Tar’s Portfolio and Information Attic

I dont think I have mastered anything, I am still learning and have a long way to go. Have made plenty of mistakes, but my objective is to keep learning and growing by adding a new skillset in my quiver every year.

I get to a lot of mine, primarily through researching via exchange filings. Have started looking at micro and small caps closely. Most traditional models here do not work and usually companies in this area of market do not have good financials, etc. I am mostly looking for companies that are able to grow their topline, increase market share, are functioning in a niche and have strong balance sheets.

Once I find something I like, I usually spend weeks hunting for data and documents to build an investment case. For example, in Cineline, I read their annual reports pre 2012 so as to understand how they were operating their multiplex business.

Risk is also high in this corner of the market so you have to be really strong in your conviction, sure about integrity of promoters and consider the risk:reward before making investments. Volatility is also high so a stomach made of steel and good personal finance (no debt, plenty of personal cash flow etc) help in the long run.

Borosil Renew was a similar case. Most investors misunderstand the micro and small caps and judge every company with an eye of CG issues etc. Right from Rs 35 to Rs 500 per share, everyone assumed Borosil Renew was a commodity company and wrote it off without judging how fast the topline and margins will expand and thus the share price.

When stock doubled in Oct 2021, whole world became bullish on it and sent the price to Rs 800/share. I started booking then.

Same playbook and theme can be found in so many other names.

When it comes to small and micro caps, all you need to judge is

1. How fast topline can grow?
2. Are the promoters honest? (there can be shades of grey but judge them based on their incentives) For example, recent promoter buying etc
3. Are the promoters hungry to grow? (Vijay Kedia’s SMILE model)
4. Is the balance sheet strong? (low debt, high cash, able to increase topline without excess dilution or loading balance sheet with debt)

To get ideas to study, you can also check for companies whose share prices are rising in a falling market. Most are duds, but occasionally you will find something interesting.