2nd March 2008, 07:26 PM
I haven't read any book by Benjamin Graham.
What was the figure given by him?
Actually that figure won't even be valid today for US markets, unless you adjust it for inflation.
I think the reason behind a "minimum turnover" figure, would be to avoid risks of unexpected developments.
Usually smaller companies are more vulnerable to changes in their industry.
Take the case of IT industries. Most bigger players are still growing fast today. On the other hand, many medium and small sized companies are finding it very difficult to maintain margins.
The smaller a company is, more unpredictable it becomes, compared to larger companies in the same industry.
Smaller companies are usually more dependent on a few clients. A big client coming to, or going from a company can make significant difference to the company.
I would not like to give a figure for a minimum turnover, but I would suggest that an investor's exposure to small companies should be limited.
Not more than 20% of the portfolio, should be small-caps.
One has to be very careful of any company with less than Rs 300 crore annual turnover......especially if no analyst is tracking it.