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India - Ready to Rise ?

Finally month-long Indian elections are over. The results were quite surprising and in a way positive for country. I was little dis-appointed with BJP's loss and Advani's last chance to become PM. I really wanted him to become PM and lead India for next 4-5 years. But alas - that was not to happen. However good thing was that congress won decisively and hence does not have to depend on whims of smaller parties like SP, BSP, Lalu and so on. Now Dr. Manmohan Singh can form strong government and pursue economic and foreign policies which he could not in first term. On these two topics, BJP and Congress are both aligned and can really make a difference at least in first three years before election season starts. Here is what I think India could (and should) in next 5 years.
  • GDP to grow by 50% in 5 years taking it to $1.5 Trillion
  • 100 to 200 Million new jobs
  • IIT and IIM  in every state
  • 5 international level companies with revenues of $50 Billion each
  • Telecom penetration of 70% (with 700-800 million subscribers)
  • Sensex above 20000 at sustainable basis
If India could achieve such achievements in next 5 years, future looks good. So as investor, how can one position. Here are some options - these stocks could return 100% in next 3-5 years:

  • ICICI Bank (IBN) at $29
  • Sterlite Industires (SLT) at $10
  • Matthews India Fund (MINDX) at $11-12
  • Powershares India (PIN) at $16
  • There are quite a few other opportunities. As long as you believe in long-term prospects of India, you won't go wrong. You may want to wait for some time to let election result mania settle down. I was surprised to see Sensex goes up by 2100 points - I was expecting it to go up by about 800 points or so
Here is my another investing premise:

Perpetual "call option:

Despite markets going up by nearly 30% from its lows, there are still many companies which are selling at single digits or even under $5 due to fear for their survival. Many of these companies are raising significant amount of equity from market and diluting their current share-holders. That's where the opportunity lies. Since new investors are willing to invest money, it is likely that these companies would survive and at single-digit stock prices, they are more like perpetual "call option". This means that when survival fear for these companies goes away, these stocks would trade in 2 to 3 times of their current values in 3-5 years. Here are some examples:

  • Delta Petroleum (DPTR): $1.70
  • Regions Financials (RF): $ 4
  • Kite Realty (KRG): $3.2
  • Lear Corporation (LEA): $1.5 - this company has highest risk of BK and hence losing all investment due to uncertainty of GM BK
  • KKR Financial (KFN): $1.35
  • iStar Financial (SFI): $3. This company has preferred like (SFI-PD at $8, SFI-PE at$8) which pay dividends yielding nearly 25%. My recommendation would be to buy preferred which would not only generate regular income but also provide upside upto 2 times current price.
Have a great memorial weekend !

/Shyam

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