Volatility may be an opportunity; 4 smallcaps with high ROE & consistent return on capital employed

One big challenge with small cap investing is that as soon as nifty starts to correct, small caps are the first one to feel the heat and crack. But using some parameters may help in avoiding the possible mistakes. ET screener powered by Refinitiv’s Stock Report Plus lists down stocks from small cap space with high upside potential of more than 20% over the next 12 months, having an average recommendation rating of “Buy” or Strong Buy .

Reality of small cap stocks. Investor’s desire to own them “highest”. Their ability to find good quality stocks is “very low” and on top of it understanding the risk of investing in small cap “ lowest”. All these three things are relevant at this point of time. Everyone wants to buy small cap stocks, but they don't understand that the valuations are extremely high and so are the risks. For all those who still want to take exposure to them, in such times, it would be better to be cautious in selecting the stocks, better to go with buying in smaller quantities and keep some cash allocated for the stocks, but only to be used on the day when there is absolutely chaos on the street. Refinitiv’s Stock Report Plus which lists stocks with high upside potential over the next 12 months, having an average recommendation rating of “buy” or strong buy .

Even when nifty has been correcting, the participation in the small cap segment high and breadth is better in most of the trading sessions. ET screener powered by Refinitiv’s Stock Report Plus lists down stocks from small cap space with high upside potential over the next 12 months, having an average recommendation rating of “Buy” or Strong Buy and also meeting parameters like net margins and return on equity.

These small cap companies have shown positive returns in the last one month at a time when markets have been overwhelmed by news and other developments. ET screener powered by Refinitiv’s Stock Report Plus lists down stocks with high upside potential over the next 12 months, having an average recommendation of “buy” or strong buy .

These small cap companies have shown returns of more than 10 percent in the last 3 months at a time when markets have been overwhelmed by news and other developments. Also, their overall scores have improved from their three months prior score. ET screener powered by Refinitiv’s Stock Report Plus lists down stocks with high upside potential over the next 12 months, having the average recommendation of Strong Buy .

Recency basis, getting impacted by what has happened recently and over relating it with what may happen in near future is something which probably is happening in midcap cap space. In such times, it would be better that investors should be cautious in selecting the stocks, better to go with buying in smaller quantities and keep some cash allocated for the stocks, but only to be used on the day when there is absolutely chaos on the street. Refinitiv’s Stock Report Plus which lists stocks with high upside potential over the next 12 months, having an average recommendation rating of “buy” or strong buy .

Every industry has different operating conditions which have high correlation with the kind of ROE they generate and how sustainable that number is. Of all the stocks, which our algorithms come up with, we took companies from three sectors, biologics, engineering and an auto ancillary company which is focussed on EV space and has been able to get an early lead. ET screener powered by Refinitiv’s Stock Report Plus lists down stocks with high upside potential over the next 12 months, having an average recommendation rating of “buy” or strong buy .