Wednesday, January 30, 2008
Simplex Infrastructure expecting good growth ahead
Simplex Infrastructure has over the past few years successfully built pre-qualifications for new verticals like roads, ports (marine), urban infrastructure, civil and industrial construction, the company’s growth from a piling and power sector focused construction player to new verticals. Simplex Infrastructure has an order book position of Rs 8,300 crore comprising: building and housing – 26 per cent, roads – 23 per cent, industrial construction – 22 per cent, urban infrastructure – 12 per cent, marine – 10 per cent, and power – 7 per cent. Private sector constitutes 65 per cent of the company’s current order book; short project execution cycle leads to better margins in a continued tight industry scenario; superior return ratios (RoE and RoCE) versus peers; and focus on faster project execution - has one of the largest fleet of equipment. This sites the company looks to a strong growth in future.
Saturday, January 26, 2008
Stock Market Success - Smart Money Moves
The stock market can be a tricky and certainly risky venture to get into. But the opportunity for making large sums of money is incredible alluring and, if you do it right, definitely worth it. Doing the stock market right means doing it safe, by making smart stock market moves. Here's how:
1. Invest small at first. Dabble in the market, don't go full throttle all at once. What separates the beginning winners from the crash and burn losers, are the amount of money they invest. The losers will bet the whole boat in a matter of a few weeks. And then they'll disappear, never to resurface in the stock market again. The smart investors and future winners will be the ones who throw a small amount here, and a small amount there. Testing the waters and never throwing down more than their willing to lose. Once they invest small and begin to win some, and perhaps lose some, then they will have the knowledge to go bigger. And once they have the knowledge to go bigger, the money can really begin to roll in big time.
2. Get a program to do your work and increase efficiency. The old time investors are still in the dark ages when it comes to stock market programs and the efficiency that they can provide. The new, cutting edge investors are utilizing and actually designing programs to make investing faster and much more profitable. They can find several great, highly profitable stocks in half the time it would take the normal person to discover them, all with the help of software or automated robot programs which do the majority of the work. Find a good program to aid in your investing, and your not only looking at higher profits, but higher profits in a very short amount of time.
Source: http://ezinearticles.com/?Stock-Market-Success---Smart-Money-Moves&id=874120
1. Invest small at first. Dabble in the market, don't go full throttle all at once. What separates the beginning winners from the crash and burn losers, are the amount of money they invest. The losers will bet the whole boat in a matter of a few weeks. And then they'll disappear, never to resurface in the stock market again. The smart investors and future winners will be the ones who throw a small amount here, and a small amount there. Testing the waters and never throwing down more than their willing to lose. Once they invest small and begin to win some, and perhaps lose some, then they will have the knowledge to go bigger. And once they have the knowledge to go bigger, the money can really begin to roll in big time.
2. Get a program to do your work and increase efficiency. The old time investors are still in the dark ages when it comes to stock market programs and the efficiency that they can provide. The new, cutting edge investors are utilizing and actually designing programs to make investing faster and much more profitable. They can find several great, highly profitable stocks in half the time it would take the normal person to discover them, all with the help of software or automated robot programs which do the majority of the work. Find a good program to aid in your investing, and your not only looking at higher profits, but higher profits in a very short amount of time.
Source: http://ezinearticles.com/?Stock-Market-Success---Smart-Money-Moves&id=874120
Friday, January 25, 2008
Sesa Goa positioned to ride
"Sesa Goa is India’s largest private iron-ore miner and exporter. The company is well positioned to ride the current boom in the iron-ore market on the back of an output of approx 10mtpa, which it is planning to increase to 15mtpa over the next three years. Further, Sesa Goa is mulling increasing its spot sales to 50% by approx CY10E from 24% at present, given that the current differential between the spot and the contract markets is more than 100%. The company has access to resource & reserves of approx 207mnte (i.e. 20 years of mining life) of iron ore. At Rs 2,618/share, Sesa Goa is currently trading at FY09E and FY10E P/E and EV/EBITDA of 7.9x & 6.9x and 4.4x & 3.3x respectively. Initiate BUY with a target price of Rs 3,990/share,"
Wednesday, January 23, 2008
Stock Investing Instruction Stock Market in Young Age
“An investment in knowledge always pays the best interest”
These days stock market investment is right very popular. Many young investors gain interest in share market. Regretful to say, most will find lose money more than they earned in their first conjecture. Why youngsters can’t make it in their first venture?
Stock Market is multifaceted. Although anybody can make money in stock market now merely learning the functioning will not make money for them. If you now acquire happening you will find it a scary task to appreciate almost everything at the alike time. You have no choice but to spend least 5 hours per week studying on stock. And prepare to use money to obtain the in turn and tools that is requisite.
Finally Warren Buffet starts investing in stock at 11 and yet regrets not to start much earlier. And the best stock investing advice from him is start investing as young as likely. Other than make sure you are 100pct induces of what you are doing before betting any money into it. Or else mull in excess of invest in low down risk MF first.Many teen investors cannot give the time and money. Also they are so full of activity with the homework and task or enjoy spending time hang out with friends. There is nothing wrong with that but risking money in a bit that they do not know sufficient is financially suicide.
To alleviate the danger of downward money, you should merely invest with money that you can pay for to lose first. Having additional $1000 is now not sufficient. You do not desire to risk your graduates scroll with some losing stocks do you? If not you have so much money or all-consuming cash flow.
On the other hand this might not hold true for stock trading just for the reason that stock trading is not an investment but another job instead. So the first establish capital can be from additional investors. Except you need to have what it take to be a stock trader which can be more complicate than stock investment.
These days stock market investment is right very popular. Many young investors gain interest in share market. Regretful to say, most will find lose money more than they earned in their first conjecture. Why youngsters can’t make it in their first venture?
Stock Market is multifaceted. Although anybody can make money in stock market now merely learning the functioning will not make money for them. If you now acquire happening you will find it a scary task to appreciate almost everything at the alike time. You have no choice but to spend least 5 hours per week studying on stock. And prepare to use money to obtain the in turn and tools that is requisite.
Finally Warren Buffet starts investing in stock at 11 and yet regrets not to start much earlier. And the best stock investing advice from him is start investing as young as likely. Other than make sure you are 100pct induces of what you are doing before betting any money into it. Or else mull in excess of invest in low down risk MF first.Many teen investors cannot give the time and money. Also they are so full of activity with the homework and task or enjoy spending time hang out with friends. There is nothing wrong with that but risking money in a bit that they do not know sufficient is financially suicide.
To alleviate the danger of downward money, you should merely invest with money that you can pay for to lose first. Having additional $1000 is now not sufficient. You do not desire to risk your graduates scroll with some losing stocks do you? If not you have so much money or all-consuming cash flow.
On the other hand this might not hold true for stock trading just for the reason that stock trading is not an investment but another job instead. So the first establish capital can be from additional investors. Except you need to have what it take to be a stock trader which can be more complicate than stock investment.
Stock Market Crash
What Really occur When The Stock Market Crashes?
The market is known as a bull market, when the market hit the highest point and investors are buying and making profits, then. However, as many economists point out, bad times always follows the strong economic times. Whenever the stock market pitch s high and profits are good, economic recession eventually happens.
Sometimes, stock markets crash because of a specific economic or political situation. What we say that a market crashes, what we mean is that the value of stocks drops spectacularly across the board. Somewhat than just one corporation being affected, the stocks of many or all corporations fall noticeably. This, in turn, causes investor panic and many people rush to sell their stocks. The more people try to sell their stocks lower stock value falls, making the problem worse
Who Is Involved In A Stock Market Crash?
Many people are involved in a stock market slump. Involvement is of, shareholders or those who own stocks who are most involved. In many cases, it is investors themselves can add to a crash. Investors may borrow money to buy stocks or may invest in stocks without thoroughly understanding the stock market. Investors who are undisciplined and who do not understand the market may be among the first panic and try to sell their stock, pushing a temporary downturn into an actual crash.
More significantly, however, investors are often part of assumption. This means that they buy stock in the hopes that it will increase in profit. When some sort of economic news seems to suggest that they will lose money, again, they often rush to sell their stock, driving stock prices down. Companies selling stock are also involved in the stock market crash. As their stock values drop, many companies will tightly curled and reduce spending. Often, this can lead to job cuts and other types of decrease which can affect the economy overall and can reduce customer and investor confidence.
Investments and finance professionals also involved in a crash. They are the ones that not only report the incidents to the media and explain it to reporters, but they are also the ones that people frequently consult when their stocks fall.
Who Exactly Affected By A Crash?
In short, everyone is affected by a crash. When the stock market takes a downturn, job loss, slow (Gross Domestic Product) GDP growth, slow economic growth, and overwhelmed consumer confidence are often the results. Investors and companies are making less money, companies are closing, and therefore people are buying less. This affects virtually every aspect of the economy and causes overall economic depression. Since the crash often follows a bull market, many people are panicked by the sudden economic downturn and may become even more cautious with their money, which can further hinder financial growth.
