Why We Cannot Ignore The Stock Picks Of Ashish Chugh Of Hidden Gems Anymore

Ashish Chugh

Ashish Chugh of Hidden Gems is developing a formidable reputation as a consistent picker of winning stocks. He conducts a brilliant and far-sighted analysis while recommending stocks, ensuring that the downside risk is low while the upside potential is high.

His recent stock pick, Selan Exploration, stands out as a good example of how one can protect capital while angling for high returns. Ashish Chugh recommended the stock in January 2013 when it was at Rs. 315. Today, the stock is at Rs. 510, giving a return of 62%.

Swelect Energy Systems is another stock that few investors had heard about (at least I hadn’t heard about it). In January 2013, when Swelect was at Rs. 140, Ashish Chugh recommended a buy on the logic that the company was debt-free, had a good dividend track record, was quoting at reasonable valuations and had good prospects. Swelect also has a lot of margin of safety, Ashish added.

Today, at the CMP of Rs. 296, investors are looking at a gain of 111%.

Eimco Elecon is another example of a stock that Ashish Chugh confidently called a “multibagger stock” in March 2013, when it was quoting at Rs. 155. He reiterated the buy call in March 2014.

Again, Ashish’s emphasis was on how the risk-reward ratio was skewed in favour of the latter and the downside was limited. Eimco Elecon is debt-free, has an uninterrupted track record of dividends for 20 years, promoter holding is 74% and the valuations are rock-bottom, Ashish emphasized.

Today, when Eimco Elecon reported block-buster results (pdf), delirious investors thronged the counter, triggering the upper circuit. At the CMP of Rs. 230, you are looking at a return of 48%, and counting.

Panacea Biotech is yet another example of a stock that gripped investors’ imagination as soon as Ashish Chugh recommended it. The stock was recommended at Rs. 108 and hit two consecutive upper circuits of 20% each. At today’s CMP of Rs. 172, there is a gain of 60% in just a few days. Of course, the floating stock is so low that it is doubtful that many investors managed to buy any stock after Ashish’s recommendation.

There are other examples like Nucleus Software, Vadilal Industries, Linc Pen, Sandur Manganese, GVK Power and others.

Of course, there are four things that we must remember before we rush in to buy such stocks indiscriminately. The first is that a lot of the explosive gains have come because the entire market is in the grip of a buying frenzy. All stocks, including those with dubious credentials, are flying high. You can read a report on this in the ET. When the frenzy cools down, small and mid-cap stocks will be the first to fall and they will fall the hardest, as compared to the blue chips.

Second, it is not that all of Ashish Chugh’s stock picks have become winners. Some have flopped miserably. But this is true of most stock pickers. Nobody can boast of 100% success in his stock picks. There is a high element of risk in such stocks, which Ashish himself points out in his recommendations.

Thirdly, most of these stocks are not at all well-researched by the investing community and so there could be serious issues of corporate governance and financial misappropriation that one may not become aware of until it is too late. Even the financial results may be doctored. In his article, How To Identify Neglected Stocks, Sanjoy Bhattacharyya has explained how the lack of analyst coverage is both a boon and a bane.

Fourthly, most of these stocks are illiquid. There may be cartels of operators who are rigging the prices, luring the unsuspecting buyer to buy the stocks. There are a number of instances where brokers have been caught red-handed by SEBI for synchronized and circular trading, intended to dupe innocent investors.

You also have to factor in your own temperament and risk-tolerance. Personally, I steer clear of unknown stocks and prefer to invest my hard-earned money in proven powerhouse stocks and blue chips. Of course, this does not mean we should keep our eyes and ears closed to new stock recommendations. Instead, each stock has to be objectively analyzed on its own merits. After all, all of today’s well known & reputed multi-bagger stocks were unknown stocks yesterday. As Sanjoy Bhattacharyya rightly says in the aforesaid article “Lack of reputation does not necessarily mean low standards”.