Friday, October 29, 2010

Wednesday, October 27, 2010

Why Micro Finance?Why not Banks and some other arguments...

There has been huge noise generated over the management changes in SKS Microfinance started by Mr Vikram Akula.Does it deserve all the attention - from the media as well as investors?

Sadly I think this business model would be great as a non profit venture as envisioned by Mohammad Yunus who fructified the concept through his Grameen Bank which means the Village Bank.The moment profit comes into the picture all kinds of sharks(and Gordon gekkos) get into that " picture" which then goes from something of a Rembrandt to a bad copy of Dali.Some other Micro Fin cos that are eyeing an IPO are Ujjivan Finance founded by another ex-Citibanker.

As an investor I would rather prefer Banks who have a track record,starting from the mammoth State Bank of India,ICICI Bank to the smallcaps - Dhanlaxmi,Vijaya,Karnataka Bank.

We know the business they are in and they dont lend so that someone can buy a goat and pay interest on that!

It is sad that even today approx  84% of Indians still burn wood or coal for their cooking needs.In the coming years with the lesser dependence on fossill fuel a change to LPG or other cleaner fuels will become mandatory.Everest Kanto Cyclinders(EKC),CMP:133,P/E:34,EPS:3.9(as of 31/03/2010) and a market cap of Rupees 14 million is well poised and is a BUY at current levels with target price of 200 by April 2011.One can hold it in the long term portfolio if required.

Micro finance as a sector is critical for the rural poor of India to come out of their financial dependence,BUT Micro Finance Companies that simply look at the bottomline are not required!

Having travelled and lived in villages I know the importance of a single goat,I have seen tigers and leopards being beaten to death by enraged villagers when their cattle were attacked(but thats another story),its economic value is significant and I hope that our systems allow funding to percolate down to all levels of Indian Society.

Monday, October 25, 2010

Empathetic Economics?

Apropos to C K Prahalad for writing,"Value at the Bottom of the Pyramid".So too Amartya Sen for getting the Nobel Prize on economic value chain for the poor.Of all the funny acronyms used by us in India the most contradictory is "BPL-Below Poverty Line".At last count unofficially 32% of the Indian population of 1 billion was BPL!And thats not counting Nepal,Pakistan,Burma...

The global economy has become a paradigm in itself and its got beyond regulations.In the 1970s when the CIA and KGB were facing off in such places at Angola,Zambia,Congo,Mozambique etc buyng of puppet dictators and the US corporates buying them off for their mineral wealth I suppose  no one wondered on how one day it would shape the world geo-politic.

Gone is the "Cold War","Iron Curtain","USSR" but the behemoth system thats replaced it is all the more frightening due to its faceless,invisible quality.How do you fight currency swaps?junk bonds?rogue traders?

Getting Main Street to live with Wall Street aint so easy Mr Obama!

Thursday, October 21, 2010

My Own Boswell

Dana Gioia,bringing poetry to the world of business.Long have I thought of marrying the creative world with business but fell into the same straitjacket as so many others who join the ranks of the newly employed with dreams of doing something,anything new.

After a few years its back to the safety of the tried and tested methods!Do read the following article


Thank god that there are a few others who think alike.

14th Century lessons still relevant in 21st Century...

That he which hath no stomach to this fight,
Let him depart; his passport shall be made
And crowns for convoy put into his purse:
We would not die in that man's company
That fears his fellowship to die with us...
Old men forget: yet all shall be forgot,
But he'll remember with advantages
What feats he did that day: then shall our names
Familiar in his mouth as household words
Harry the King, Bedford and Exeter,
Warwick and Talbot, Salisbury and Gloucester,
Be in their flowing cups freshly remember'd.
This story shall the good man teach his son
And Crispin Crispian shall ne'er go by,
From this day to the ending of the world,
But we in it shall be remember'd;
We few, we happy few, we band of brothers;
For he today that shed his blood with me
Shall be my brother."

Thursday, October 14, 2010

Another Multibagger Reccomendion

Buy Koutons Retail at Rs 122 with the view of  getting a 100% return on it in approximately 2 months.It is in the garment retail and export business and at present valuations far below its intrinsic stock value of around Rs 300.PE is 4.23,EPS 26.77 and RoE 164.29

Recommended Buy at current market price.

Wednesday, October 13, 2010

Hot Streak...

The equity markets are on  roll and every punter in every shop is making some money.The madness is still not contagious and hence allows me to a little fearful(even though i am not paid to be so!).

A repeat of 2004 Homeland Investment Act 2004 in the US,when tax rates were temporarily reduced from 35% to 5.25% would lead to a trillions of $ of unrepatriated profits back to the US.Asset prices there are already at record lows and so far no cherry picking has been visible.

Imagine the gush of money that could vamosh from all the emerging markets and quickly and where would it leave all those investors who are rushing to catch the gravy train?India is lucky to have a huge consumption driven economy and the billion strong population would be a handy fallback.

What guts me is the as yet small number of startups and the lack of entrepreneurial streak in my fellow Indians,the bureacrasy,the redtape all the old misnomers still await the unwary.Before I started this blog I had taken a bet with a treasury head of a Bank I shall not name that the Rupee wouldn't fall below 50 versus $ and we turned the corner from 49.30 when Europe threatened a collapse.I  still remain a Rupee Bull!

Tuesday, October 12, 2010

My stocks have given a 25% average return in 2 months

Winning aint everything,its the only thing - Vince Lombardi
The stocks  I have reccomended have given 25% net returns in 2 months.

Tata Sponge recco @335 now 381
Supreme Ind recco @645 now 830

Value investors can continue to hold these in their portfolio,read earlier blogs for the target price.

Thursday, October 7, 2010

Ne Hao

I seem to be turning into a full time China watcher but I feel honour bound to share the insights of an analyst friend of mine who says that in the previous 6 months wages have risen by almost 25-30% in China.And food inflation is running almost 250 basis points higher than the official figure.

If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle-Sun Tzu

The Chinese Mandarins know the enemy but not themselves is my closest guess.Media bans or Mr Buffet's confidence in the country will not lessen the angst of those carted out in cattle trucks before the Beijing Olympics or those farmers who lost crops in the Sept floods or even the Uigher resistance.Tibet style cleansing will probably not work any more.The world will be more culturally sensitive and the Green brigade is growing stronger by the day,I tended to agree with Michael Crichton's ideas in "State of Fear" but the chinese disregard for the environment is callous to the point of insanity.

By 2015 I see a huge social and cultural change in China,question is will it be painful?violent?revolutionary?intense or orderly?How will the investors be able to get a RoE or how much?How will it affect India,Europe or the USA?Srebenica frightens me...and i have no answers.

Tuesday, October 5, 2010

Asian Initiative

There is something called the Khlong Saen Saep Express Boat  on the Khlong Saen Saep in bangkok which in effect is nothing more than a sewer.But due do Thai initiative its been transformed into a transportation system by boat that takes you to the heart of Bangkok in 20 minutes versus almost an hour and half by car.The day,night,floating markets have transformed it into centre of cloth manufacturing and I found better cotton there than in India,supposedly the manufacturer of the best quality cotton.

It is but a singular example of how commerce has taken root in what was once a mere village two decades ago.The Thai markets need a closer look and I feel the vibes that come from being friends with the Chinese,Taiwanese as well as the Myanmarese(Burma) which is a market thatz has close to five billion consumers!India is trading at 19X PE and that makes me uncomfortable.Russia is too complex,Hongkong too unpredictable,a slightly less volatile situation should see the Thai markets give alpha returns.

P.S.Tried to meet Mr Marc Faber but apparently he was not in residence.