The market is known as a bull market, when the market hit the highest point and investors are buying and making profits, then. However, as many economists point out, bad times always follows the strong economic times. Whenever the stock market pitch s high and profits are good, economic recession eventually happens.
Sometimes, stock markets crash because of a specific economic or political situation. What we say that a market crashes, what we mean is that the value of stocks drops spectacularly across the board. Somewhat than just one corporation being affected, the stocks of many or all corporations fall noticeably. This, in turn, causes investor panic and many people rush to sell their stocks. The more people try to sell their stocks lower stock value falls, making the problem worse
Who Is Involved In A Stock Market Crash?
Many people are involved in a stock market slump. Involvement is of, shareholders or those who own stocks who are most involved. In many cases, it is investors themselves can add to a crash. Investors may borrow money to buy stocks or may invest in stocks without thoroughly understanding the stock market. Investors who are undisciplined and who do not understand the market may be among the first panic and try to sell their stock, pushing a temporary downturn into an actual crash.
More significantly, however, investors are often part of assumption. This means that they buy stock in the hopes that it will increase in profit. When some sort of economic news seems to suggest that they will lose money, again, they often rush to sell their stock, driving stock prices down. Companies selling stock are also involved in the stock market crash. As their stock values drop, many companies will tightly curled and reduce spending. Often, this can lead to job cuts and other types of decrease which can affect the economy overall and can reduce customer and investor confidence.
Investments and finance professionals also involved in a crash. They are the ones that not only report the incidents to the media and explain it to reporters, but they are also the ones that people frequently consult when their stocks fall.
Who Exactly Affected By A Crash?
In short, everyone is affected by a crash. When the stock market takes a downturn, job loss, slow (Gross Domestic Product) GDP growth, slow economic growth, and overwhelmed consumer confidence are often the results. Investors and companies are making less money, companies are closing, and therefore people are buying less. This affects virtually every aspect of the economy and causes overall economic depression. Since the crash often follows a bull market, many people are panicked by the sudden economic downturn and may become even more cautious with their money, which can further hinder financial growth.
Stock Investing Instruction Stock Market in Young Age
“An investment in knowledge always pays the best interest”
These days stock market investment is right very popular. Many young investors gain interest in share market. Regretful to say, most will find lose money more than they earned in their first conjecture. Why youngsters can’t make it in their first venture?
Stock Market is multifaceted. Although anybody can make money in stock market now merely learning the functioning will not make money for them. If you now acquire happening you will find it a scary task to appreciate almost everything at the alike time. You have no choice but to spend least 5 hours per week studying on stock. And prepare to use money to obtain the in turn and tools that is requisite.
Finally Warren Buffet starts investing in stock at 11 and yet regrets not to start much earlier. And the best stock investing advice from him is start investing as young as likely. Other than make sure you are 100pct induces of what you are doing before betting any money into it. Or else mull in excess of invest in low down risk MF first.Many teen investors cannot give the time and money. Also they are so full of activity with the homework and task or enjoy spending time hang out with friends. There is nothing wrong with that but risking money in a bit that they do not know sufficient is financially suicide.
To alleviate the danger of downward money, you should merely invest with money that you can pay for to lose first. Having additional $1000 is now not sufficient. You do not desire to risk your graduates scroll with some losing stocks do you? If not you have so much money or all-consuming cash flow.On the other hand this might not hold true for stock trading just for the reason that stock trading is not an investment but another job instead. So the first establish capital can be from additional investors. Except you need to have what it take to be a stock trader which can be more complicate than stock investment.
These days stock market investment is right very popular. Many young investors gain interest in share market. Regretful to say, most will find lose money more than they earned in their first conjecture. Why youngsters can’t make it in their first venture?
Stock Market is multifaceted. Although anybody can make money in stock market now merely learning the functioning will not make money for them. If you now acquire happening you will find it a scary task to appreciate almost everything at the alike time. You have no choice but to spend least 5 hours per week studying on stock. And prepare to use money to obtain the in turn and tools that is requisite.
Finally Warren Buffet starts investing in stock at 11 and yet regrets not to start much earlier. And the best stock investing advice from him is start investing as young as likely. Other than make sure you are 100pct induces of what you are doing before betting any money into it. Or else mull in excess of invest in low down risk MF first.Many teen investors cannot give the time and money. Also they are so full of activity with the homework and task or enjoy spending time hang out with friends. There is nothing wrong with that but risking money in a bit that they do not know sufficient is financially suicide.
To alleviate the danger of downward money, you should merely invest with money that you can pay for to lose first. Having additional $1000 is now not sufficient. You do not desire to risk your graduates scroll with some losing stocks do you? If not you have so much money or all-consuming cash flow.On the other hand this might not hold true for stock trading just for the reason that stock trading is not an investment but another job instead. So the first establish capital can be from additional investors. Except you need to have what it take to be a stock trader which can be more complicate than stock investment.
Sunday, January 20, 2008
The Effect The Current Subprime Loan Crisis Has On Global Markets
Submitted By: Ricky Schmidt
Dear Fellow-Investor.
"Why is it, that this subprime loan crisis has such a rippling effect on many sectors of the economy?"
"Why are even companies outside the USA also affected by the U.S. mortgage crisis?"
In the last 7 days I received lots of emails from my subscribers asking me questions like these, and I'd like to take the opportunity to explain what this housing, mortgage,subprime loan, credit crisis - whatever you want to call it - and the present situation is all about.
Between 2002 and 2004 the interest rates in the United States were as low as never before. At least as far as I can remember. I'm not that old yet! The effect of such low interest rates was a real-estate boom in the U.S. often financed with so-called subprime loans. These are loans given to borrowers who do not qualify for the best market interest rates because of their deficient credit history.
Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others. The term "subprime" refers to the credit status of the borrower (being less than ideal), not the interest rate on the loan itself.
But banks didn't worry too much about this because interest rates were low and simultaneously, real-estate prices were rising continuously in the 90's.
So back in 2002/2004, anyone that could count to 3 was given a loan. Many people in America were suddenly able to afford expensive single family homes and other kind of real-estate that they couldn't before.
But in 2006 the U.S. interest rates had tripled and now, especially the subprime borrowers couldn't pay their monthly installments anymore. So more and more of these subprime loans started to crumble.
But that's not all. Some banks and other financial institutionals converted millions of these subprime loans into bonds. These were then sold for billions of dollars to banks, insurance companies and mutual funds that assumed this to be a secure investment because bonds usually are. That's why they're also considered a safe haven in stormy times.
And not only were these bonds sold to U.S. institutionals, but International ones too. You see, in a nutshell, everyone invests everywhere. America invests in Europe, and Europe invests in America, etc, etc.!
So you can imagine what happened when these loans started to crumble and the practice of converting them into bonds backfired. It all swept over the borders of America into other countries as well. The German industrial bank IKB invested 13 billion dollars in these bonds and now they are looking at a $5 billion loss.
For years this subprime game turned out all right and gigantic amounts of cash were invested into real-estate in Florida, Delaware or Texas by U.S. and international equity markets. No one thought that so many borrowers would go broke at the same time.
According to the U.S.Federal Reserve, loans of up to 100 billion dollars could bounce. At the same time, this seems to just be a drop in the ocean considering the effect it could have on international capital markets.
These bad loans could be the biggest single risk for the global economy. In the past, many in America spent their money stout-heartedly thus, stimulating and cranking up the economy. Their houses became worth more and more and banks literally threw loans at customers with low interest rates.
This could all backfire now putting a lot of pressure on the U.S. economy, because the money that was spent so generously is now being held back. Also because borrowers that are now up to their ears in financial troubles can't spent anymore money because there simply is none left to spend. This, in turn, takes a lot of liquidity out of the markets.
Also companies and corporations that have nothing to do with the current real-estate turmoil are drawn into the subprime crisis. If they want new capital from banks, they have to pay higher interest rates as an additional premium for risk. Or, taking things into extremes, they won't get a loan at all making it difficult for companies to grow, especially if a company wants to merge with another which often costs billion of dollars. This all drops out now thus, reducing earnings and profit outlooks.
And there's another, equally bad effect on all companies. whether attached to any real-estate or not. Hedge funds bought these converted mortgage bonds by the millions and very often using margins i.e. buying on borrowed money. And now they are sitting on a huge heap of losses and debt. In order to pay back those debts they have to sell stocks, commodities and other equity. And this obviously pushes prices down. Also stock prices. It's like a chain reaction.
And that's basically the reason why the markets around the world are in such shambles right now.
Back at the trading floor, for Bullish trading the best hope for continued long trading is in turnarounds and bounce backs. Rather than hold your breath and open new long trades why not take the Bearish pat and trade puts or stand on the side lines for a time?
Is my trading bias still Bullish? In the short-term no. In the mid and long-term, yes. So I'm definitely not opening any new long trades right now. But in the future, we'll be looking at plenty long trade opportunities. That's the good side of it all!
Yours in Successful Trading,
Ricky Schmidt
Dear Fellow-Investor.
"Why is it, that this subprime loan crisis has such a rippling effect on many sectors of the economy?"
