Every investor wishes to discover the undervalued, undervalued stock that explodes in value, but how to find hidden gems in stock market?
Stocks may be “hidden” since they are out of favour in the stock market and are monitored occasionally, if at all, by Market experts. Not all hidden gems in stock market are good investments.
Although, There’s a good chance to buy them if there’s anything worth available and isn’t getting noticed in the share market.
Table of Contents
Expert Coverage
It’s essential to remember that the Stock market has a finite number of experts. With lots of businesses this ensures that not each one will receive the publicity it deserves.
Experts on the stock market typically focus on businesses in well-known sectors. They also include major businesses too.
This means that certain firms will don’t even have a single expert monitoring them, while several will have 30 or even more.
For instance:
There are 37 analysts offering forecasts on Petronet LNG, while Ion Exchange (India) Ltd don’t even have a single analyst’s coverage.
The businesses which don’t have any analyst coverage mostly remain out of the limelight in the stock market.
That suggests such stocks are truly “hidden.”
How to Find Hidden Gems in Stock Market?
Looking for stocks with less or no analyst attention is one way to find hidden gems in stock market.
It normally indicates that the business will be less active on stock chat boards and people only come to buy when news comes out about that stock.
You must look further back than the trends going on in this stock. On the Stock market, several businesses are clearly out of fashion, which leaves a stock “hidden.”
However, You need to do research according to below given points to make it to a successful hidden gem.
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Debt
This is an important point in case of any company as even if the business is profitable but the company has too much debt then that business will not survive in the long term.
Ruchi Soya is a correct example of this point. In the end they need to file the bankruptcy to come out of the trouble. Always Select low debt or debt free companies.
Note:
This point is excluding banks and NDFC as their business is about Debt in their case take a look at the trend of NPA Instead of Debt.
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Share Holding
Companies with strong promoter holding are trend to remain more profitable. This is due to the promoter interest in the company. They are going to get more benefit than anyone else if the company’s performance remains promising in the long term.
Fine Organics is a perfect example of this. Their promoters have 75% holding and the company is trading around Inr 2500 to it’s listing price around Inr 800 in 2018.
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Promoter Pledged
This is also a quite important factor while selecting hidden gems in stock market. Promoter Pledged must be low less than 20% at least. This will give you information about how serious promoters are about their company. Everyone knows high pledged promoter firm’s don’t have a good reputation in the India share market.
Avanti Feeds is a good example of this. They don’t have any promoter pledged and only 4 experts cover it. While on the other hand Zee Media is just an opposite example of it.
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Business Outlook
Always Check out the future outlook of the business in which your hidden gems are working. This will give you an idea where they are ahead. Experts might not cover it but they might cover their competitors. So you will at least get the idea about the future outlook of their industry.
GMM Pfaudler Ltd is a good example of this point. The company has acquired it’s parent company. The business is going to boom if they handle it correctly. Only 3 analysts cover it.
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Management
You must check this factor as the main management who is running that business is quite important as they are the ones who will use your money. They should be well experienced and well known in the industry they are working. you must also check if they are facing any legal issues.
Kaveri seed is the perfect example of it. The Chairman Mr. G.V. Bhaskar Rao is a well known and experienced person. However, Not many people cover this company.
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Products or Area of Service
You must check the website of the company so you will get the information about it’s products or service area. This will help you in identifying their working mode and how well the company is diversified in a sector. You will also get their client information in some cases.
Black Rose Industries is a good example in this kind of hidden gems stocks. They are well diversified company in their respective field. Whereas no expert covers this company.
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Legal Issue
Always stay away from the company which has some legal issues. Any bad news can be very harmful for the stock as they are not well covered by the company. So recovery from bad news may take years.
Firm Godfrey Phillips India Ltd is a suitable example of it this kind of hidden gems stocks. Promoters are having some issues with each other and the share of the company is hardly moving on a positive side from so many days.
Conclusion
There might be some other factors as well like long term chart pattern, government policies which are also equally important while looking for hidden gem stocks.
However, that all from our side on stock market gems. Let us know your views about hidden gems in stock market in the comment section.
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FAQ About Hidden Gem Stocks
What are Hidden Gems in Indian Stock Market?
Hidden Gems are stocks which are not in flavor and under valued.
Do there really hidden gems in Indian stock market?
Yes, there are many but you must need to do your research.
Why analysts don't cover some good stocks?
There are thousands of stocks in the share market and limited analysts in the market. So they are not able to cover every stock.
Do a beginner can also invest in Hidden gems?
Yes, If you find a company which is perfect on Hidden gems parameters.
Where i can find the best information about stocks?
BSE and NSE websites are best and most suitable to find any information about any stock.
