May the Force be With You

I have taken such a long break from my blogging that it almost felt like waiting for Star Wars movie or interest rate hike by FED. Both events: new Star Wars movie after 10 years and interest rate hike by Fed after 9 years. What a timing - both these events happened in span of less than 48 hours!
These events and upcoming new year inspired to start blogging again.
Year 2015 have been tough for my investing suggestions. I just looked it my recommendations and collectively they are down by about 15% (assuming shadow portfolio of equal amounts invested at start of year). It's bad - there is no other way to say it. I almost started doubted my own analysis.
Hopefully you did your own diligence and did not lose as much. But that won't deter me to continue my passion of analyzing market trends and come up with some investment ideas. Here are few. I will follow up for 2016 recommendations in next blog.

• Sunny outlook for solar and wind - This was another significant development last week that congress extended green energy tax credits by another 3 to 5 years (they were supposed to be expired by end of 2016). This gave a major support to solar stocks many of them doubled in 1 week. However there are still some "relative" bargains. I am considering SUNE ($6.5), GLBL ($5.5) and TERP ($12). These are from same management team which really messed up with their balance sheet and got punished by market by pushing these stocks by nearly 70-80% in span of 6 months. Finally management wised up and started to pull back. This should reduce their bankruptcy risk and could give these stocks at least 50% run in 2016. For GLBL and TERP, there is nice 10%+ yield (provided they do not cut)
• Biotech - this has been one of my favorite sector. Given trends like older demographics, better early detection mechanisms, wider covered pool due to Obamacare and FDA willing to grant approvals for unmet needs, this sector had good long-term prospects. However picking winners and losers are like picking lottery numbers unless one has excellent background in this area (which I don't). Having said that I am excited about biotech focused on cancer areas (due to some personal reasons) and especially interested in immunotherapy. Few names to mention are BLUE ($60), KITE ($60) and risky company CLVS ($32). I also like PTCT ($32) which focus on unmet need for DMD
• Energy - this has been bummer (and cause for major losses) for me and I have been completely wrong about quick recovery in energy sector. Given that OPEC has absolutely no influence and shell revolution in USA, oil glut would continue till crude falls closer to $25. It's repeat of 1980's. So it would be at least year or two before energy sector recovers. If you have long-term horizon (5+ years), then picking XLE around $50 may be wise move.

Coming back to StarWars - it broke all time records and is on way to become only 2nd movie to worldwide gross of $2B. Only Disney can put such an excitement in 30 year old franchise. I just caught up with Episode 4, 5 and 6 over weekend and now looking forward to seeing "Force Awakens" today evening. Next blog would be on 2016 recommendations - till then let the Force be with you!

/Shyam

Modiji: Welcome to Silicon Valley

Yesterday me and Yash went to San Jose Airport to welcome India's PM Narendra Modiji. It was great experience to see one of the most popular world leaders in person and have slight of hand-shake two times. Yash managed to get a selfie also:-) The weekend is full of events culminating into Community welcome at SAP center which we plan to attend. It would be fun.
What a change leader can make in terms of country's perception at world stage. 2 years back India was slowing, stuck in lack of governance and despite her potential no one was paying attention. After Modi became PM, he took on himself personally to travel extensively and use his charisma to change India's image on world stage. And what a success he got. He is only leader in world (other than Obama and Pope) who can fill a stadium of thousands of people to listen to him. His policies such as Digital India, Make In India, Clean India and many others have captured imagination of Indians across the world. No wonder he has over 80% approval ratings. Now would all of these result into real change for India and Indians. I think so. Right now India is fastest growing major economy in world (more than China) and if India can maintain 8+ % GDP growth for next 10 years (assuming Modiji become PM for 2nd term), it would make wonders in reducing poverty and adding significant wealth and make India 3rd largest economy in world before Modi retires from active politics (in 10-12 years). For now, Indians from all over the world are proud of calling Narendra Modiji as their leader! Welcome Modiji to Silicon Valley and looking forward to hearing you
/Shyam

Alphabet of Companies!

Google is now Alphabet - very interesting move by one of the biggest company in the world and it came out of nowhere. This may be in works and may have been triggered by motivation of creating CEO positions for very capable candidates like Sundar P and others. Congrats to another Indian CEO at major tech company. This move by Google triggered me thinking. What are various companies which would complete Alphabet's A-Z? Here is my take:

A: Airbnb (Hospitality)
B: Baidu (Search in biggest market)
C: Calico (Biotech/Life Sciences)
D: Dropbox (Storage)
E: Expedia (Travel)
F: Flipcart (India's biggest online marketplace)
G: Google (of course)
H: Hulu (complementary to YouTube)
I: Instacart (Grocery shopping)
J: Jawbone (Wearables)
K: Kickstarter (Fund-raising)
L: LinkedIn (Professional social network)
M: MonDB (Database for app developers)
N: Nest (Home Automation)
O: OpenTable (Online restaurant reservation)
P: PayPal (Payments)
Q: Quora (Search based on Q&A)
R: Rackspace (Cloud provider to fight against AWS)
S: Snapchat (social, social and social)
T: Twitter (Social and newsfeed)
U: Uber (City-travel)
V: Vimeo (Complementary to Youtube)
W: Wing (Google company focused on Drones)
X: Xerox (this was difficult choice but buy it for patents)
Y: Yelp (customer reviews)
Z: Zenefits (Cloud based benefit provider)

I am sure there could be many such lists. Would be interested to find out how many of these end up being an "Alphabet" company!
/Shyam

Great "Fall" of China and Europe?

