Archive for September, 2006

The recent rally has been a large cap rally, quite heavy on the banking sector. Are bank stocks good? I see stable interest rates in the near term, though on the longer term we need to increase rates to be competitive worldwide. Real estate is slowing down, and in many metros even declining; in my opinion, there will be panic sales in 1st Quarter 2007 which will hit banks hard with defaults and negotiations. Treasury income has dried up and in the next two quarters will show no real sign of change.

I believe this is a temporary rally. The other heavyweights that have rebounded are oil stocks but not by much. Most of the FMCG counters (HLL, ITC) are overpriced, and so are the real estate plays (Bata, Indiabulls etc.) I think the market is overheated and now the "panic buys" are setting in; people are buying because they feel this rally will go on to 15,000!

It's time for the smart investors to look to exit. If this market hits 13,000 in four more trading sessions (next Friday) it is REALLY a panic situation and you should sell half your holdings in the heavyweights. Midcaps will follow the leaders and they might go up 10-20% in this rally, sell when each stock goes up 20% from where it is today.

You will get an opportunity to buy back at a much lower rate. The market will crash after Diwali and stay down till november end, in my foresight.

But if the market retains current prices and hovers around these levels for a long time (till October end) please ignore my prediction.

I'm assuming you're one of the former, otherwise you shouldn't even be here. So what do you do with what's left over?

1) Do you put it in a bank account, and spend it whenever you have a big purchase like an LCD TV, an iPod, a camera?
2) Do you make a fixed deposit every month (or once you have a large sum)?
3) Do you buy mutual funds, shares, or other investments?

1) is a Saving. 3) is an Investment. 2) is "saving" according to me (but others will think of it as an investment) There's a difference.

An Investment is where you can grow your money significantly above inflation, after tax is applied. Remember that quoted inflation is around 5% but for real terms, it's around 6.5% a year. That means your money needs to grow ABOVE That for any real returns. An investment MUST carry some amount of risk; assured returns are usually negative post-tax and post-inflation.

Savings are everything else. Money in the bank, in a fixed deposit, hidden in your pillow etc. Even bonds and debt mutual funds, in my opinion, are "savings" - they hardly return more than inflation post tax.

You might think "No! A fixed deposit can grow at 8% a year!" Reduce tax on that amount at 30%, you'll get 5.6% left over. That's still less than inflation of 6.5%.

Shares and equity/balanced mutual fund units are investments. They carry a large amount of risk, but have the potential to grow much more than inflation. Gold and other commodities are investments too, and so is real estate, paintings (art) etc.

Within investments you have two types: cash-flow and value-appreciation. Cash-flow means you get money ever so often; royalties from books, dividends, rent (from real estate) etc. Cash-flow income is usually called "passive income"; meaning you don't have to work for it.

Value appreciation is growth in the intrinsic value of what you buy. (Note: Cars, iPods etc. are not investments. They lose value from the minute you buy them!)

Most people usually buy for value appreciation, since there are limited cash-flow options available. In India for instance, both dividends and rents are around 3% post-tax, and that's no fun. But there are a few companies that consistently give 10% dividends, and places where you can get upto 7% as rents. You just have to look harder.

Investments are your future. Savings are your present. Straddle the two - keep around 40-60% of your money in investments and the rest in savings. You need your savings to build up your purchases and pay extraordinary bills (like a pregnancy or hospitalisation), but don't forego your investments either.

If you want to ensure a stable future, invest more. Key check:
1) It should "appreciate" in value (either through cash flow of value appreciation)
2) It should have an element of risk.
3) It should have the ability to grow more than inflation.

Stockhive's "funda" is to focus on effective presentation of technical and fundamental data of Indian traded stocks. Yog said (to me) that he built Stockhive because none of the other investing sites addressed my needs - simple things like showing trailing PEs, EPSs, growth rates, adjusting EPS for bonus and splits, showing technical breakouts, etc.

Now it's easy to comment on someone's work, and very difficult to do something yourself. Briefly put, Criticism is simple, Creation is tough. Kudos to Yogi for having implemented this site; I hope my comments will be of help to him and to the investing community at large.

I went in and registered in what was an extraordinarily short amount of time. Presented on the post-registration screen was a Sensex chart for one year till last Friday closing. A broad Sensex trend does me little good as I am a more active investor and tend to know where the index has been; more useful, perhaps, is the current value of the index and the change.

Searching for a company proved very interesting. As you type into the search field, you can see a list of matching companies, though "clicking" is not intuitive (the cursor does not become a hand). But the search is not very comprehensive - for instance, searching for "HLL" yields no results, and neither does searching for NSE or BSE codes. Also, you can't search for a sector like "Auto ancilliaries" - no results.

Now I went into a company page - Ranbaxy Laboratories. A colourful single page view of the stock lit up the screen, showing the Price, Trailing P/E (for a year from June 2006) and Trailing EPS. This is cool: I always had to get this information by adding up quarterly results in the NSE website. The price chart ran over a year with prices adjusted for the split last year; and key factors such as Sales Growth, EPS growth, EV/Sales, EV/EBIDTA etc. are displayed.

I wish there was more explanation of these terms ("help"), and more importantly, a comparision within the sector the company is in. For instance, an EV/EBIDTA value by itself is useless - sector comparative numbers indicate value buys. A link to rank companies by these factors and within sectors would be extremely useful; for instance, I would like to see financial data ranked by EV/EBIDTA of Pharma companies.

Key values that are missed: Dividend yield, Last Announced Dividend, Today's volume, Beta value, BSE vs. NSE price & volume and link to company web site.

There's a link to "News", which seems to be a consolidation of NSE+BSE announcements, but no sources are mentioned. since nearly One problem is that the "year" is not mentioned in the announcement, which is a problem when looking at an entry named "10 Jun".

The "Financials" gives you quarterly results, balance sheets and P&L accounts. The nice thing here is that all of this is adjusted for stock splits and bonuses. The graphs are not that useful - I tend to look at data more - but the data is also available to view.

There's also a Company Background information giving you names of directors, the Registered office, and a year wise loosely formatted summary of the company. This is probably pasted from Asian CERC data, for I found a few other sites with this data as well.

You can also have companies in your "watchlist" that allows you to see specific companies you want to track, and your "recently viewed" companies are visible as a list on the main page.

What's missing?

As I'd mentioned before, company and sector comparisons are absent. Data isn't real time - but that will likely be fixed later.

Watchlists don't provide tabular information on stock prices, changes etc. - like the Moneycontrol.com portfolio stock tracker page, which is quite useful for a one shot look at your portfolio. Further your watchlist is not a portfolio tracker, so you cannot get investment analysis, or set up price alerts etc. on this page.

There's no community participation on the site; no stock specific discussions, or viewable feedback/rating. What I'd love to see is : Rs. 10,000 invested in this company 1, 2, 5 years ago would now be worth (X,Y,Z), accounting for bonuses and splits.

There's no way to set up a complex query - such as, give me stocks with P/E less than 20 and 1 year growth of greater than 30%, and average daily traded value greater than 5 crores. No site gives me this information, so I have always ended up doing this through a program I've written. But most sites have canned lists of "Upper Circuit stocks", "Highest Dividend Yield" etc.

Last but not least, there is no information on futures and options, or mutual funds (even index traded funds).

In all, I think Stockhive has potential; it's a site written by an investor, so there are some good things that can happen. How they will make money is a question I don't have an answer for - all the information they present is already available online, so why would anyone pay? Ad revenue isn't all that much nowadays. Stockhive is funded by two private companies and by Yogi himself, but that will only go so far. At this point, the site does very few unique things to get people to pay; but as a free site this will go a long way.