"Why are even companies outside the USA also affected by the U.S. mortgage crisis?"
In the last 7 days I received lots of emails from my subscribers asking me questions like these, and I'd like to take the opportunity to explain what this housing, mortgage,subprime loan, credit crisis - whatever you want to call it - and the present situation is all about.
Between 2002 and 2004 the interest rates in the United States were as low as never before. At least as far as I can remember. I'm not that old yet! The effect of such low interest rates was a real-estate boom in the U.S. often financed with so-called subprime loans. These are loans given to borrowers who do not qualify for the best market interest rates because of their deficient credit history.
Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others. The term "subprime" refers to the credit status of the borrower (being less than ideal), not the interest rate on the loan itself.
But banks didn't worry too much about this because interest rates were low and simultaneously, real-estate prices were rising continuously in the 90's.
So back in 2002/2004, anyone that could count to 3 was given a loan. Many people in America were suddenly able to afford expensive single family homes and other kind of real-estate that they couldn't before.
But in 2006 the U.S. interest rates had tripled and now, especially the subprime borrowers couldn't pay their monthly installments anymore. So more and more of these subprime loans started to crumble.
But that's not all. Some banks and other financial institutionals converted millions of these subprime loans into bonds. These were then sold for billions of dollars to banks, insurance companies and mutual funds that assumed this to be a secure investment because bonds usually are. That's why they're also considered a safe haven in stormy times.
And not only were these bonds sold to U.S. institutionals, but International ones too. You see, in a nutshell, everyone invests everywhere. America invests in Europe, and Europe invests in America, etc, etc.!
So you can imagine what happened when these loans started to crumble and the practice of converting them into bonds backfired. It all swept over the borders of America into other countries as well. The German industrial bank IKB invested 13 billion dollars in these bonds and now they are looking at a $5 billion loss.
For years this subprime game turned out all right and gigantic amounts of cash were invested into real-estate in Florida, Delaware or Texas by U.S. and international equity markets. No one thought that so many borrowers would go broke at the same time.
According to the U.S.Federal Reserve, loans of up to 100 billion dollars could bounce. At the same time, this seems to just be a drop in the ocean considering the effect it could have on international capital markets.
These bad loans could be the biggest single risk for the global economy. In the past, many in America spent their money stout-heartedly thus, stimulating and cranking up the economy. Their houses became worth more and more and banks literally threw loans at customers with low interest rates.
This could all backfire now putting a lot of pressure on the U.S. economy, because the money that was spent so generously is now being held back. Also because borrowers that are now up to their ears in financial troubles can't spent anymore money because there simply is none left to spend. This, in turn, takes a lot of liquidity out of the markets.
Also companies and corporations that have nothing to do with the current real-estate turmoil are drawn into the subprime crisis. If they want new capital from banks, they have to pay higher interest rates as an additional premium for risk. Or, taking things into extremes, they won't get a loan at all making it difficult for companies to grow, especially if a company wants to merge with another which often costs billion of dollars. This all drops out now thus, reducing earnings and profit outlooks.
And there's another, equally bad effect on all companies. whether attached to any real-estate or not. Hedge funds bought these converted mortgage bonds by the millions and very often using margins i.e. buying on borrowed money. And now they are sitting on a huge heap of losses and debt. In order to pay back those debts they have to sell stocks, commodities and other equity. And this obviously pushes prices down. Also stock prices. It's like a chain reaction.
And that's basically the reason why the markets around the world are in such shambles right now.
Back at the trading floor, for Bullish trading the best hope for continued long trading is in turnarounds and bounce backs. Rather than hold your breath and open new long trades why not take the Bearish pat and trade puts or stand on the side lines for a time?
Is my trading bias still Bullish? In the short-term no. In the mid and long-term, yes. So I'm definitely not opening any new long trades right now. But in the future, we'll be looking at plenty long trade opportunities. That's the good side of it all!
Yours in Successful Trading,
Ricky Schmidt
Traders worst enemy "Emotional trading"
Schwager wrote: "In our experience, investors are truly their own worst enemies. The natural instincts of many lead them to do precisely the wrong thing at the wrong time--with uncanny persistence…
Proletarian can feel high with the trading or investing excitement. At the short interval of time nobody can get high and make money. Voracity and panic are bound to destroy any trader or investor. Instead of trading on gut feeling, one needs to use their intelligence. Road to untold riches can be open by conquering our emotions of fear and greed.
It’s a human’s natural inclination to follow the crowd. But when it comes of trading, following the crowd can often be make extreme effects. The shrewd trader knows how to look forward to the trend and they also makes sure that he or she sells before the style reverses, and the masses start selling
To become victorious, it was vital to protect one's self interests yet also stay within the bounds of acceptable behavior. In the markets, it is sometimes useful to be conventional. For example, for long term investing, it is wise to put your money in stocks that don't have a great deal of instability and by all indications, have solid fundamentals that will push the stock up consistently for several years. If a large enough crowds believes strongly that the company will produce profits for decades, it would be to your advantage to follow them, if you want a safe investment.
Even though following the crowd isn't bad all the time, there are times when a trader should not follow the crowd. Traders are looking for instability and a good chance for making a big profit. Most of the time that means going your own way. It requires that one think like contrarians, where you are trying to guess what the crowd will do next and trying to capitalize on it. The key is to know when to follow the crowd and when to go against it. The crowd is usually right, until a turning point occurs. When virtually everyone has taken the position that the market is headed in a particular direction, there are almost no traders left to push the trend further. At that point, a countertrend initiates and moves the market in the opposite direction.
The challenge is predicting when that turning point will occur, anticipating it, and developing a trading plan to capitalize on it. Now, this all sounds easy in theory, but in practice, it is difficult to implement a trading strategy to capitalize on this cycle. How can one predict the turning point? Some say it is almost impossible. All you can do is develop a sound method that works most of the time but also admit that it may fail. Whether you use technical indicators or you are lucky enough to use the media news to your advantage, you must temporarily believe in your method, put money on the line, and work under the assumption that overall, luck will be in your favor should you make enough trades.
Going against the crowd takes a special kind of person, a person who isn't afraid of risk but doesn't seek it out, a person who looks inward only, and doesn't need reassurance from others. One must creatively study the markets and try to devise an innovative trading plan. It takes a great deal of experience and thought, but by using the proper perspective, gaining extensive experience, and honing your trading skills, you can break away from the masses, and trade consistently and profitably.
The human body and mind operate much like a machine in that they need preventative maintenance. Just as you wouldn't drive a car without routinely changing the oil or checking the tire pressure, you shouldn't over-stress your mind or body without taking a rest so as to allow yourself to rejuvenate. Trading is a stressful business. Traders continually must cope with uncertainty and endless setbacks, and these factors tax the mind and body to the point that they can no longer function efficiently. Make sure you do preventive psychological maintenance so that you can always trade in a peak performance state.
Trading is intrinsically motivating. It's fun and exciting, but any activity can become boring and tedious if you have to do it over and over again, and do it quickly and under pressure. Trading is fun when you first start, and if you trade as a hobby, but the professional winning trader must persist under less than ideal conditions. Many times a trader must make trade after trade to allow the law of averages to work in his or her favor. The search for winning trading strategies is endless and a challenge. Even the most passionate trader eventually finds trading stressful and tedious. The long-term ramifications of a tedious and anxiety provoking profession can be severe. The mind and body have limited resources, and when these resources are depleted, one cannot continue to function efficiently. Eventually, one needs to take a rest and allow mental and physical abilities to recuperate.
In the long term, it is vital that you take vacations from trading. If you trade month after month without a break, you'll get burned out, and the activity you are passionate about will turn into something that you hate. By taking a vacation, you'll not only get some important rest and relaxation, but you will get a new perspective. You'll see trading in a new light and remember why you like trading so much. When you return, you'll trade with renewed vigor and that will help you trade efficiently over the long haul.
Winning traders execute and monitor their trades while in a peak performance mindset, a mindset where one is calm, logical, and determined. When you are stressed out and worn out, however, you can't cultivate this mindset. It is vital to take rests so that your mind and body can rejuvenate. By doing preventative maintenance, you can trade with a mindset that ensures consistent profitability.
Proletarian can feel high with the trading or investing excitement. At the short interval of time nobody can get high and make money. Voracity and panic are bound to destroy any trader or investor. Instead of trading on gut feeling, one needs to use their intelligence. Road to untold riches can be open by conquering our emotions of fear and greed.
It’s a human’s natural inclination to follow the crowd. But when it comes of trading, following the crowd can often be make extreme effects. The shrewd trader knows how to look forward to the trend and they also makes sure that he or she sells before the style reverses, and the masses start selling
To become victorious, it was vital to protect one's self interests yet also stay within the bounds of acceptable behavior. In the markets, it is sometimes useful to be conventional. For example, for long term investing, it is wise to put your money in stocks that don't have a great deal of instability and by all indications, have solid fundamentals that will push the stock up consistently for several years. If a large enough crowds believes strongly that the company will produce profits for decades, it would be to your advantage to follow them, if you want a safe investment.
