More bang for your penny You can make money in micro-cap stocks, but you've got to be cautious, patient-and lucky

• Published in: Business today (New Delhi, India)
• Main Author: Varadarajan, Nitya
• Format: Magazine Article
• Language: English
• Published: New Delhi Living Media India, Limited 19.09.2010
• Subjects: Portfolio management; Ramkumar, P
• ISSN: 0974-3650

Those who've made a quick buck in penny stocks are a dime a dozen, but you won't find too many investors who've amassed a fortune from micro-caps over the long term. Arun Kumar Mukherjee is an exception. The 22-year-old sub-broker with Motilal Oswal Securities in Kolkata says he started off with Rs 1,000 eight years ago and has since grown his corpus to Rs 1 crore - thanks largely to penny stock investments. The difference between Mukherjee and most of the penny-punters is that the former actually delves deep into each micro-cap he invests in - he claims to have analysed 800 of them so far, and spoken to the managements of each. "Nobody had gone in-depth into penny stocks and I always felt this area had potential," says Mukherjee. "All stocks need to be analysed, and small-caps even more so." What also sets Mukherjee apart from the rest of the speculative herd is that he is in it for the long term. "Don't look for quick gains," is his advice. And he has learnt that lesson the hard way. In 2002, Mukherjee invested in KEC International (renamed Summit Securities in 2000) when the stock was quoting at Rs 12. Mukherjee bought into the power transmission equipment company on the basis of its fundamentals. In the near term, the stock oscillated between Rs 9 and Rs 12. When the stock plunged under Rs 9, Mukherjee panicked and exited. A few months, later, KEC had touched Rs 20 - and in three years, it was at Rs 300. "I am still haunted by that incident," says the college dropout who learnt English by reading The Economic Times.