The SME portfolio

I have been trading in multiple SME Stocks in last 2 years. Here are few cents which I have understood of this whole segment –

1. SME platform is not a very old concept in the market. BSE & NSE introduced this so that small cos. can raise money easily and with lesser info. to be shared with the market and lesser rules and regulations as compared to main board interms of compliance and public sharing info. One such example is – many cos. do result declaration bi-yearly basis rather than quarterly basis.
2. This move was purely to encourage more and more cos. coming to the board and thus BSE & NSE having better volumes and better businesses. When you compare the IPO’s which have come in on these platforms vs. main board, you will understand that there is huge difference where SME platform is leading by a big margin.
3. These stocks generally are having pretty low float and thus no doubt comes with a certain kind of a risk. But when you are investing in such stocks, it is prudent that you have high conviction and are doing your own research since as many have said earlier too, burrowed conviction will get you soon or later.
4. I have been holding and have traded and made decent money in below stocks –

a) Prevest Denpro
b) Sealmatic India
c) Inflame Appliances
d) KMEW
e) EKI
f) Beta Drugs
g) Insolation Energy
h) And now recently entered Bondada Engg., etc.

One thing I have personally experienced in SME is – If your stock selection is right – You will make decent money as compared to any main board stock. Stock selection and at right price is v.v. important. I personally feel that management quality and transparency interms of sharing info. to the public is something which is very critical while choosing an SME stock. These days, there are many SME cos. which are doing quarterly con calls, sharing updates too, sharing investor presentations time to time which is helping the investors to understand the business better.
5. I also feel that SME platform stocks are now gaining traction and would continue to become something like Small Caps and Mid Caps since earlier these platforms were not there and hence people used to make money from small and mid cap stocks only and make stories of 5x-10x returns. Now since these stocks are listing on SME platform, more and more better cos. are listing in their early days and going on to be listed on the main board in 2-3 years and thus making their shareholders wealthy by 15-20x as well.
6. There has been now a surge in investments from the veteran investors too in this segment. I see many strong names like Ashish Kacholia sir, Vijay Karnani sir, Mukul Agrawal sir, etc. investing in this segment. This to me tells a lot about how good this platform is.

Conclusion – I think it’s a simple R:R ratio. If you do a proper research there is nothing to worry about SME platform. In fact, this is one of the best thing that can happen to your portfolio if a stock selection is right at right price. Rest, its upto an individual as to what kind of a risk profile and time he has to do the study and research on such stocks.

Discl. – Invested and biased in the above names. I may or may not have holdings in the above names. And this is not at all a stock recommendation. It is only my personal view.