Even though following the crowd isn't bad all the time, there are times when a trader should not follow the crowd. Traders are looking for instability and a good chance for making a big profit. Most of the time that means going your own way. It requires that one think like contrarians, where you are trying to guess what the crowd will do next and trying to capitalize on it. The key is to know when to follow the crowd and when to go against it. The crowd is usually right, until a turning point occurs. When virtually everyone has taken the position that the market is headed in a particular direction, there are almost no traders left to push the trend further. At that point, a countertrend initiates and moves the market in the opposite direction.
The challenge is predicting when that turning point will occur, anticipating it, and developing a trading plan to capitalize on it. Now, this all sounds easy in theory, but in practice, it is difficult to implement a trading strategy to capitalize on this cycle. How can one predict the turning point? Some say it is almost impossible. All you can do is develop a sound method that works most of the time but also admit that it may fail. Whether you use technical indicators or you are lucky enough to use the media news to your advantage, you must temporarily believe in your method, put money on the line, and work under the assumption that overall, luck will be in your favor should you make enough trades.
Going against the crowd takes a special kind of person, a person who isn't afraid of risk but doesn't seek it out, a person who looks inward only, and doesn't need reassurance from others. One must creatively study the markets and try to devise an innovative trading plan. It takes a great deal of experience and thought, but by using the proper perspective, gaining extensive experience, and honing your trading skills, you can break away from the masses, and trade consistently and profitably.
The human body and mind operate much like a machine in that they need preventative maintenance. Just as you wouldn't drive a car without routinely changing the oil or checking the tire pressure, you shouldn't over-stress your mind or body without taking a rest so as to allow yourself to rejuvenate. Trading is a stressful business. Traders continually must cope with uncertainty and endless setbacks, and these factors tax the mind and body to the point that they can no longer function efficiently. Make sure you do preventive psychological maintenance so that you can always trade in a peak performance state.
Trading is intrinsically motivating. It's fun and exciting, but any activity can become boring and tedious if you have to do it over and over again, and do it quickly and under pressure. Trading is fun when you first start, and if you trade as a hobby, but the professional winning trader must persist under less than ideal conditions. Many times a trader must make trade after trade to allow the law of averages to work in his or her favor. The search for winning trading strategies is endless and a challenge. Even the most passionate trader eventually finds trading stressful and tedious. The long-term ramifications of a tedious and anxiety provoking profession can be severe. The mind and body have limited resources, and when these resources are depleted, one cannot continue to function efficiently. Eventually, one needs to take a rest and allow mental and physical abilities to recuperate.
In the long term, it is vital that you take vacations from trading. If you trade month after month without a break, you'll get burned out, and the activity you are passionate about will turn into something that you hate. By taking a vacation, you'll not only get some important rest and relaxation, but you will get a new perspective. You'll see trading in a new light and remember why you like trading so much. When you return, you'll trade with renewed vigor and that will help you trade efficiently over the long haul.
Winning traders execute and monitor their trades while in a peak performance mindset, a mindset where one is calm, logical, and determined. When you are stressed out and worn out, however, you can't cultivate this mindset. It is vital to take rests so that your mind and body can rejuvenate. By doing preventative maintenance, you can trade with a mindset that ensures consistent profitability.
Short-term Trading Papularity, Principles, Capital Allocation, Profit booking
There are primarily three types of traders/investors in the stock market:
Investors: Those who expect minimum 30-40% appreciation and are willing to hold between two months to a few years. They enter only long positions and usually select a scrip based on fundamental analysis. Medium-long term investors can utilise technical analysis to time their entry and profit booking better.
Day traders: Day traders enter long/short trades to square up the same day. They usually base decisions on technicals, information or at times, gut feel.
Short-term traders: Short-term traders expect 5-20% returns within 2 days to 3 weeks. They enter long as well as short positions. These include:
1. Position trading, where one either buys a stock and holds for the required appreciation, or sells from an existing long (or borrowed) position to cover at a lower level.
2. Futures & options trading
The popularity of Short-term trading, is on the rise due to the following reasons:
It provides an opportunity to make substantial profits in a short period and ensures continuous rotation of capital.
As against long-term investment, short-term trading has limited downside because of strict stoplosses.
Short-term trading has less demand on the traders time, while day trading requires full-time attention at the terminal. Hence, even those who pursue other professions can do short-term trading.
One can leverage on margin in case of short-term trading in futures.
Short-term trading in options requires smaller investment and has limited risk.
Like every discipline, short-term trading also has its Dos and Donts. These are not well understood by all. This article outlines these rules, which would make short-term trading a relatively safe and satisfying experience.
Basic Principles of Short-term Trading: The first principle is to do few trades. At any point, one should not have more than 6 trades outstanding. A good number is 3-5.
Equal capital allocation: Divide your short term trading capital equally into each trade. Ideally if one has Rs 1 lac of capital, one should put around Rs 20,000 in each trade.
Clear Targets and profit booking: While entering a trade, one should be clear about the target price he expects to achieve. Once the target is reached, profits should be booked promptly. Here, some traders often fall to the greed-syndrome and hold on for more profits. This, more often than not, leads to losses in the long run.
Strict stoplosses: No strategy, however good, can ensure 100% success. A strategy that yields above 65% success rate is reasonably good.
But there is a catch here! 65% success means you achieve your targets in 2 out of every 3 trades. But how much do you lose in the third? This is what determines your overall profitability.
The following example illustrates this: Suppose one invests Rs 10,000 in each of the 3 trades. The 2 successful trades fetch a profit of RS 1000 (RS 500 each) at 5%. Now, if the stoploss on the third unprofitable trade were also around 5% (including brokerage), he would lose RS 500 on it. Thus, his net profit across the 3 trades is RS 1000 RS 500 = RS 500. This is around 1.67% net return on the total capital of RS 30000. And considering that this is short term trading, the average holding period may be a fortnight. Therefore, the annualised return would still amount to 1.67% x 26 (26 fortnights in a year) = 43% per annum. Not a mean achievement by any standards.
But in the same example, if the trader does not have a stoploss, he continues to hold the loss-making trade. Finally, when he realises that he is in an irretrievable situation, he squares up the trade at say 15% loss. (In my experience, this is what happens to many traders when market suddenly turns bearish). In this case, he makes RS 1500 loss on this trade, which eats the RS 1000 profit he has made in the other two. Thus, he ends up with a net loss of RS 500 (-1.67%) on his 3 trades. At this rate, he would wipe out his entire capital in 2.5 years.
That should forever, put to rest the doubt whether stoplosses are needed in short-term (or for that matter in any type of) trading! Trading is like a war, you need to lose small battles to see another day and eventually win the war!
Dont "buy time": Often traders mix up various types of trading. For example, a trader entering a day trade carries his position overnight if the trade turns against him. Or, a short-term trader does not exit at a stoploss and converts it to a long-term investment. He hopes some day it will fetch him profit. These traders are just "buying time". Unfortunately, this works as rarely as you would find refrigerator in an igloo. Stick to your trading style and importantly; dont convert trades from one type to another.
Track your performance: A trader should monitor performance on every trade, as well as, across all trades. Remember, if trading is your business, run it like a business. Rigorously perform the forecasting, planning and monitoring that goes into it.
In a nutshell
Short-term trading has its advantages when compared with day-trading and long-term investment. It is suited for both full-time and part-time traders. When performed in accordance with the basic principles, it can be an engrossing and potentially lucrative activity/profession
Investors: Those who expect minimum 30-40% appreciation and are willing to hold between two months to a few years. They enter only long positions and usually select a scrip based on fundamental analysis. Medium-long term investors can utilise technical analysis to time their entry and profit booking better.
Day traders: Day traders enter long/short trades to square up the same day. They usually base decisions on technicals, information or at times, gut feel.
Short-term traders: Short-term traders expect 5-20% returns within 2 days to 3 weeks. They enter long as well as short positions. These include:
1. Position trading, where one either buys a stock and holds for the required appreciation, or sells from an existing long (or borrowed) position to cover at a lower level.
2. Futures & options trading
The popularity of Short-term trading, is on the rise due to the following reasons:
It provides an opportunity to make substantial profits in a short period and ensures continuous rotation of capital.
As against long-term investment, short-term trading has limited downside because of strict stoplosses.
Short-term trading has less demand on the traders time, while day trading requires full-time attention at the terminal. Hence, even those who pursue other professions can do short-term trading.
One can leverage on margin in case of short-term trading in futures.
Short-term trading in options requires smaller investment and has limited risk.
Like every discipline, short-term trading also has its Dos and Donts. These are not well understood by all. This article outlines these rules, which would make short-term trading a relatively safe and satisfying experience.
Basic Principles of Short-term Trading: The first principle is to do few trades. At any point, one should not have more than 6 trades outstanding. A good number is 3-5.
Equal capital allocation: Divide your short term trading capital equally into each trade. Ideally if one has Rs 1 lac of capital, one should put around Rs 20,000 in each trade.
