I have been enjoying the strength displayed by the mid caps recently. Like any retail investor, I too have my portfolio biased towards mid caps. I had read in a website www.damodaran.com about the general performance of mid caps in any market. The annualised returns are higher than that of large caps when tabulated for over 7 to 8 year periods. Also the rally in mid caps usually gathers steam between longer time intervals. This means that if one aims to get better returns as compared to the large caps, then one has to hold on to mid caps for a longer period of time. The risk associated with such a strategy is that every now and then, some of these mid caps throw some negative surprises, which the markets swiftly discount and tear them apart. A good example would be Subex Azure. Once regarded as a quality mid cap stock in the IT space, today two thirds of the company is owned by creditors. The quest for fast growth lead the company to one huge acquisition because of which the debt has spiralled and the shareholders have lost tremendous wealth even in bull market periods. The lesson I have learnt: "You better be very choosy when you enter a mid cap stock". But of course sometimes greed takes control and I do buy some small caps, although with sound fundamentals. I just keep adding to my conviction while my average returns are taken care of by some good large cap stocks and one or two high flying mid caps

Whether the Dubai scare was underplayed or not, I really do not know. But I recall that when the first news flow on the sub-prime crisis started there was a knee jerk reaction only. Then the up-trend resumed with renewed vigour. Remember the RNRL & the RPL horses which took our sensex above 21000? For a moment I thought this could be a replay of those events. But I still am not sure.
Promptly I received an email claiming that this event was only a trigger and not the cause for the knee jerk reaction. There could be a fast ride to 5400 nifty (so the email claims). But I will stick to basics and keep looking for pockets of over valuation, especially in some of the mid-caps I hold. I am yet to find any such cases.
There was an interesting comment by the popular TV anchor on Tata motors, where he suggested that analyst estimates for the bottomline could be anywhere between 3000 to 4000 crores. Now that could be a huge peak to scale. No wonder, market movers are busy discounting 2010-11 earnings in this stock. Otherwise, I think this bounce in the index will still be regarded with suspicion by retail invetsors.
Increase the investment horizon all the time is what I always feel. What say? By the way, has anyone been able to guess the name of the small cap I commented on in my last entry It was apcotex industries!! Only for your information!!

For the first time in many years, I did not feel the pinch when the market indices were sliding on thursday and friday (first half). I think now there are serious takers for mid caps and small caps. I bought one small cap as it was going too cheap and my dividend yield was working out to be over 5%. I sold out on one stock booking losses and bought another(one I already own) with that money. It means one less stock to watch. With the addition of that one small cap stock, I have now the same number of stocks as before. I always felt that fewer the annual reports I get, better I can read them. What say?
Now can i hear you guys asking which small cap?, I can drop a few hints. (1) It is trading below book value (2) It has no debt (3) The promoter has recently announced a buy back offer at a price above the current market price. Come on, put that grey matter to some serious work. I do have some concern though on small caps. The season, or should I say, the fancy for small caps comes once every 5 to 6 years. So my patience will definitely be tested. Maybe, I become a better investor that way. So let us just see!
As for the markets, I think we should have a good December. The broadbased movement in the market is a good sign. Last weeks narrow range also is a good sign. So all the best for a good rise!!