@Investor_No_1
I do my own research, and therefore avoid widely known stocks. I understand that every widely known stock is researched by hundreds or thousands of full time analysts working on those stocks only. With my a few hours of research, I don’t think I can learn anything market don’t know. So there is no advantage in studying those stocks. Even theoretically, market is much more efficient in widely known stocks.
SME sector is different. When I research there I feel I am one of the few person researching that, and if I find anything good, probably I will be among the very first to enter there. Now a days annual reports of all the companies are easily available and what more one can read even if you are researching SBI!!
How to find those SME stocks? Well, I don’t know those companies. I just use screener to find stocks having certain quantitative attributes… May be high profit margin, good ROCE, Sales growth etc etc. Some of those stocks look interesting. Then I visit their website and try to understand their business, specifically if they have some competitive advantage or pricing power. If yes, I go to whatever document is available on their filing, investor link etc. If things look good, look for valuation, expected growth, scalability. Look at market cycle, sector headwinds/tailwinds etc. Do some scuttlebutt if possible.
Some sort of competitive advantage is a must before I pick up any SME stocks.
Liquidity is not a problem for small investors looking for a few lots. Further, one can always wait for the market downdays to pick them at a good discount.
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