Mudar Pathreya is a well-known veteran and specialist in picking micro-cap and small-cap stocks. We have so far not paid attention to his stock picks because of our perception that such stocks lack in corporate governance standards and are of alleged “low quality”.
However, after the clarion call by Shankar Sharma that micro and small-cap stocks have the potential to give multi-bagger returns, it is incumbent upon us to pay due attention to Mudar Pathreya’s stock recommendations.
Track Record Of Mudar Pathreya’s Recent Stock Recommendations:
Let’s take a quick look at the recent stock recommendations of Mudar Pathreya and see how well they have performed:
|Date of reco||Name of stock||Price on date of reco (Rs)||CMP (Rs)||Gain/ Loss (%)|
|16.11.2015||PTC India Financial Services||42||40||(4)|
|14.12.2015||APL Apollo Tubes||680||937||38|
|27.12.2015||Jubilant Life Sciences||415||335||(19)|
|27.12.2015||Indo Count Industries||1063||894||(16)|
As one can see, a few stocks have given sensational returns in a short period of time. Maithan Alloys, which was recommended on 17th April 2016, has given a spectacular gain of 165 in just three months. Similarly, Mercator and GHCL have given gains in excess of 100% in just a few months.
It is also notable that out of 18 stocks, only five have given negative returns and that too of small amounts.
Four Dark Horse Stock Picks:
Now let’s look at the four dark horse stocks recommended by Mudar Pathreya on 30th May 2016:
|Dark Horse stock||Price on date of reco (Rs)||CMP (Rs)||Gain/ Loss (%)|
Mudar Pathreya has provided a detailed explanation on why he regards the aforesaid four stocks as “dark horses”.
As one can see, even in the short period that has elapsed since the recommendations, three stocks have notched up positive gains and only one has given negative returns.
While Failure Of A Micro-Cap Stock Can Mean Loss Of 100% Of The Capital, Its Success Can Mean Infinite Gain:
It is well known that micro-cap stocks have a high success and high failure rate.
This is best exemplified by the two stocks recommended by Mudar Pathreya six years ago, namely, Somany Cermaics and MSP Steel. Mudar’s logic for both stocks was very convincing. However, while Somany Ceramics has become a ferocious 24x Multi-Bagger in the six years that have elapsed, MSP Steel has lost 68% of its value.
However, this also exemplifies another point that the risk-reward ratio is in favour of such investments because while the loss is capped at 100%, there is no upper limit to the gains. One can make an infinite amount of gains, if the stock becomes a success.
Basket Approach Required:
So, if one has a basket of micro-cap stocks which are judicially selected and if one has the temperament to bear a 100% loss in a few stocks, the investment exercise can become very worthwhile!