Last few weeks have been very interesting and blog-worthy. It has been while since I wrote my commentary regarding various events impacting economy and markets. End of Jun had multiple deadlines - all of which passed and still discussions going on: Greece/Creditors bailout discussions, Iran and world powers Nuclear deal. Unfortunately none of these are closed - deadlines gone and extended multiple times with leaders meeting over weekends.
So what's in store over next few weeks and how it could impact markets?
Here is my take:
Greece and creditors would negotiate well into mid-night Sunday and may declare a last minute deal avoiding "Grexit" but it would only be temporary patch at best. The Greek drama would continue well till end of year creating repeat of Jun drama around holiday season. IMO, best course of action would be for Greece to come out of Euro and introduce local currency (which would be at 50% of face-value of Euro) and promote some structural reforms. Argentina did it successfully, Iceland did it recently. This major step could give a temporary shock to markets but in long run it would best for everyone involved.
Now coming to Iran nuclear deal. This has more political implications than economic (outside of course crude market). Getting Iran into mainstream could help stabilize middle-east and could be a feather in cap for Obama presidency. UN and other sections have not really worked in stopping Iran from developing nuclear knowhow. So not getting deal done won't change anything for Iran. So it would be practical for Kerry and Obama to accept reasonable terms and get the deal done. Again this could be short-term negative for crude market but market have already priced it in. So I won't be surprised if crude goes up when actual deal gets announced.
Now coming to Great "Fall" of Chinese market. Anyone who had studied history of markets could predict it. It has eerily similarity to Nasdaq market during .com bubble when index went from 2000 to 5000 only to crash below 2000 again (it took 15 years for Nasdaq to cross 2000 high) Shanghai index also went from 2000 to over 5000 to crash back to 3300. Due to short-term measures Chinese authorities have taken, market seem to have stabilized but I won't be surprised if selling starts again later this year and index falls back below 3000. So if I am an investor, I won't go anywhere near Chinese market for next few months.
So how all these events impact markets in US? Six months of 2015 had gone and indexes have not gone anywhere. They are stuck in neutral zone. While single day gyrations have increased due to all events mentioned, for year markets have hardly moved in any direction. Now that earnings season is about to get into high-gear and geo-political events finally coming to some conclusion over next 2 weeks could give markets direction it is looking for. I am personally investing in energy market (oil, solar) as well as bio-tech. Oil is contrarian play while bio-tech is growth play. Let's see how these trends turn out. Come Sept/Oct, watch out for "seven year itch". More about that in next blog!
/Shyam

Super-Pi Day: 3/14/15 9:26:53

Let's celebrate Super-pi day with 10 digits in famous "pi" aligning today with 3/14/15 @ 9:26:53. Some math and science geeks are planning to wed exactly on that time to show their love for each other and for mathematics. Today also happens to be Albert Einstein's Birthday!

So I am happy that my son Yash is going to spend his morning volunteering at Tech Museum and Isha would be spending her day participating in three events at Science Olympiad. Well done kids with your pursuit of science and math!

Now coming to my events in finance world. March always have been quite interesting (2nd to months of Sept/Oct). 15 years back Nasdaq reached its peak (above 5000) in March and it touched 5000 just few days back just to fall back. In 2009 markets reached it's bottom on Mar 9 and this year oil markets are reaching it's multi-year lows in March. Even in currency markets, Euro and Yen are reaching multi-year lows. Euro is racing towards parity with US dollar and should reach by end of March. With so many multi-year events happening in span of few days, how should we interpret these macro and micro events to make investment decisions?

Here are my simple recommendations:

• Markets would do what normally they do - they go up and down in short term. So don't pay too much attention to these daily gyrations
• Select industry (to invest) which you understand and could form some educated opinions
• Invest for long-term in companies with solid fundamentals in those industries
• Invest small amounts in some speculative stocks which could potentially return "Apple" type of returns (Apple would have considered speculative stock in late 90's)
• If you can deal with so much complexity, just invest in index funds (S&P500, mid-cap and small-cap)
• And above all, just enjoy life one day at a time with days like "pi" day, Cricket world-cup matches, walk on sunny day or nice movie!

Happy pi day to all!

/Shyam

Cricket World Cup - 3rd biggest show on earth!

On Valentine's day, third biggest show on earth started it's latest incarnation in Australia/NewZealand (first and 2nd would be Olympics and Soccer WC). And what a start with most awaited India-Pak match. I was glad that India outplayed Pak in every aspect of the game and won the match convincingly. Hope "boys in blue" can repeat this performance in all games including knockout round which would be in March (the tournament goes on till Mar 28).