Clear Targets and profit booking: While entering a trade, one should be clear about the target price he expects to achieve. Once the target is reached, profits should be booked promptly. Here, some traders often fall to the greed-syndrome and hold on for more profits. This, more often than not, leads to losses in the long run.
Strict stoplosses: No strategy, however good, can ensure 100% success. A strategy that yields above 65% success rate is reasonably good.
But there is a catch here! 65% success means you achieve your targets in 2 out of every 3 trades. But how much do you lose in the third? This is what determines your overall profitability.
The following example illustrates this: Suppose one invests Rs 10,000 in each of the 3 trades. The 2 successful trades fetch a profit of RS 1000 (RS 500 each) at 5%. Now, if the stoploss on the third unprofitable trade were also around 5% (including brokerage), he would lose RS 500 on it. Thus, his net profit across the 3 trades is RS 1000 RS 500 = RS 500. This is around 1.67% net return on the total capital of RS 30000. And considering that this is short term trading, the average holding period may be a fortnight. Therefore, the annualised return would still amount to 1.67% x 26 (26 fortnights in a year) = 43% per annum. Not a mean achievement by any standards.
But in the same example, if the trader does not have a stoploss, he continues to hold the loss-making trade. Finally, when he realises that he is in an irretrievable situation, he squares up the trade at say 15% loss. (In my experience, this is what happens to many traders when market suddenly turns bearish). In this case, he makes RS 1500 loss on this trade, which eats the RS 1000 profit he has made in the other two. Thus, he ends up with a net loss of RS 500 (-1.67%) on his 3 trades. At this rate, he would wipe out his entire capital in 2.5 years.
That should forever, put to rest the doubt whether stoplosses are needed in short-term (or for that matter in any type of) trading! Trading is like a war, you need to lose small battles to see another day and eventually win the war!
Dont "buy time": Often traders mix up various types of trading. For example, a trader entering a day trade carries his position overnight if the trade turns against him. Or, a short-term trader does not exit at a stoploss and converts it to a long-term investment. He hopes some day it will fetch him profit. These traders are just "buying time". Unfortunately, this works as rarely as you would find refrigerator in an igloo. Stick to your trading style and importantly; dont convert trades from one type to another.
Track your performance: A trader should monitor performance on every trade, as well as, across all trades. Remember, if trading is your business, run it like a business. Rigorously perform the forecasting, planning and monitoring that goes into it.
In a nutshell
Short-term trading has its advantages when compared with day-trading and long-term investment. It is suited for both full-time and part-time traders. When performed in accordance with the basic principles, it can be an engrossing and potentially lucrative activity/profession
Thursday, January 17, 2008
Sub-Prime Effect and Emerging Markets
What is Sub-prime?
Some borrowers may have issues like poor credit history or hard to prove income, which makesThem ineligible to borrow money at prevailing market rates or prime rates. Sub Prime Lending is thePractice of financing such borrowers at a higher than prime rate. Such loans are considered riskyBecause of high interest rates, bad credit history and lack of resources to pay off the loans. Sub primeMortgage lending refers to such loans extended in the housing market.Sub-prime mortgage issues began to crop up when the housing prices in the US began to softenAnd the borrowers started to default on loan repayments. Loan defaults led to rising rate of sub primeMortgage foreclosures, which further led to a few sub prime mortgage lenders to fileBankruptcy. As a result, participants in the market with exposure to sub-prime mortgage backedSecurities began to witness mark-to-market losses. They also faced liquidity crunch, as no buyersWere willing to buy such paper.
The Contagion Effect
Market participants who had exposure to sub-prime mortgage securities as well as risky assets,covered up for sub prime mortgage losses by reprising the risky assets. Due to this, other leveragedequity market participants found it difficult to service their cost of leverage. This led them to deleveragetheir exposure in the form of further re-pricing of risky assets in US. Due to integration ofglobal financial markets, risky assets in other emerging markets also got re-priced as a spill overeffect. Several central bankers pumped funds into the economy to ease the liquidity tighteningcaused by sub-prime mortgage issue.
Impact on emerging markets
The impact of the sub-prime effect on emerging markets is hard to gauge. There are two parts to it. One is the impact on the real economies and another is the impact on the stock markets. Due toMacro policies, structural policies and domestic consumption, the fundamentals of emergingEconomies including India continue to remain strong. This might act as a cushion against any majorFinancial setback in the US. However it’s early to gauge whether the sub-prime issue has thePotential to disrupt the US imports and to that extent affect economic growth of emerging markets.As far as the stock markets are concerned, they may take some hit because of de-leveraging doneBy market participants. Time and again these kinds of events affect market sentiment leading toBouts of corrections. We believe that such corrective dips present an opportunity for investors to Invest in emerging markets at relatively attractive valuations.
Some borrowers may have issues like poor credit history or hard to prove income, which makesThem ineligible to borrow money at prevailing market rates or prime rates. Sub Prime Lending is thePractice of financing such borrowers at a higher than prime rate. Such loans are considered riskyBecause of high interest rates, bad credit history and lack of resources to pay off the loans. Sub primeMortgage lending refers to such loans extended in the housing market.Sub-prime mortgage issues began to crop up when the housing prices in the US began to softenAnd the borrowers started to default on loan repayments. Loan defaults led to rising rate of sub primeMortgage foreclosures, which further led to a few sub prime mortgage lenders to fileBankruptcy. As a result, participants in the market with exposure to sub-prime mortgage backedSecurities began to witness mark-to-market losses. They also faced liquidity crunch, as no buyersWere willing to buy such paper.
The Contagion Effect
Market participants who had exposure to sub-prime mortgage securities as well as risky assets,covered up for sub prime mortgage losses by reprising the risky assets. Due to this, other leveragedequity market participants found it difficult to service their cost of leverage. This led them to deleveragetheir exposure in the form of further re-pricing of risky assets in US. Due to integration ofglobal financial markets, risky assets in other emerging markets also got re-priced as a spill overeffect. Several central bankers pumped funds into the economy to ease the liquidity tighteningcaused by sub-prime mortgage issue.
Impact on emerging markets
The impact of the sub-prime effect on emerging markets is hard to gauge. There are two parts to it. One is the impact on the real economies and another is the impact on the stock markets. Due toMacro policies, structural policies and domestic consumption, the fundamentals of emergingEconomies including India continue to remain strong. This might act as a cushion against any majorFinancial setback in the US. However it’s early to gauge whether the sub-prime issue has thePotential to disrupt the US imports and to that extent affect economic growth of emerging markets.As far as the stock markets are concerned, they may take some hit because of de-leveraging doneBy market participants. Time and again these kinds of events affect market sentiment leading toBouts of corrections. We believe that such corrective dips present an opportunity for investors to Invest in emerging markets at relatively attractive valuations.
Wednesday, January 16, 2008
Larsen & Toubro expecting strong growth by earnings and orderbook
I put overweight rating and a 12-month price target of Rs 5,010 citing expectation of strong earnings and order book growth. “Expecting an earnings CAGR (compounded annual growth rate) of 45% over FY07-10 and ROE (return on equity) of 31% in FY08E (adjusted for investments in subsidiaries),” the investment bank said. Expects the company’s order book to grow 40%, on a compounded basis, toll 2009-10. “Expect L&T Infotech, L&T Finance and certain manufacturing subsidiaries to record growth in excess of 30% over the next three years. Value discovery in some of the subsidiaries is a strong possibility over the next three years, in a view.”
Tuesday, January 15, 2008
Jaiprakash Associates expansions more promissive in long term
Jaiprakash is expanding its capacity by 15MMT over the next 3 years at the end of which it will emerge as one of the largest cement players in north india with a capacity of 22MMT. The company is the largest private sector hydropower player and is currently sitting on a huge construction order book of Rs.7,200 crore. Taking cognisance of the government's target of achieving 50,000 MW in hydropower electricity by 2012, expecting order book to maintain its current momentum. The taj express way project coupled with the company's real estate business (taj green) will add value to the company's shareholders. This makes clear picture about companies future. Buy this stock in every dip to make higher returns in medium to long term.
Monday, January 14, 2008
reliance communication looks for a big move by a big order
Reliance Communications has floated an order for 80 million to 100 million lines for GSM mobile services. The company recently received spectrum from the government to launch GSM services in 14 service areas under a controversial new cross-over technology policy. The company’s shares are likely to witness some action on the news.
Sunday, January 13, 2008
Locating a wealth creator
The first rule to investing is ‘Don’t lose money’. The second rule to investing is ‘Don’t forget rule no. 1’! It is essential to stick to these rules when it comes to investing, in order to avoid the possibility of capital erosion.
To apply these rules successfully and to create wealth through equity investing, Raamdeo Agrawal, Director & Co-founder, Motilal Oswal Financial Services identifies five parameters that you must evaluate. They are:
1. Assess the entry barriers created by a company Entry barrier should be preferably intellectual in character
Remember, a stock is nothing but a stake in the company’s business. So, observe the company’s business and the entry barriers created by it. The entry barrier should be more ‘intellectual’ in character rather than ‘physical’. This is because while it is next to impossible to compete with a strong brand (an intellectual barrier), competitive advantage associated with a piece of land (a physical barrier) disappears when a competitor acquires one as well.
