Even without a meaningful economic recovery, since Sept 2013, small-cap and mid-cap stocks have seen a sharp rerating. Whilst the Sensex has delivered 13% CAGR returns over this period (i.e. Sept 2013 till date), BSE SmallCap and BSE Midcap indices have compounded at 33% and 34% respectively.
According to Ambit Capital's Research, A few stocks from the BSE500 universe that have rallied significantly over the past three years without any improvement in fundamentals are as under,
Titagarh Wagons Ltd
Century Textiles & Industries Ltd
Texmaco Rail & Engineering Ltd.
Hindustan Construction Company Ltd
Cox & Kings (India) Ltd.
Adani Enterprises Ltd.
In spite of weak fundamental performance and relatively sub-par ‘accounting’ and ‘greatness’ scores, the above said companies have had a stellar run over the past three years. Further, consensus is building in significantly higher earnings expectation over the next couple of years and hence the room for disappointment for these stocks is much higher.
