This is Basant Maheshwari’s advice on how to make big money from smallcaps

This is Basant Maheshwari’s advice on how to make big money from smallcaps

Market


To identify if a small cap stock will make money or lose money one must look at the business model of the company rather than its management, believes wealth expert Basant Maheshwari.

The veteran fund manager said, for investors to understand if the company will bring good returns in the future or not, they have to figure out the success of the business model. To know if the business model will work in the Indian scenario or not, he advised investors to simply check if it has worked in the USA or not. If not possible then find out about the US-based companies with similar business models, he said in a recent interview that he posted through his Twitter account.

“Something that has worked in the US normally works in India and you have a 10-15 year lag because things happen in the US earlier it happens in India after a lag of 10-15 years. So you can go and check whether the business model has worked in America or not if it has worked there is a big possibility that it’s going to work in India also so these are the broad contours within which we’ve set this scheme of our company,” said Basant Maheshwari. He also added that his company invests around 10-15 lakh every month in small-cap stocks through BM Small Cap Secular Growth smallcase.

His company’s small-cap investment scheme consists of 15 companies’ stocks. The scheme also has companies from home improvement and home finances.

Basant’s 2 big bets – Pantaloon Retail, Page Ind

Basant Maheshwari said in the interview that he had bought Pantaloon when it was a 75 crore market-cap company in 2003. Its value grew tremendously afterwards. However, the Pantaloon Retail went bankrupt.

Another company – Page Industries’ stock – he bought when its m-cap was 350 crore. Now, it has a worth of 45,000 crore. 

Don’t be stubborn with what you have bought

To invest in small-cap companies, one needs to put in their conviction in the game as well. However, one must not end up being stubborn about the small-cap stock they have invested in, advises Basant Maheshwari. He says there is always an option of easy exit and easy entry for small retail investors. That’s why he advises investors to not get stubborn about what they have bought. “you don’t fight a small cap company that is not doing well you try and move out of it,” said Maheshwari.

Bull markets and smallcaps

Smallcaps do well when there is a huge bull market coming around. These companies have better growth prospects compared to their peers in the large-cap category. He expressed that small-cap consumers companies do well as compared to small-cap firms from other sectors. Basant Maheshwari also asked investors to stay away from PSU bank stocks. Despite the impressive performance of Nifty Bank, he said, “ In times like these, you see small-cap PSU Banks hitting 20% circuits up but those stocks haven’t moved for 15 years. So how on Earth would you know that today is the day to buy an XYZ PSU bank for you to make money so small cap.”

He also advised avoiding putting money in small-cap textile companies and small-cap metals. Small-cap cement plants are performing normally, he said.


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