Strong brands such as ‘Thums-Up’, ‘Parle-G’, etc. have enabled their companies to retain the top spot. However, at times, there could be exceptions. For instance, the entry barrier associated with TISCO would be its large base of iron ore and coal, which allows it to lower its raw material cost drastically vis-Ã -vis its competitors for long time to come.
Entry barrier should be long-lasting
Strong brands such as ‘Thums-Up’, ‘Parle-G’, etc. have enabled their companies to retain the top spot. However, at times, there could be exceptions. For instance, the entry barrier associated with TISCO would be its large base of iron ore and coal, which allows it to lower its raw material cost drastically vis-Ã -vis its competitors but its strong brand continuously earns money for it.
Buy into such companies at the earliest
As an investor, buy into such businesses ahead of the crowd. If an entry barrier has been established very recently, it may not yet be exploited by the business. Accordingly, the market would not have valued it in the company’s share price.
For instance, when Financial Technologies (promoters of MCX) got its commodity exchange license and launched it, the popular opinion held was that it would be unable to execute the business well. But, today, it has emerged as a premier commodity exchange. Investing in such companies before the market sees their potential delivers best appreciation. “Though difficult to practice think ahead of the crowd”.
2. Management should be competent and passionate
For instance, when Financial Technologies (promoters of MCX) got its commodity exchange license and launched it, the popular opinion held was that it would be unable to execute the business well. But, today, it has emerged as a premier commodity exchange. Investing in such companies before the market sees their potential. “The definition of a great company is one that will remain great for many years”.
3. Management should have integrity
Integrity is the most crucial quality that a company’s management must have. Such companies not only run their businesses in an honest manner, but, are honest to all their stakeholders, whether they are employees, the government or the shareholders.
If honesty is part of a company’s DNA, it will be fair to its smallest stakeholders – the minority retail shareholders. Companies such as Tata and Infosys have this quality, which has added to their growth and market attractiveness immensely. “Without management integrity, no margin of safety can be high enough”. The above-mentioned three characteristics (long lasting intellectual entry barrier, competent and passionate management and integrity) must all be simultaneously present in a company that you choose to invest in.
4. buy low
The price that you pay for a stock determines your rate of return. So, it is essential that you get your purchase price right. While some companies come out on top with respect to all the first three parameters, the returns falter when it comes to the purchase price.
For instance, HLL comes on top with respect to all the first three parameters but has not delivered as much as far as its stock goes. Its stock delivered a CAGR of approximately just 3 per cent over the last 5 years, when the market delivered a CAGR of approximately 44 per cent over the same period.
The quote - “In the bible it is said that love takes care of a lot of sins. In investments, purchase price takes care of a lot of mistakes” – is very apt. You can make mistakes on assessing the first three parameters, since they are subjective in nature, but getting the right purchase price covers up for all your mistakes. Hence, estimate the expected value / intrinsic value of the company and keep an adequate margin of safety in the purchase price. “It is much more important to buy cheap than to sell dear”.
5. Have Ptience
When you buy a house you don’t expect it to appreciate overnight. You look at its appreciation over a long period. The same goes with equity. After having bought a company that conforms to all the above four criteria, you need to have patience. Investing in equities is often driven by two emotions – greed and fear. And patience is the mantra that helps overcome these emotions. Patience makes the difference between investing and speculation. It’s like a fertiliser to the investment process. “In reality, patience is crucial, but it is a rare commodity”.
End Note
Investing is laying out today’s money for more in the future. Its about performance of the underlying assets. Success in investing is the outcome of a disciplined approach.
Happy Investing.
To apply these rules successfully and to create wealth through equity investing, Raamdeo Agrawal, Director & Co-founder, Motilal Oswal Financial Services identifies five parameters that you must evaluate. They are:
1. Assess the entry barriers created by a company Entry barrier should be preferably intellectual in character
Remember, a stock is nothing but a stake in the company’s business. So, observe the company’s business and the entry barriers created by it. The entry barrier should be more ‘intellectual’ in character rather than ‘physical’. This is because while it is next to impossible to compete with a strong brand (an intellectual barrier), competitive advantage associated with a piece of land (a physical barrier) disappears when a competitor acquires one as well.
Strong brands such as ‘Thums-Up’, ‘Parle-G’, etc. have enabled their companies to retain the top spot. However, at times, there could be exceptions. For instance, the entry barrier associated with TISCO would be its large base of iron ore and coal, which allows it to lower its raw material cost drastically vis-Ã -vis its competitors for long time to come.
Entry barrier should be long-lasting
Strong brands such as ‘Thums-Up’, ‘Parle-G’, etc. have enabled their companies to retain the top spot. However, at times, there could be exceptions. For instance, the entry barrier associated with TISCO would be its large base of iron ore and coal, which allows it to lower its raw material cost drastically vis-Ã -vis its competitors but its strong brand continuously earns money for it.
Buy into such companies at the earliest
As an investor, buy into such businesses ahead of the crowd. If an entry barrier has been established very recently, it may not yet be exploited by the business. Accordingly, the market would not have valued it in the company’s share price.
For instance, when Financial Technologies (promoters of MCX) got its commodity exchange license and launched it, the popular opinion held was that it would be unable to execute the business well. But, today, it has emerged as a premier commodity exchange. Investing in such companies before the market sees their potential delivers best appreciation. “Though difficult to practice think ahead of the crowd”.
2. Management should be competent and passionate
For instance, when Financial Technologies (promoters of MCX) got its commodity exchange license and launched it, the popular opinion held was that it would be unable to execute the business well. But, today, it has emerged as a premier commodity exchange. Investing in such companies before the market sees their potential. “The definition of a great company is one that will remain great for many years”.
3. Management should have integrity
Integrity is the most crucial quality that a company’s management must have. Such companies not only run their businesses in an honest manner, but, are honest to all their stakeholders, whether they are employees, the government or the shareholders.
If honesty is part of a company’s DNA, it will be fair to its smallest stakeholders – the minority retail shareholders. Companies such as Tata and Infosys have this quality, which has added to their growth and market attractiveness immensely. “Without management integrity, no margin of safety can be high enough”. The above-mentioned three characteristics (long lasting intellectual entry barrier, competent and passionate management and integrity) must all be simultaneously present in a company that you choose to invest in.
4. buy low
The price that you pay for a stock determines your rate of return. So, it is essential that you get your purchase price right. While some companies come out on top with respect to all the first three parameters, the returns falter when it comes to the purchase price.
For instance, HLL comes on top with respect to all the first three parameters but has not delivered as much as far as its stock goes. Its stock delivered a CAGR of approximately just 3 per cent over the last 5 years, when the market delivered a CAGR of approximately 44 per cent over the same period.
The quote - “In the bible it is said that love takes care of a lot of sins. In investments, purchase price takes care of a lot of mistakes” – is very apt. You can make mistakes on assessing the first three parameters, since they are subjective in nature, but getting the right purchase price covers up for all your mistakes. Hence, estimate the expected value / intrinsic value of the company and keep an adequate margin of safety in the purchase price. “It is much more important to buy cheap than to sell dear”.
5. Have Ptience
When you buy a house you don’t expect it to appreciate overnight. You look at its appreciation over a long period. The same goes with equity. After having bought a company that conforms to all the above four criteria, you need to have patience. Investing in equities is often driven by two emotions – greed and fear. And patience is the mantra that helps overcome these emotions. Patience makes the difference between investing and speculation. It’s like a fertiliser to the investment process. “In reality, patience is crucial, but it is a rare commodity”.
End Note
Investing is laying out today’s money for more in the future. Its about performance of the underlying assets. Success in investing is the outcome of a disciplined approach.
Happy Investing.
Sub-Prime Effect and Emerging Markets
What is Sub-prime?
Some borrowers may have issues like poor credit history or hard to prove income, which makesThem ineligible to borrow money at prevailing market rates or prime rates. Sub Prime Lending is thePractice of financing such borrowers at a higher than prime rate. Such loans are considered riskyBecause of high interest rates, bad credit history and lack of resources to pay off the loans. Sub primeMortgage lending refers to such loans extended in the housing market.Sub-prime mortgage issues began to crop up when the housing prices in the US began to softenAnd the borrowers started to default on loan repayments. Loan defaults led to rising rate of sub primeMortgage foreclosures, which further led to a few sub prime mortgage lenders to fileBankruptcy. As a result, participants in the market with exposure to sub-prime mortgage backedSecurities began to witness mark-to-market losses. They also faced liquidity crunch, as no buyersWere willing to buy such paper.
The Contagion Effect
Market participants who had exposure to sub-prime mortgage securities as well as risky assets,covered up for sub prime mortgage losses by reprising the risky assets. Due to this, other leveragedequity market participants found it difficult to service their cost of leverage. This led them to deleveragetheir exposure in the form of further re-pricing of risky assets in US. Due to integration ofglobal financial markets, risky assets in other emerging markets also got re-priced as a spill overeffect. Several central bankers pumped funds into the economy to ease the liquidity tighteningcaused by sub-prime mortgage issue.
