Friday, April 26, 2013

Should you invest in gold now?

I know this is late by two weeks –I was travelling for book sessions to Pune and Delhi for the past two weeks and hence I could not blog. In all my book sessions, this topic came up – should we invest in gold or not?

So here is my take –

If you follow my blogs or have read the chapters in my book on Gold– you would know that:

Indian price of gold = “Global price of gold” X “USD / INR conversion ratio”.

The current drop of gold price is directly attributable to the global price of gold.
Around the 15th of April, gold price dropped by about 10% - from around $ 1550 -1600 per ounce to around $1350 per ounce. It is now around $1450 per ounce.
This had a corresponding fall in Indian markets - from Rs 2725 per gm to Rs 2400 per gm – now it is around 2475 per gm.

The global price of gold was expected to be subdued in 2013 as the US stock market has risen since 2012 – globally, money is moving away from gold and moving into equities. Also, gold has gone up in USD terms for 12 straight years and so a small correction in the price was expected sometime soon.

In the coming two years, the US stock markets are further expected to do well – that single factor will keep global gold prices subdued in 2013 and 2014

Will it be in the current range of $ 1450 per ounce?  
Most analysts believe that this would be the case. I too believe that global price of gold will not go up in the coming 2 years.
The second factor -the USD/INR ratio will surely help Indian gold investors a bit as the long term trend of the USD /INR ratio is one of devaluation.  I believe that INR will devalue by about 6% to around Rs 57 to a USD  this year and that will give the gold investors in India a 6% appreciation in gold prices. I expect similar scenario next year even though it is hard to predict next year as it is an election year.

When you combine these two factors, with a 2 year time frame – you can see that, gold in India will not give great returns – it would be close to 6-10% returns per annum at best.

So should you invest in gold?

Surely not with a two year perspective. 

Those who bought gold in the current dip - well you will make a few % points more as your entry price was low – but that is not a good enough reason to buy gold with a two year horizon.
Those who hold gold in their portfolio - be aware that you will get only 6-10% returns on this part of your portfolio and then decide whether you want to keep it or sell it.

Thursday, April 4, 2013

Love at first sight

I am almost 50 and I have fallen in love again.

I did not even know this company till a few days back. My ex -student, expert stock picker and advisor, Jatin introduced me to this company three days back. My first impression was that it is too small and too cash rich. It sure was an unusual company – its website did not even list the services that it offers  -and  I wondered what the marketing department was doing?

Jatin persisted – sent me a few reports and as I read the reports – I fell in love slowly. I spent almost the whole day yesterday doing research on this company – slept over it last night and today I am happy to announce that I am investing in this company.

The company is NESCO  – they own 70 acres of land in Mumbai  - of this they have used 25 acres and the remaining is still to be utilised.  They own the Bombay Exhibition centre where most of the large exhibitions in Mumbai are held – the centre is booked all through the year and earns them INR  80 cr per annum. They also have commercial spaces rented out to IT companies, from where they earn INR 25 cr plus per annum. Both these are very high margin businesses.

They are  adding additional commercial space and exhibition space in the next 3-4 years. The management is conservative and uses cash generated internally for these expansions and they are very cash rich (appx 240 cr in their books).

My analysis shows that it will give a good 20% plus return every year at the current price of 790-795 per share.
 would suggest that you also do your analysis before investing in this stock.
Here is a small note for my readers -
I have stopped  sharing my equity calls through this blog. But in case you want to know my equity calls, please do write to me at or in the comment column below -I have a private mailing list where I share my equity calls. Remember, when you decide to follow my calls, the rewards are your's but the risks are your's too.