You are invited to a session on Investing

I am taking a two hour session this Sunday in the Bangalore stock exchange - the topic is " Stock picking in Indian markets - the Warren Buffet way" - the session starts at 10 am and the Bangalore stock exchange is just off the JC Road.

 

So if you are interested and if you are in Bangalore - please do come. It will be a good session - that's my promise.

 

The session is free.

 

Please pass this message on to your friends who may be interested.

My recommendations for investments now:

On 19^th June, US Fed indicated that they would end the QE3 by middle of 2014. Ever since then, the markets globally have been in a tizzy. The Indian Rupee crashed to almost Rs. 60 to a USD. Gold went down globally to $ 1200 per ounce from around $1350 per ounce. The Indian stock market fell by 526 points in one single day on June 20th. The Indian bond prices crashed and trading had to be halted on 20th of June.

As we all know, for the past few years, the central bankers in developed economies had resorted to a money printing spree -just to keep their economies propped up. This excess liquidity kept the interest rates in developed economies low and this cheap liquidity found its way into  financial assets globally including the Indian stock markets.

The global investors were riding the proverbial tiger and there was only one way out – to keep on riding or be eaten up. And now the US Fed has given a timeline to end the ride.

So where do we invest now?

My recommendations are as follows:

1. Equities – For those who are new to equities, you must stay away from the equity market for the time being. If you are into equities already, I believe that you will not make much money in equities till the next elections.  However, there will be opportunities to invest due to the gloom and doom - if one looks at select stocks. For example – TCS should do well as the Rupee devaluation will play to its advantage.  So I would recommend investing in select stocks where there will be opportunities and then stay invested for a few years.  You can write to me and be part of my private equity mailing list where I share my buy and sell activities in the equity markets.
2. Debt – Long term debt funds are not safe at this situation. I believe with the weakening of Indian rupee, RBI could be forced to raise the interest rates. It is best to keep money in liquid funds or in dynamic funds.
3. Gold – even though the whole world is looking away from Gold – I am starting to see some value here. If you have gold – hold on to it.  I am not recommending that you buy it now – but I believe if situation in the global markets gets worse in the coming months – then it would be time to invest in gold.

Spring cleaning and my current stock portfolio

One of the reasons I have a reasonably good track record in stocks is because I accept my mistakes and sell without any emotional involvement.

So here I am, selling a few stocks in the coming days – the timing of the sell depends on the market.

I am selling BHEL – where I have made a loss of 19% over two years.  So, assuming my expectations of 20% per annum, I have actually lost 60%. I was hopeful of the power sector story – but the coal scam is unlikely to be resolved till elections time - and I have lost my patience on this one. I have many friends in BHEL and I know it is a good PSU and I am still hopeful that things will eventually do well – and so I may enter this stock again in the future – but right now, I am selling it.

I am also selling Noida Toll Bridge – this is a safe company and it should have shown a ROI of 20% per annum - but has not. I have just made 2% over the past 18 months and that is not a good record. So I am selling it.

Post this sale,  my one year plus portfolio will consist of Page Industires, Havells, Sundaram Finance, HDFC bank, Bajaj Auto, Crisil, Agrotech Industries, Gruh Finance, TCS,  Swaraj engines, Maruti Suzuki,  Dabur India,  L&T, TTK Prestige, Colgate and Shriram Transport finance.  As I see it, all these are good companies worth holding for the long run.

Here is an investment idea that gives 7-9% passive income as well as capital appreciation of 15% per annum

Inside Electronic city in Bangalore, where there are thousands of IT professionals working, there is a new facility that has just got inaugurated by a company called Uniworld (http://www.uniworldindia.com/).  It is a studio apartment complex with about 720 fully furnished studio apartments that comes  with additional facilities like a cafeteria, laundrette, gym, lounges, gaming zone, 2/3 home theatres, WiFi, 100% power back up etc. This complex is meant for working professionals. The room rent starts at Rs. 5500 (on twin occupancy basis) and it is truly premium in the way it is built, furnished and managed. I have known the person behind this venture (Mr. Kush Shah) for about 18 months and I have recommended this investment opportunity to my most of close friends last year and many have invested in the property.  Yesterday, I had visited the complex, for the first time after inauguration in mid April and I sure am impressed - you can see some of the photos shot by me here.

 

For an investment of appx. 10-11 lacs, you can own one apartment -this apartment will be managed by the company (Uniworld) and will be rented out to working professionals. 75% of the rentals are returned back to investors every quarter and this works out to appx 7-9%. This is pure passive income on an investment secured by immovable asset. The rental income is paid back on a sharing basis –hence, even if your specific apartment is not rented, you will surely get a rental income as long as other apartments are rented out.

The location is so good that there are lots of flats coming up in the same road and the property rates in the area will surely go up by about 15% per annum as there are lots of IT jobs in that area.

Hence as an investor you will get a 7-9% return as passive income and also a capital appreciation of around 15% per annum.

So these are all the reasons why one must invest here.

There is one key risk elements here that needs to be mentioned – the key risk element is mis-management of the complex that could result in the rentals dropping and also lowering the value of the property. Kush Shah, who is the man behind the complex, along with his family, owns about 200 of these studio apartments (out 720 apartments) and has a pretty high stake in the success of the venture. Plus I believe that he has the ability to manage such a venture (that is my opinion though).