Impact on emerging markets
The impact of the sub-prime effect on emerging markets is hard to gauge. There are two parts to it.One is the impact on the real economies and another is the impact on the stock markets. Due toMacro policies, structural policies and domestic consumption, the fundamentals of emergingEconomies including India continue to remain strong. This might act as a cushion against any majorFinancial setback in the US. However it’s early to gauge whether the sub-prime issue has thePotential to disrupt the US imports and to that extent affect economic growth of emerging markets.As far as the stock markets are concerned, they may take some hit because of de-leveraging doneBy market participants. Time and again these kinds of events affect market sentiment leading toBouts of corrections. We believe that such corrective dips present an opportunity for investors to Invest in emerging markets at relatively attractive valuations.
Some borrowers may have issues like poor credit history or hard to prove income, which makesThem ineligible to borrow money at prevailing market rates or prime rates. Sub Prime Lending is thePractice of financing such borrowers at a higher than prime rate. Such loans are considered riskyBecause of high interest rates, bad credit history and lack of resources to pay off the loans. Sub primeMortgage lending refers to such loans extended in the housing market.Sub-prime mortgage issues began to crop up when the housing prices in the US began to softenAnd the borrowers started to default on loan repayments. Loan defaults led to rising rate of sub primeMortgage foreclosures, which further led to a few sub prime mortgage lenders to fileBankruptcy. As a result, participants in the market with exposure to sub-prime mortgage backedSecurities began to witness mark-to-market losses. They also faced liquidity crunch, as no buyersWere willing to buy such paper.
The Contagion Effect
Market participants who had exposure to sub-prime mortgage securities as well as risky assets,covered up for sub prime mortgage losses by reprising the risky assets. Due to this, other leveragedequity market participants found it difficult to service their cost of leverage. This led them to deleveragetheir exposure in the form of further re-pricing of risky assets in US. Due to integration ofglobal financial markets, risky assets in other emerging markets also got re-priced as a spill overeffect. Several central bankers pumped funds into the economy to ease the liquidity tighteningcaused by sub-prime mortgage issue.
Impact on emerging markets
The impact of the sub-prime effect on emerging markets is hard to gauge. There are two parts to it.One is the impact on the real economies and another is the impact on the stock markets. Due toMacro policies, structural policies and domestic consumption, the fundamentals of emergingEconomies including India continue to remain strong. This might act as a cushion against any majorFinancial setback in the US. However it’s early to gauge whether the sub-prime issue has thePotential to disrupt the US imports and to that extent affect economic growth of emerging markets.As far as the stock markets are concerned, they may take some hit because of de-leveraging doneBy market participants. Time and again these kinds of events affect market sentiment leading toBouts of corrections. We believe that such corrective dips present an opportunity for investors to Invest in emerging markets at relatively attractive valuations.
Ben graham - the father of Value investing
A named of Ben Graham has buffet erudite how to invest money. Ben Graham experienced what is called “value investing.” The scheme of value investing is to invest in a company when we believe that company is underrating, and expect the stock market to accurate the mispricing. For example, if anybody observes a company’s earnings, debt, growth rate, potential future growth rates, and etcetera and determines that it is worth $15 billion when the stock prices only entail it is worth $10 billion, after that you would purchase the stock. Buffet says, He erudite some key principles from Mr. Graham
Initially learn what a business is worth. Don’t misuse your time with stock charts and volume and all of that rubbish. Now spotlight on discover the inherent value of a business. After that, know that the stock market is there to teach you, not hand out you. You should take benefit of stock prices when they are crooked with realism.
Finally, forever have a margin of security. Still although you may have picked a stock which is undervalued at the time, awful news can come out before the price has attuned and the stock may have one more inherent value. Thus don’t decant all of your net worth into a stock just for the reason that it’s undervalued at the era. This is at variance from a more dangerous approach called “growth investing,” where you just attempt to pick a company that is be present at be the after that huge thing with no stare for its inherent value. I believe it is a much safer stake to value invest than enlargement invest, while expansion investing is often an end to gainful than gambling on horses, though it certain is many of amusing.
Buffet also has a test that he uses previous to he put some of his money into an exacting investment. The test is as follows:
The businesses have to be a business he appreciates. Buffet does not own a lot of technology companies partially for the reason that he doesn’t appreciate the business splendidly.
The business must have a lasting spirited benefit. This income investing in a company that sells a product in an in excess of soaked market of alternate is a big no-no in this regard, except that company can sell at an extremely low price. Investing in a company that is selling a product that is wildly popular and has a brand new patent, though, is a greatly recovered idea.
Buffet says, “The business must have a management that he trusts. This is particularly important today with so much corruption going on at the corporate level.”
The business must be selling at a sensibly striking price. Buffet states that this is the slightest significant of the 4points in his test, other than at rest a very important point to make. A company selling at well in excess of its inherent value on the stock market, no matter how great the company is at rest a poor investment except you know for in no doubt it will develop at a lightning fast rate.
These are very positive investing tips that I think all investor should remember if he/she makes a decision to pick stocks. Though, I still suggest, especially for those inexperienced with investing, just keeping money in an S&P 500 index fund with a low expense ratio and holding on to it for an extremely extended time period. In excess of the lasting, the only two people I can imagine of who have beaten the S&P 500 are Peter Lynch and Warren Buffet so if I were you, I’d take the steady, about 10-11pct return of the S&P 500 eventually.
Initially learn what a business is worth. Don’t misuse your time with stock charts and volume and all of that rubbish. Now spotlight on discover the inherent value of a business. After that, know that the stock market is there to teach you, not hand out you. You should take benefit of stock prices when they are crooked with realism.
Finally, forever have a margin of security. Still although you may have picked a stock which is undervalued at the time, awful news can come out before the price has attuned and the stock may have one more inherent value. Thus don’t decant all of your net worth into a stock just for the reason that it’s undervalued at the era. This is at variance from a more dangerous approach called “growth investing,” where you just attempt to pick a company that is be present at be the after that huge thing with no stare for its inherent value. I believe it is a much safer stake to value invest than enlargement invest, while expansion investing is often an end to gainful than gambling on horses, though it certain is many of amusing.
Buffet also has a test that he uses previous to he put some of his money into an exacting investment. The test is as follows:
The businesses have to be a business he appreciates. Buffet does not own a lot of technology companies partially for the reason that he doesn’t appreciate the business splendidly.
The business must have a lasting spirited benefit. This income investing in a company that sells a product in an in excess of soaked market of alternate is a big no-no in this regard, except that company can sell at an extremely low price. Investing in a company that is selling a product that is wildly popular and has a brand new patent, though, is a greatly recovered idea.
Buffet says, “The business must have a management that he trusts. This is particularly important today with so much corruption going on at the corporate level.”
The business must be selling at a sensibly striking price. Buffet states that this is the slightest significant of the 4points in his test, other than at rest a very important point to make. A company selling at well in excess of its inherent value on the stock market, no matter how great the company is at rest a poor investment except you know for in no doubt it will develop at a lightning fast rate.
These are very positive investing tips that I think all investor should remember if he/she makes a decision to pick stocks. Though, I still suggest, especially for those inexperienced with investing, just keeping money in an S&P 500 index fund with a low expense ratio and holding on to it for an extremely extended time period. In excess of the lasting, the only two people I can imagine of who have beaten the S&P 500 are Peter Lynch and Warren Buffet so if I were you, I’d take the steady, about 10-11pct return of the S&P 500 eventually.
Reliance Industries most beleavable stock to perform well
I have been very positive on the Reliance for several reasons and I would say that even at Rs 3,060-Rs 3,070 or so one should keep buying that stock both for the short-term and long-term. Because there their margins are very good and there are distinct signs of corporate activity in terms of mergers and unlocking of value. So all in all and of course Reliance is a favourite with the retail investors, so I would say its one of the strongest stocks in the index as of now.
Friday, January 11, 2008
M&M and ABG Shipyard can buy for medium to long term basis
MAHINDRA & MAHINDRA
Expecting a number of positive triggers for M&M in the year ahead. The management continues to unlock value in its various subsidiaries and group companies. The public issue of MHRIL is around the corner and the same is expected to be listed in 2008. The company is slated to launch its new ultilty vehicle Ingenio in August 2008, while a new sports utility vehicle is also planned. The JV with International Truck for manufacturing medium and heavy commercial vehicles is expected to start by CY2009. At the current market price of Rs 830, the stock quotes at 11.9x its FY2009E consolidated earnings. On the basis of above news target expecting Rs.900-Rs.950 in medium term.
ABG Shipyard
ABG Shipyard the company’s topline grew by 68% Y-o-Y to Rs 2,584 million (Rs 258.4 crore), accompanied by strong operating margin of 25%. Expecting FY09 turnover estimate upwards by 20% to Rs 18.9 billion (Rs 189 crore) on account of the expansion at Surat,”. The company has announced Rs 4 billion (Rs 400 crore) expansion of its Surat facility, which will increase its fabrication capacity by four times, that in order to fund expansion, the company has issued four million warrants to its promoter at a price of Rs 796. Further, the company plans to raise Rs 8 billion (Rs 800 crore) through a QIB issue and the estimated equity dilution, post-issue, is likely to be 22%. This states company is promisive in medium term to long term.
