well-designed screen is only a preliminary search!

    Remember that even the best designed screen is only a preliminary search for investments using a small set of quantitative factors. A complete in-depth analysis of shortlisted stocks that explores both quantitative and qualitative factors should follow any screen.

    If you want to follow any of the shortlisted stock ideas, the best place to start is the companies website; start by digging at the Annual Report (usually found in the Investor section); look at analyst presentations if available, press releases and also search for more information on the company, recent newsflow, etc. Find out all you can about the company and its competitive environment. 

    Disclosure: This article is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. The author, a Director at ValuePickr Investments, frequently invests in the shares discussed by him.
Back To Donald Francis' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (2)
Track new comments
  • chitrakumaresh
    , contributor
    Comments (2) | Send Message
    Hello mr Donald I happy to see this small cap stocks I hold 4 of them Iam working in small banking sector I invest regularly in companies at 100 cr market cap and have given good returns I do wonder whether this three names I am mentioning merit consideration
    1 gulshan polyols this meets the above conditions the sorbitol market is predicted to grow the company financial is good profit growth is good client list includes big names like DABUR Colgate asian paints etc promoter holding 72% they are entering in IMFL sector.
    2. Superhouse very good management the balance sheet is good profit and sales growth is good the textile brand is growing the debt level is little higher excellent brand Allen cooper.
    3. L.G. Balakrisnan bro this company is in my city they have an excellent factory the brand name of chain is ROLON the balance sheet is good product is used in automobile and other industrial purpose management is clean and ethical.


    Sir Iam not mentioning in detail about the financial because I know you will be able to understand far better than me.


    My doubt is why the market was hesitant to give a good value for these companies even though there is a rally in all of them due to broader market my question is the market is always right on longer run do you feel these three names are worthy for consideration for long term


    With regards and respects
    13 Jul 2014, 11:48 PM Reply Like
  • chitrakumaresh
    , contributor
    Comments (2) | Send Message
    This is excellent list does this three names merit consideration GULSHAN POLYOL, SUPERHOUSE AND L.G BALAKRISHNAN AND BRO . are they suitable for long term investments
    13 Jul 2014, 11:48 PM Reply Like
Full index of posts »
Latest Followers

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.