YOU could call them slumdog stocks. And believe it or not — they actually had the potential of making you a millionaire, that is if you picked up the right stock. In fact, investors taking risky bets on sub-Re 1 penny stocks at the beginning of the last bull-phase pocketed phenomenal returns. Many of these penny stocks which were trading below Re 1 in April 2003, have now shown a price appreciation of a whopping 2,000%, a performance level not even achieved by the blue-chips.
According to a SundayET analysis of all 55 penny stocks on BSE which were trading below Rs 1 in April 2003 — when the last bullrun actually began — 26 of them, constituting about half of that amount, are now trading in positive territory.
Of course, only 30 of the 55 penny stock companies are currently traded, while the rest no longer feature on BSE. And out of the 26 top performers, four actually gave a massive return of more than 1,000% and as many as 14 companies are trading with a price appreciation of more than 100%. Stocks such as Pennar Industries and Entegra are now trading at a price appreciation of 2,290% and 1,739% respectively.
According to Motilal Oswal, chairman & managing director of Motilal Oswal Financial Services, it does not matter whether an investor keeps his money in blue-chips or penny stocks. “One can make money in both and also lose in both. Moreover, it is difficult to find several multibaggers — stocks that can multiply several times in value — in the segment of large cap companies, while they are relatively easier to find in the penny stock category,” he said. The last bear phase between 1998 and 2002, pushed several top performing stocks into the bracket of penny stocks. Sectors such as IT and metals were battered in that period. But in the consequent bull-phase, stocks from these sectors picked up and started selling like hot cakes.
Pennar Industries can be dubbed as one of the slumdogs of the previous bull-phase and was a victim of the last downturn. As the steel sector got impacted badly, Pennar Industries, a maker of cold rolled steel, could not isolate itself from the slowdown. It recorded a sales turnover of Rs 76 crore in fiscal 2002 against Rs 320 crore in FY98. As the slowdown ended in 2002, it started performing better and in 2008, it reported a net income of Rs 537 crore and net profit of Rs 30 crore.
Twentyfirst Century Management Services, which is into capital market services, is another company which saw changes in fortune with the ups and downs of the economic cycle. Between 2001 and 2004, it posted losses but the bull-phase later turned it around. During the last year, it posted a net profit of Rs 20.76 cr against a loss of Rs 0.33 crore in 2004. Similarly, Shyam Star Gems also posted good profit during the last year. Mr Oswal further said, “The most important criteria to judge such a company is to see its strong business prospect for the next three to four years. Also, the management of the company must be good.” So even as Hollywood celebrates the ‘Slumdog’ season, Indian investors too can do the same as they laugh their way to the bank.
anand.rawani@timesgroup.com
According to a SundayET analysis of all 55 penny stocks on BSE which were trading below Rs 1 in April 2003 — when the last bullrun actually began — 26 of them, constituting about half of that amount, are now trading in positive territory.
Of course, only 30 of the 55 penny stock companies are currently traded, while the rest no longer feature on BSE. And out of the 26 top performers, four actually gave a massive return of more than 1,000% and as many as 14 companies are trading with a price appreciation of more than 100%. Stocks such as Pennar Industries and Entegra are now trading at a price appreciation of 2,290% and 1,739% respectively.
According to Motilal Oswal, chairman & managing director of Motilal Oswal Financial Services, it does not matter whether an investor keeps his money in blue-chips or penny stocks. “One can make money in both and also lose in both. Moreover, it is difficult to find several multibaggers — stocks that can multiply several times in value — in the segment of large cap companies, while they are relatively easier to find in the penny stock category,” he said. The last bear phase between 1998 and 2002, pushed several top performing stocks into the bracket of penny stocks. Sectors such as IT and metals were battered in that period. But in the consequent bull-phase, stocks from these sectors picked up and started selling like hot cakes.
Pennar Industries can be dubbed as one of the slumdogs of the previous bull-phase and was a victim of the last downturn. As the steel sector got impacted badly, Pennar Industries, a maker of cold rolled steel, could not isolate itself from the slowdown. It recorded a sales turnover of Rs 76 crore in fiscal 2002 against Rs 320 crore in FY98. As the slowdown ended in 2002, it started performing better and in 2008, it reported a net income of Rs 537 crore and net profit of Rs 30 crore.
Twentyfirst Century Management Services, which is into capital market services, is another company which saw changes in fortune with the ups and downs of the economic cycle. Between 2001 and 2004, it posted losses but the bull-phase later turned it around. During the last year, it posted a net profit of Rs 20.76 cr against a loss of Rs 0.33 crore in 2004. Similarly, Shyam Star Gems also posted good profit during the last year. Mr Oswal further said, “The most important criteria to judge such a company is to see its strong business prospect for the next three to four years. Also, the management of the company must be good.” So even as Hollywood celebrates the ‘Slumdog’ season, Indian investors too can do the same as they laugh their way to the bank.
anand.rawani@timesgroup.com
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