Method­ol­ogy of Pick­ing up 400 Small-cap Stocks

Dalal Street Investment Journal - - COVER STORY -

(All the fi­nan­cial data are sourced from Dion Global So­lu­tions Ltd.) To emerge with “400 Small-caps” we have con­sid­ered four fac­tors. First fac­tor is re­lated to mar­ket data i.e. mar­ket cap­i­tal­iza­tion; se­cond and third fac­tor is from profit and loss ac­count that are sales and net profit; fourth is re­turn to in­vestors in terms of div­i­dend. We ranked ev­ery data and then gave equal weight-age of 25 bps points to each pa­ram­e­ter so that rank­ing does not get tilted due to­wards any one fac­tor. One could won­der why we have taken div­i­dend as one of the pa­ram­e­ters. This is to safe­guard that in­vestor friendly com­pa­nies should rep­re­sent in our “400 Small-caps” list. It also gives ef­fect of dif­fer­ent face value. We took div­i­dend as a per­cent­age to en­sure that face value (FV) of 1 or 2 put them at dis­ad­van­tage over com­pa­nies hav­ing face value (FV) of 10. Since we have run the query in first week of Au­gust 2017, all the data avail­able of the com­pa­nies dur­ing that pe­riod has been com­prised in our study.

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