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Uncovered Thai Stocks is approaching its first year on Substack. Many of you joined along the way. You have seen the companies we focus on, but perhaps not the thinking behind them.
This post brings together the core ideas from our earlier articles. We explain what makes a stock “uncovered,” why we think this part of the Thai market is worth a closer look, and how we analyze and rank the companies in the Uncovered Thai Stocks universe.
The gap in Thai stock research
Hundreds of companies are listed on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (mai), but analyst attention is concentrated on the largest and most actively traded companies. With so many brokers and institutions studying them, their share prices tend to reflect new information quickly.
Among smaller companies on the SET and the mai, the picture is different. Their shares often trade in low volumes, and few analysts, if any, cover them. With fewer people paying attention, share prices can take longer to reflect what is happening inside the business.
Uncovered Thai Stocks is supported by the Thailand Capital Market Development Fund (CMDF) and was set up to help close that gap.
What “uncovered” means
We consider a stock “uncovered” if fewer than three analysts cover it. By coverage, we mean an analyst who has a recommendation, a target price, and forecasts on the company, and has published a report on it in the past six months.
We set the minimum at three because one or two opinions are too few to form a reliable consensus estimate. Dr. Andrew Stotz, CFA, used the same cutoff in his doctoral research.
When a stock gains a third analyst, it is removed from the Top 50 at the next quarterly update, even if it still looks attractive. At that point it is no longer uncovered.
What sets these stocks apart
Small, lightly traded stocks are not for everyone. For investors with patience and a long-term horizon, though, they can offer something larger stocks usually don’t.
Illiquid, under-researched stocks often trade at a discount to their intrinsic value. That discount can narrow as coverage and liquidity improve and the market re-rates the stock.
These stocks often carry additional risks. Shares can be hard to sell because trading volumes are low and only a small portion may be freely traded. Due to a lack of coverage, less information is generally available, and news about important changes in the business may take longer to reach the market. Uncovered stocks call for a high risk tolerance, careful position sizing, and staying on top of things.
Not every uncovered stock makes the cut
Our universe excludes companies in the Financials sector and REITs. Every stock in it must also meet these requirements:
Average daily turnover of at least US$5,000 (~Bt160,000) over the past three months
A Corporate Governance Report (CGR) rating of 3 or higher from the Thai Institute of Directors (IOD)
No SET caution or suspension signs (CB, CS, CC, CF, or SP)
No qualified opinion from its auditor
No formal accusation by Thailand’s Securities and Exchange Commission (SEC)
From 300 stocks to the Top 50
Each quarter, we evaluate and rank our universe of about 300 Uncovered Thai Stocks using the A. Stotz Investment Research FVMR® framework. FVMR® stands for Fundamentals, Valuation, Momentum, and Risk, the sources of investment returns.
Using our framework, we developed the A. Stotz Stock Picking Checklist. We studied stocks that had multiplied in value and identified eight characteristics they shared, including strong long-run sales growth, sustainably high gross margins, and consistently positive operating cash flow. We then backtested those factors to find the combination that has historically performed best.
From the quarterly ranking, we publish AI-powered reports on the Top 50 Uncovered Thai Stocks. A high rank indicates that a stock has characteristics historically linked to outperformance. It suggests a higher likelihood, not a certainty. There are, of course, no guarantees in investing.
World Class Benchmarking
A central part of our analysis is World Class Benchmarking. It ranks each company from 1 (best) to 10 (worst) on six financial measures relative to peers of similar size in the same sector, drawn from a global universe of 27,000 non-financial companies.
The analysis is presented as a triangle. At the top sits Profitable Growth, the measure that matters most. Our research has linked it to share price gains. The measures beneath it show where a company is doing well, where it is falling short, and whether performance is improving.
Thinking backward about growth
Most stock analysis asks how big a company can get. We also ask the opposite: what is stopping it from getting bigger? The approach draws on Charlie Munger’s advice to “invert, always invert.” The idea came from Founding Partner Alexander Wetterling, CIPM, in a conversation with Dr. Andrew Stotz, CFA.
For each company, we assess four constraints to growth and rank them from most to least limiting. Capital is about whether the business can fund its growth. Operations covers whether its supply chain can keep up with rising demand. Market asks how much room is left to expand, and People looks at whether leadership has the depth to execute. For family-led companies, that includes whether the next generation is ready to take over.
Uncovered Thai Stocks Snapshots show how each constraint applies to individual companies. If the constraints look manageable, you might be onto something.
Getting the most from our research
Our reports are intended to be a starting point for further research. The reports provide investors with objective, data-driven analysis that serves as a preliminary resource. This content is for informational purposes only and is not intended as investment advice.
If a company in the Top 50 catches your interest, the next step is to learn more about it. Reading its MD&A and other filings on the SET website, attending its AGM, or talking to people who know the business can all help fill in the picture. Our Reading between the lines series is a good place to start. Each article compares a company’s consecutive MD&As to see what’s changed and what’s worth watching.
Thank you to everyone who has read, shared, and subscribed over the past year. Whether you joined at the start or more recently, we hope this has given you a clearer picture of what we do and why we do it.
We look forward to sharing another year of insights with you.