Expecting a number of positive triggers for M&M in the year ahead. The management continues to unlock value in its various subsidiaries and group companies. The public issue of MHRIL is around the corner and the same is expected to be listed in 2008. The company is slated to launch its new ultilty vehicle Ingenio in August 2008, while a new sports utility vehicle is also planned. The JV with International Truck for manufacturing medium and heavy commercial vehicles is expected to start by CY2009. At the current market price of Rs 830, the stock quotes at 11.9x its FY2009E consolidated earnings. On the basis of above news target expecting Rs.900-Rs.950 in medium term.
ABG Shipyard
ABG Shipyard the company’s topline grew by 68% Y-o-Y to Rs 2,584 million (Rs 258.4 crore), accompanied by strong operating margin of 25%. Expecting FY09 turnover estimate upwards by 20% to Rs 18.9 billion (Rs 189 crore) on account of the expansion at Surat,”. The company has announced Rs 4 billion (Rs 400 crore) expansion of its Surat facility, which will increase its fabrication capacity by four times, that in order to fund expansion, the company has issued four million warrants to its promoter at a price of Rs 796. Further, the company plans to raise Rs 8 billion (Rs 800 crore) through a QIB issue and the estimated equity dilution, post-issue, is likely to be 22%. This states company is promisive in medium term to long term.
Thursday, January 10, 2008
Omaxe is a good buy to take now
Omaxe Limited is a real estate development and construction company with business spread across 30 cities of 9 states in India. The company has proven track record of delivering 120 projects aggregating 30 million sqft for third parties as civil contractors. This also proves the operational efficiency of the company and capability to deliver in future as well. Omaxe’s main focus remains Tier II-III cities, which is obvious from the fact that 83% of its real estate revenues for FY2007 resulted from sale in these cities vis-a-vis 62% in FY2006. Omaxe’s development projects range from integrated townships, group housing, commercial properties, hotels, IT and bio-tech parks to Special Economic Zone. At CMP of Rs 547, the stock trades at a P/E of 11.4x FY2009E and 7.4x FY2010E and EV/EBIDTA of 9.1x FY2009E and 6.0x FY2010E. Expecting on OMAXE with a price target of Rs 744. price target is at a 10% premium.
Wednesday, January 9, 2008
Orchid Chemicals to grow more
The company emerged as a mid-sized business domestic player, consistent with its predominant emphasis on an international presence. The company with its world wide presence and strong growth path is expected to perform well in the medium to long term. The stock at the current market price of Rs 312 is trading 12.28 times to its earnings and 3.33 times to its book value and is expected to generate handsome returns in the medium to long term. Therefore we can expect the stock will move for good target..
Tuesday, January 8, 2008
Parswanath Developers blessed with God's project
Parsvnath Developers which has bagged a contract for constructing Sai Ashram at Shirdi in Maharashtra. The counter has been in the thick of action ahead of the company’s announcement on Monday. Though the price has moved sharply, one can not really link the rally with the latest development. The market has probably been discounting the progress that the company has achieved in some of its projects. Besides the Shirdi contract an IT park in Gurgaon and pharma SEZ in Nanded. Parsvnath Developers was the one of the top gainers, ending 8.5% up at Rs 574.2 on Monday after touching a new peak of Rs 598 intra-day. Over the past one month, it has risen by 45%. This developments zooming a better performance expecting from Parswanath.
Sunday, January 6, 2008
Pyramid Saimira can entertain by its growth plan
Investors should ‘buy’ the stock on declines as it could be a good long-term bet. The company, engaged in distribution and exhibition of films, plans to enter into movie making business with plans to make 40 movies in five languages by FY09. “Expectation is subsidiaries of PSTL, Pyramid Saimira Production and Singapore based Pyramid Saimira Entertainment to witness huge growth in coming quarters,”. The company’s capex plans also include development of 200 malls and 175 multiplex with around 2,000 screens by FY10. Recently, PSTL acquired Texas based FunAsia an existing theatre and radio network in Chicago and Houston.
Blue Star can rock by its earnings
The central air-conditioning systems major Blue Star will report handsome earnings growth over the next two years (CAGR of 78% between FY07 and FY09). The company being in a position to offer the best requirement for central as well as commercial refrigeration equipment enabling it to maintain a leading market position in this segment, remains one of the key reasons for its bullishness. The stock is a play on structural themes like IT/ITeS and retail. However, that appreciation in the rupee and slowdown in IT/ITeS services remain key concerns.
Friday, January 4, 2008
Trading plan: by cut your losses and profits could run
- Set up a strategy and identify exact menace and profit objectives before trading. Sustain the necessary discipline to follow that plan through both good and bad times. Successful traders will have the same opinion that discipline contributes more to their success than their trading philosophy itself.
- Gain knowledge from your trading mistakes. Never make a trading mistake without asking yourself why.
- Lack of experience in the market causes many traders to make the mistake of taking small profits and letting losses run. Fundamental trading intelligence states the exact opposite. When in a winning trade, be patient and fully take advantage of the success.
- There is no "sure thing", and there is no trading system that is 100% accurate. Your goal, as a trader, is to use the tools available and try to develop an edge. Base your trades on sound fundamental and technical reasoning, rather than on intuition and long shots. If you can develop an edge, however small, over time you will be successful.
- A trader must be able to admit they have made a mistake. Do not become emotionally or financially committed to a losing trade. Avoid the pitfall of becoming emotionally involved with any trade.
- As a trader, be cautious, and never let greed take control of a winning position.
- An investing edge is only part of the equation. A trader should diversify sufficiently so that the growth in equity can be consistent and the likelihood of a catastrophic loss can be diminished. The lower the percentage of a traders account dedicated to any one trade the greater the chance of the trader being successful. Even if the trader has a perceived investing edge, it is unwise to run the risk of ruin, and bet it all on one trade. The goal is not only to make money, but also to be able to continue to make money consistently for an extended period of time. A trader must learn the basic concepts and the importance of money management.
- A trading system does not have to be difficult, time consuming, complicated and stressful in order to be profitable. In trading systems, as in many other things in life, simple can be better.
- Be aware that declining volume usually indicates the market is not accepting higher or lower prices, and this could indicate a market turn.
- Do not make trading decision based solely on margin requirements, and always trade within your capabilities. Remain true to your trading plan and follow the trading style that works best for you.
- Do not trade markets that you don’t understand. Trade with confidence and assurance. Trade only with risk capital, and be aware of the risk of losing. Divide your capital into 6 equal parts and never risk more than one-tenth of your capital on any one trade.
- After a long period of success or a period of profitable trades, try to avoid the natural tendency toward increasing your trading activity. Conversely, use self-discipline when a trade goes against your position. Take your loss and wait for another opportunity. Never increase your trading after a loss.
- Avoid getting into the market because you are anxious from waiting and/or out of the market because you have lost your patience. Never over trade and adhere to your risk management rules.
- Do not make a trading decision to buy just because the price of the stock is low or sell just because the price is high. Never change your position in the market without a good reason that is based on a fundamental or technical rule indicating a change in trend.
- Trade the most active stocks and refrain from trading the slow moving markets. Trade "at the market" whenever possible and try to avoid a fixed buying and selling price.
- When the market is moving with your position and you are using a stop loss order, and then raise your stop loss so as to lock in your profit. Protect yourself against the possibility of turning a profit into a loss.
- The "trend is your friend," and never buy and sell if you are insecure of the trend according to your fundamentals and technical rules. If you are in doubt, then exit the market. Only trade when you feel confident with your trading strategies.18. Trade in five or six different stocks at a time, so as to avoid tying up all of your capital in any single stock.
- A trader should establish a "surplus account" after a series of successful or winning trades. The goal is to retain the "surplus account" for times of emergency or panic.
- It is difficult to try and guess where the top and bottom of the market is.
Wednesday, January 2, 2008
Nalco the good pick for portfolio
If one wants to have a metal stock in the portfolio, it should be Nalco. The stock has a target price of Rs 550 by short term, Nalco plans to invest Rs 11,000 crore in a greenfield project in Orissa. The company plans to set up a 1250 MW new captive power plant in Orissa and has received government assurance for 7 mt/year coal linkage. The news has pushed the stock up and it is good stock to pick for medium term.
Gulf Oil has to be look
GULF OIL The strong organic growth is expected across segments driven by increased prices and robust economic growth. The company is also planning to set up an IT and ITES park at its Bangalore land and a knowledge city at its Hyderabad land with an investment of about Rs 10 billion and Rs 8 billion respectively. “These projects when kicked off will unlock shareholders’ wealth significantly,” says the report. new product addition and venturing into new locations will provide a huge growth to its speciality chemical business unit. on this the stock looking promisive to give some best returns.
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