We’ve used Capitalmind SNAP Outliers extensively to discover stocks and sectoral stories. What follows is how it helped us identify Sudarshan Chemicals, which ended up returning 200% in 15 months. You can learn more about Outliers by watching these: Tutorial 1, Tutorial 2, Tutorial 3.
We added Sudarshan Chemicals in April 2015, after it appeared in Outliers for the first time. Outliers is a discovery tool; it finds interesting stocks. But it uses momentum factors to zone in on a stock. Momentum is also caused by players buying, and sometimes the players are smart enough to have bought into a stock early. Sudarshan seemed to be this kind of a stock.
We investigated further and found something very cool. The company wasn’t richly valued, at a P/E of 17 at the time. And it was growing profits at more than 25% a year, coming off a low couple of years.
When we picked it up, the reason we noticed it was the sudden momentum in the stock, which almost begged us to look further:
And then on checking we found the fundamentals were sound. And that a marquee investor, Vijay Kedia had a reasonable holding (you can use SNAP to see all companies where Kedia holds shares).
Outliers helped us discover the stock. Other research helped us get further! Today the stock has gone up 3x, about a year after we bought, as the discovery process and P/E rerating has taken the stock up big time – even now, the stock trades at a P/E of 29, but the profit growth has been over 66% in FY2016.
With input from Outliers, we’ve found some enormously interesting stocks that didn’t just make the momentum grade, they joined the longer term portfolios as well. Sudarshan is one of them.
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Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.
Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.