Do you want to try an unconventional yet effective investment strategy?
If yes, then start focusing on stocks with a low float.
What are Low float stocks?
Low float stocks are stocks with a relatively small number of shares available for public trading.
Keeping the share count low and not splitting the stock tends to be a sign that a company is more focused on its long-term growth and success rather than short-term performance in stock market.
Additionally, not splitting the stock can signal that a company is confident in its ability to continue growing and creating value for shareholders without the need for artificial price adjustments. This approach can be attractive to investors who prioritize a company's fundamentals and growth potential over short-term market fluctuations.
Ya got it. Can you show me the list of low float stocks?
If this is what you are thinking, then here is a list of all the stocks where the total float or share outstanding is < 3 crore and market cap is > 1000 crores. You can sort the table by clicking on the column headers and can also click on rows to get more details on the price, results history, insider buys, delivery % and institutional holding history.
Filter Table By Market Cap
Just to clarify, the data is based on float or total float and not free float. There is a subtle difference between the two.
Float: This refers to the total no shares of a company held by promoter, public, institutions and various other entities.
Free float: This refers to the number of shares of a company that are available for trading on the open market, excluding shares that are held by insiders and shares that are held as strategic investments by other companies.
Looking for a multibagger? Look no further than a thriving business with a small float.
Now let me tell you why it's a good rule of thump to put stocks with the lowest number of shares outstanding at the forefront of your watch list.
Supply and demand. Does this principle ring a bell?
Companies with a lower number of shares outstanding often have a higher level of ownership concentration among its shareholders. This can result in greater alignment of interests between management and shareholders, which can lead to better decision-making and a stronger overall performance.
Furthermore, when a company has a lower number of shares outstanding, the supply of shares available for purchase is relatively limited. This can create greater demand for the stock, which can lead to an increase in the stock price in relatively shorter time frame.
Let me tell you a secret.
Secret to quick profit with low float stocks lies in high float rotation
But what is Float Rotation?
Float rotation means the amount of times a stock's entire float, or available shares, is traded during a single trading day. For example:
Let's say there is a stock with float = 10 Lakh shares
Trading volume today = 30 Lakhs
Then float rotation = 30/10 = 3 times of Float or 300% of Float
You can decide the pecking order of your watch list by looking at the trading volume of low float stocks on daily basis.
All else equal, the stocks with higher float rotation should ideally be at top of your favorites list.
If you think carefully, high float rotation inherently means high demand.
And when there is low supply, this demand could have amazing effect on prices in very short span of time.
I would encourage you to test this theory on the next set of data I am going to provide. Here is a table listing low float stocks with high float rotation on daily basis.
Focus on the Float Rotation column. It's Volume expressed as percentage of Total Float column. Just in case you are confused about Delivery % column then it is nothing but the security wise delivery % for the day. You can sort the table by clicking on the column headers and can also click on rows to get more details on the price, results, insider buys, delivery % and institutional holding history.
Now to test the theory I proposed above, you just need to be watchful.
Analyse the price movement of stocks that appear at top of the table for few days. The question you have to answer is:
Does high float rotation lead to sharp move in stock prices?
Most probably your answer will be yes.
Before I move ahead, a quick pointer:
People at times confuse trading volume with the float of a stock because both concepts are related to the supply and demand of shares. Don't do that as trading volume measures the number of shares that are being bought and sold during a given period of time, while float represents the total number of shares that are available for trading.
Ok, so now you have a focused list of high float rotation stocks. Won't it be great if you are able to find some partners in crime? Hear this:
High institutional holding in low float stocks with high float rotation could be a very positive sign indicating strong fundamentals, stability, and the potential for long-term value creation.
Here is the list of low float stocks having substantial holding by FII's, Mutual Fund Houses and influential individual investors. As with earlier tables, you can sort the table by clicking on the column headers and can also click on rows to get more details on the price, results, insider buys, delivery % and institutional holding history.
If you are skilled in trading derivatives, then here is the list of low float stocks that trade in the FnO section. It's important to note that trading low float stocks in the F&O segment can be very risky, as their prices can be volatile and may be influenced by a variety of factors. So if you are a beginner or not yet profitable in trading derivatives, then it's in your best interest to ignore this table.
Let me be the Devils Advocate
Hold on for a moment and think.
What kind of challenges you might face while dealing in low float stocks?
If you have spent enough time trading and investing then you already know the answer. Let me spell it out for the rest.
The key challenge will be to deal with the inner conflict. How?
Although there are potential rewards, investing in low float stocks can be very risky due to their volatility and susceptibility to manipulation.
Yes, low float makes it easier to manipulate the trading volumes since one needs to game relatively lower number of shares to control the prices.
And there is a very fine line that separates investment grade low float stocks from the rest.
So the inherent volatility that comes with low float stocks will always lead to self doubt.
The day the price falls by 10%, you will have to really struggle hard with yourself. Should I hold or was it a mistake?
Trust me, it will happen more often than not.
Volatility is the enemy....always.
Volatility will test your patience, create an environment of self doubt and ultimately push you to do the wrong thing.
Having said that, it's not all gloomy. Here are few things you can do to avoid the misery:
- Conduct thorough research before investing on company's financial health, growth potential, and competitive position. This will build conviction to hold in time of unavoidable volatility in the prices. You can do this research effectively on our revenue & profit analysis page.
- Do set a very hard stop loss in mind. You are not going to hold the stock beyond a point come what may. Remember, there is always a next time in stock market. You can study the daily and historical volatility data of the stocks here and use it to decide on the stop loss.
An additional thing you must do is to look for the reason behind the low float. Has it been historically low? If it's a recent phenomenon, then what caused it. This additional analysis can help build further conviction in time of volatility.
And to help save your effort on this analysis, here is a comprehensive list of all the stocks (low float or otherwise) whose float have been decreasing from past few years. The primary corporate actions that lead to decrease in float could be buy backs, reverse split, ESOPs and few others. You can sort the table by clicking on the column headers and can also click on rows to get the total float change history plus the corporate actions which might have been the reason for the change in total float or number of shares.
I know what you are thinking. Click on the button below to get list of all low float stocks whose total float has been decreasing in the recent past. Click on rows to get the total float change history plus the corporate actions which might have been the reason for the change in total float or number of shares.
I hope now you have enough ammunition to deal with low float stocks. Happy Investing!