Introduction: Small Cap Stocks.
In India, companies that are smaller than the top 250 companies are called small-cap companies (Small Cap Stocks).
Small-cap stocks are considered high-risk high-return investments since they are smaller companies that have a higher potential to grow but also a higher chance of falling.
Note: The list comprises stocks in descending order of 5 year CAGR. Only stocks with a market capitalisation of over Rs 100 crore have been included in the list. This is not a recommendation that historical returns or market capitalisation (mentioned here or otherwise) should be considered foremost before making any investment.
Why Small Cap Stocks are important?
A lot of people think that small cap stocks are risky and volatile. You might have heard of a company losing 50% of its value in a couple of days and you might think, “I don’t want to have anything to do with small cap stocks”. However, there is another side to the story.
Small cap stocks offer greater potential for growth than their larger cap counterparts. They can grow 100 times in value over the course of 15 years, while large caps can only do so by 10-15 times. As they say, “smaller is better”.
Small cap stocks are the most important investment class for generating successful returns. Small-cap stocks may not be as well known, but they tend to outperform their larger counterparts in the long term.
The best small cap stocks have been able to consistently beat their large-cap counterparts over the past few decades. A study conducted by Robert Novy-Marx and John O’Neal looked at two groups of stocks, large caps and small caps, from 1963 to 2013. The study period included three distinct economic cycles: high inflation, low inflation and low inflation with recession.
How to find a great small cap company?
Small cap stocks are often called the high risk, high reward market. You can gain huge returns or lose everything. With that said, there are ways to mitigate risk and find great small cap companies. By following the strategies below, you will be able to find a great small cap company and generate substantial income from it.
Before you can invest in a small cap company, you have to find one first. Keep your eyes on stocks that have seen a significant increase in price compared to their peers. This could mean that something has happened with the company (good or bad) to make it more valuable than before.
Small cap stocks are always a good bet. But how do you find a great small cap company that’s poised to thrive?
The first step is to define what makes a great small cap stock. In other words, what sort of characteristics do they possess?
The second step is to identify those characteristics in a company. This is the hardest part, since many companies that appear like they could be great investments turn out to be duds. Avoid these common pitfalls.
Here’s a list of top performing small cap stocks in India:
1.Flomic Global Logistics
| Market Cap (in Rs crore)* | P/E Ratio* | 5 Year CAGR* |
| 156 | 61.65 | 282.80% |
To know more about the stock, click here: Flomic Global Logistics
2.Authum Investment
| Market Cap (in Rs crore)* | P/E Ratio* | 5 Year CAGR* |
| 2950 | 5.56 | 153.01% |
To know more about the stock, click here: Authum Investment
3.GRM Overseas
| Market Cap (in Rs crore)* | P/E Ratio* | 5 Year CAGR* |
| 1224 | 20.34 | 120.82% |
To know more about the stock, click here: GRM Overseas
4.Sanmit Infra
| Market Cap (in Rs crore)* | P/E Ratio* | 5 Year CAGR* |
| 239 | 81.10 | 118.27% |
To know more about the stock, click here: Sanmit Infra
5.Best Agrolife
| Market Cap (in Rs crore)* | P/E Ratio* | 5 Year CAGR* |
| 2910 | 34.30 | 118.00% |
To know more about the stock, click here: Best Agrolife
6.Coastal Corporation
| Market Cap (in Rs crore)* | P/E Ratio* | 5 Year CAGR* |
| 306 | 15.02 | 115.90% |
To know more about the stock, click here: Coastal Corporation
7.Galaxy Bearings
| Market Cap (in Rs crore)* | P/E Ratio* | 5 Year CAGR* |
| 102 | 11.50 | 113.52 |
To know more about the stock, click here: Galaxy Bearings
8.Raghuvir Synthetics
| Market Cap (in Rs crore)* | P/E Ratio* | 5 Year CAGR* |
| 540 | 72.56 | 109.59 |
To know more about the stock, click here: Raghuvir Synthetics
9.Ritesh Properties
| Market Cap (in Rs crore)* | P/E Ratio* | 5 Year CAGR* |
| 359 | 68.61 | 109.20 |
To know more about the stock, click here: Ritesh Properties
10.Kwality Pharma
| Market Cap (in Rs crore)* | P/E Ratio* | 5 Year CAGR* |
| 1,045 | 10.23 | 108.45 |
To know more about the stock, click here: Kwality Pharma
Conclusion!
This article is a playful take on the classic article “10 Best Stocks To Own Forever” that’s been circulating the internet for years. We wanted to take a shot at identifying great small cap companies that have the potential to grow with their industry, and provide great returns for our investors.
We identified three key characteristics of small cap stocks that will help you identify high-performing companies for your portfolio. First, the company needs to have a long history of growing sales. Second, it should be a leader in its industry or niche with secure market share. Finally, it should be well positioned.
Read more of the awesome articles on Penny/Small Cap Stocks here.
This was the list of top 10 small cap stocks.
Happy Investing!