Now let's look at geo-politics and its impacts on markets. Since my last blog in which I recommended 15 investment ideas, markets are on fire especially energy stocks. That makes sense for multiple reasons. First of all there was "irrational pessimism" in oil markets which pushed down crude to mid-40s and pundits were predicting it to go down to 30s. Crude came down by more than 50% just over 2-3% gap in supply-demand. If we look at normal macro-economic principles, it just did not make sense. However crude markets are known for booms and busts. Last two weeks few factors changed.

• Oil rigs started coming down by non-significant numbers - this means future supplies would come down addressing the fears of over-supply
• Capex investments at many oil companies are cut by 20-30% further reducing fears of oversupply
• Geo-politics became favorable with Merkel trying to address Russia/Ukraine and Greek issues in same week
• Growth in China, India and most likely Japan coming back raising possibility of demand for crude increasing

Crude markets realized this and started pricing crude accordingly causing it to jump by more than 20%. So is it too late to invest in "oily" companies. If we look at what happened in 2009 with banking and financials, it's not late at all since there are many investment opportunities which could return 20-100%. Let's look at some of these. (usual disclaimer goes without saying - these are risky investments and do your due-diligence before investing)

1. RIG at $19
2. FCS at $19
3. VALE at $7.50
4. PWE at $2.40
5. LNCO at $12
6. OIL at $11.50
7. XLE at $80
8. EXXI at $3.50
9. GDPAN at $9
10. PEIX at $9

That's all for now. Have a great President's Day!

/Shyam

Deflation and "deflated balls: It's SuperBowl Time!

Last week words with "de" were popular. It started with Patriots winning their entry into SuperBowl with "defaulted" balls and ECB coming out with their strongest measures to deal with deflation which is setting in Europe. Interesting week indeed!
Next Sunday is SuperBowl and as always it's time to bet on who is going to win. While both teams are strong, my prediction is Seattle Seahawks would win. This could be good for Markets as SuperBowl Indicator (which is nearly 80%) accurate says that win from NFC would mean markets would end positive for the year. Or maybe it's reverse corollary. Already with so much stimulus, it's most likely that markets would end year with positive means NFC team (Seahawks) would win. Let's see what happens in 2015.
It's almost month into 2015 so it's time to recommend 15 picks for the year. Hopefully 2015 picks would do much better than 2014 picks. These picks are just an academic exercise. One needs to do his/her homework before deciding whether to invest or not

1. OIL ($10.20)
2. LNCO ($9.20)
3. XLE ($75)
4. CSIQ ($19.19)
5. FGEN ($29.29)
6. PTX ($8.64)
7. SRPT ($12)
8. FEYE ($33)
9. BBRY ($9.99)
10. BAC ($15.50)
11. VALE ($7.70)
12. MBT ($8)
13. PEIX ($8)
14. BLUE ($90)
15. TWTR ($37)

I plan to track performance of these stocks (some of them are dividend paying such as LNCO) to see how their perform for 2015. Goof luck for your own research and invest carefully

/Shyam

Year 2015 Predictions!

First of all, Happy New Year to all. 2014 was a mixed year for my predictions. While my prediction of all indexes (DOW at 18K, S&P over 2014 and Nasdaq near 4800 were very close to my predictions at start of 2014). I am proud of my predictions at macro level. However my recommendations did not do that good. Overall couple of recommendations like Yahoo (up by 28%) and RAD (up by 57%), there were some bad ones like NBG (down by 68%) and SRPT (down by 28%). Overall portfolio based on my recommendations would have been down by 3-4% (assuming equal amount investments). That's pretty shabby compared to S&P returns of 13%. Most of my recommendations are normally in small cap. When compared to small cap index which returned about 4%, it's ok.  Maybe I should stick with macro predictions:-)
So here are some:

• OIL had it's 2nd worst year of all time. So what's outlook for oil in 2015. I think it goes up from here. After coming down by 50% in 6 months, it would go up by 15% in 2015. So expect oil to trade about $60
• Here are predictions for major indexes:
• DOW: Close to 20K
• S&P: Close to 2200
• Nasdaq: Close to 5100
• Given that 3rd Presidential year is always good for stocks, it should not be very difficult for these indexes to make new records in 2015
• Russian markets could surprise on positive side in 2015 - again this could be tied to oil finding some footing as well as no major land grab by Russia and Russians defending their currency
• Europe would continue to be drag on overall world economy
• So my best investment advice would be to stick with index based ETFs. Here are few recommendations:
• XLE (around $79)
• SPY (around $200)
• TAN (around $33)
• XLF (around $24)
• IWM (around $118)
• IBB (around $250) - Biotech had gone up quite a bit so wait for it to cool down before jumping in
• QQQ (around $90)

I would still be investing in individual stocks since they still provide a good way to play "covered call" strategy. But those recommendations would be in next article.

Till then enjoy your holidays and happy new 2015 year!

/Shyam