Also this is legally  not a residential property and is, I think, classified as a “Hostel” – so you cannot get a home loan for this investment.

Despite these negatives, I believe it is a good investment option and I recommend it whole heartedly to all my readers. Many of my friends from across the globe already own apartments here. As the complex is almost ready, there are just about 10 studio apartments left for investors – so if anyone of my readers want to reach out – you can write to me  – or better still, you can reach out directly to Mr Kush Shah or Mr Deshpande at ir.uniworld@gmail.com.

One short term stock idea

Here is an act that I normally do not recommend - but I must confess that I am thinking about it.

 

To buy or not to buy India cements stock - the stock has gone down due to bad news from IPL. The stock has fallen from Rs. 87 to Rs. 71.5 in tha past 5 days -about 18%.

 

I believe that this price drop is reactive and I believe that there is an opportunity - a short term opportunity - over time I believe that the stock will stabilise at it's 200 day moving average of around Rs. 85 - but right now the stock is down.

 

The likely scenario that will play up is the Srinivasan will survive as the BCCI head -till his term ends. Plus India Cements as a company is doing steady even though the cement industry is not doing well overall. Plus this year's IPL is almost over and all the revenues and costs would be accounted for till the next year.

 

So is the market reaction justified?

Well take you call. I am just trying to seed a thought in your mind right now.

If you have any data /views on this issue - please do give me your comments in the area below

 

My book FB Page -http://bit.ly/10x56GB

Markets are at a 52 week high –so what should you do?

There is lots of low cost money floating around globally –searching for good investment opportunities.  US, EU, Japan, Australia, S Korea, and many more countries including India have reduced their interest rates or maintained low interest rates since Jan 2013. This low cost capital is an opportunity for companies to borrow at a low rate and invest in creating productive assets (read capacity expansion) –which will in turn create economic growth. It is happening to a small extent – but most of this excess cash is ending up in speculation and in high risk assets like stock markets.  A part of this cheap money is coming into Indian stock markets through the FII route and this is the reason for the highs that we saw yesterday.

Globally - most stock markets are at a high right now. What is happening in India is a global phenomenon and we are just bystanders – we can see it, but we are not the real players.

 In India, the retail investors (people like you and me) are wary and not investing in stock markets right now. In fact even the Indian Mutual funds, are selling stocks over the past 3-4 months.

So what should you do? Do nothing – just watch.

The markets will be choppy this year. I expect the Indian markets go higher than ever before in 2013. Currently, our market PE is around 17.5 - our PE was around 21 in 2008-09 before the crash. So we are not too over priced yet. There is scope for the Indian markets to go higher and with the cheap money sloshing around, I expect the markets to go further up in the coming months.

We should be wary of entering stock markets now  – do not invest when the markets are high. If you want to exit and encash your profits – do it, but not today.  Wait for some more time. Even though we cannot “time” the exit – I believe the market is destined for higher levels.  You can exit then.

I do not plan to exit though.

Keeping a 3 year time frame, I am wary of investing in stocks currently. I intend to keep most of my liquid capital in debt funds (long term debt funds where we need to have a 12 month lock in). I will surely keep some cash at hand – you never know – life is full of opportunities and something always turns up round the corner.

Where am I investing now?

Searching for good equities at the right price is a waiting game – one has to wait patiently.

Over the past few months, there is news of more quantitative easing from Japan and Korea, the US stock markets are at an all time high, the US real estate market looks postive, the jobs data in US is starting to look OK, there is a seeming calm in the EU but the Indian political scene is unstable and does not give much confidence in the short term – with such good and bad news coming in,  the Indian stock markets have to be volatile. 

In the past 2/3 months, I have invested in Gruh Finance, Jubilant Food works and Nesco. All these companies are good companies, but their current valuations are high.  I still went ahead and invested as I believe that over the next few years, the valuations will stay high due to the low interest rate regimes globally and India growth story.

Having said that, this time I am investing through two sectoral mutual funds.  These are in sectors that are fairly ever green – these sectors are here to grow as the Indian  GDP per capita grows. As Indians grow richer over time (or less poor over time), the FMCG and the Pharma sectors will do well.  Riding this wave are a few mutual funds that have given very good returns in the past few years.

In the FMCG sector, there are two funds of which  the ICICI Prudential FMCG fund is the bigger one – it still has a fairly small asset base  of Rs. 214 crores. As the sector is doing well,  this fund has given an ROI of 17% compounded per annum for the past 5 years and 25% compounded per annum for the past 3 years. The fund manager manages about Rs 2500 crores worth of funds, of which this is his best performing fund. I have decided to invest in this fund with a 3 year plus time frame

There are three pharma sector funds - of which the Reliance Pharma fund is the largest with an asset base of Rs 675 crores.  This fund has given 23% per annum compounded over the past 5 years and 12.5% per annum compounded over the past 3 years.  The fund manager manages about Rs 5000 crores worth of funds, of which this is his best performing fund. I am investing in this fund also with a 3 year time frame.

Amongst the two funds, I am betting more on the FMCG fund – that story to me is a more positive story.  Having said that, I do believe that the pharma story is also a good story to place your bets on.   I normally aim at 15% plus tax free returns in whatever I do – and I am hopeful that these funds will meet my expectations.