There are many stocks that has moved significantly in just last one month. Before we tell you simply the stocks to buy, let us explain how we ended up picking these stocks, so that you can learn and apply the logic by yourselves. Upon digging deep one thing that we could found common in most of these stocks that gained the most recently. It is Free Float Market capitalization. Everyone knows about Market Capitalization, but what does free float market cap signify?
While calculating total market capitalization of a company, all the shares, including the ones publicly traded as well as ones held by promoters, government or other private parties, are multiplied with the stock price. But in the free-float market capitalization, we exclude shares held by private parties like promoters, trusts, or government. We only consider shares held and traded by the public and multiply them with share price to arrive at a free-float market capitalization of a company.
For example, Hindustan Zinc total market capitalization is 1,26,000 Crores, whereas its free float market cap is Rs.7,600 Crores only. Which means that Promoters, trust, governments and other large institutions hold most of the shares, lesser no of shares are readily available in market to trade.
Consider ITC as an example, its has market cap of around 2,70,000 Crores but out of that almost 1,91,200 Crores is free float cap, which are readily available in market to trade. So tons of shares are available in open market for ITC which makes it harder for market manipulators to drive up the price.
So the basic idea behind free float is
the one with relatively smaller free-float size will have higher volatility simply because it takes fewer traders to drive change in prices when the free float size is small. But in companies with a larger free-float size, more people are trading the shares, and so it takes more trading volume to make prices change significantly, and so the volatility is low.
Based on this approach, we wanted to look for stocks that has met the following conditions
- Stocks with smaller free float size compared to its total market cap
- Stocks that are trading near to 52 week high, this ensures that we are looking for only uptrend stocks
- Avoid penny stocks that are trading less than Rs.10, because its highly impossible to execute the trades on these penny stocks, since most brokers blocks it or it gets locked in upper circuits.
We can get the Free float market cap of all NSE stocks from this pre-open link
Now we need to get Total Market cap of all NSE stocks from this link
Now all we need to do is find out what’s the FF ratio,
free float ratio = Total Market cap /Free Float market cap
We can sort the stocks based on this ratio, which gives list of stocks with lowest free float market cap, means these are the list of stocks that are available publicly to trade with lesser quantity, means driving up the stock price is relatively easier, all it takes is just few days of up move, then momentum catches up and stock price would continue its up move further. We add additional filter of stocks that are trading at 52 week high or stocks that are trading not less than 10% from its 52 week high price.
We have short listed five stocks from this list which are expected to move up much higher in coming weeks.
HUDCO stock with free float ratio of 8.4, tops the list. The stock has a great dividend yield of 6.56%
- The stock is in clear uptrend, once it breaks Rs.50 barrier, it is poised to move up much higher. Stock is trading at 0.76 times its book value, Company has been maintaining a healthy dividend payout of 20.41%
PSU Bank Stocks:
The PSU Bank Index has been in fire since last few months, where many PSU Bank stocks which were considered to be dead seems to woke up suddenly, with such buying interested, we can expect a big revival in Public sector bank stocks.
Just like how Maharastra Bank recently made stellar up move, these three PSU Bank Stocks could be the next in the list that can make stellar up move, as these PSU Bank stocks have relatively lower free float.
- UNION BANK
- And we can add Equitas Small Finance bank as well in this list, which has a free float ratio of 7.5, it has been moving slowly and steadily, which is yet to come in most people’s radar. But once it finds its hotspot, this stock can shoot up significantly.
SJVN is another fundamentally sound dividend paying company with free float ratio of 6.9, it provides dividend yield of around 8%
- It has been in steady uptrend making 52 week high. If the uptrend continues, soon it can cross its previous resistance and make all time high. Stock is trading at 0.88 times its book value and Company has been maintaining a healthy dividend payout of 78.72%
- This stock with free float ratio of 5.3 is making new high consistently, with great profit growth and super ROE track record, it is expected to do much better is coming months. With penetration of digital transactions increasing multi fold, SBI cards is expected to grow much bigger. Company has delivered good profit growth of 36.09% CAGR over last 5 years and good return on equity (ROE) track record: 3 Years ROE 29.04%
New India Assurance Company Ltd another low free float stock with FF ratio of 5.2, a debt free company which has recently broke out from its long term resistance level with very huge volumes. With only fewer shares available in public for trading, this stock should be definitely in one’s portfolio.