Adios 2016;Happy New Year 2017!

As we say Adios to 2016 and welcome new year 2017, it's time to take stock of 2016 recommendations done in first blog-post of 2016 and come up with new recommendations for 2017.
So here is report card of 2016 recommendations. In all, I recommended 16 stocks at start of 2016 with very clear indication that these are not for normal investors since they reflect my aggressive style of investing (after all blog is called "seeking alpha"). In all out of 16 recommendations, 6 were negative and 10 were positive. Losses range from 100% for LNCO, 94% for SUNE to 35% for FOLD. Gains range from 160% for VEDL, 144% for CHK-PD to 14% for OIL. In all assuming approx equal amount was invested in all 16 recommendations, the portfolio would have returned 28% not counting any dividends etc. This beats S&P by approx 18% which seems to be overall good performance. Of course it came with extreme volatility especially during months of Feb and Jun (around Brexit time). So as I have mentioned, these recommendations are NOT for risk-averse investors.
Now let's look at what's ahead for new year 2017. Here are some macro predictions.

• DOW would finally cross 20K in Q1 and go on breaking 21K by year end.
• S&P would break 2400 by year-end
• 10-year treasury yield would hover between 2-3%
• US unemployment would remain below 5%
• OIL would be between $40 to $65
• US tax-reforms would bring down both corporate and individual taxes thanks to Trump and GOP controlled congress
• Merkel would win her 4th term as Germany's chancellor

With this macro background, here are 17 recommendations for 2017

• Technology/Telecom/Solar: AMD ($11), MU ($22), VOD ($24), SPWR ($6.5)
• Energy: CRC ($20), LGCYO ($7.5), REN ($39), SUN ($26), ETE ($19), CVRR ($10), SN ($9), MRO ($17)
• Biotech/Pharma: PTCT ($10.80), ENDP ($16), VRX ($14)
• European Banks: DB ($18), BCS ($11)

As you can see, most of the picks are either in Energy, Biotech or beaten down stocks like European banks or Valeant/Endo type possible turnaround candidates. All of these are very aggressive picks and high-beta stocks so my usual disclaimer (do your own research before investing) stands.

Wish you all Happy, Healthy and Prosperous New Year 2017!

/Shyam

Trump Inc Startup: Ultimate Unicorn

Two weeks back I predicted that DOW would reach 20K in first quarter of 2017. Looks like it may touch even before end of 2016. I am sure many folks who are investing in stocks are happy with that and must be thanking Trump for that (even though he is not even President yet).
Last week Trump met bigwigs from Technology world for the first time. Given than all except one were against him, it must have been an interesting meeting. Conpiciously other than Palantir and Uber, none of the so called Unicorns were present. Most of the presence was by big companies with market caps over $100 Billion. Talking about Unicorns, "Trump's Presidential bid" must be the ultimate unicorn of all time and majority of folks missed seeing this unicorn which was in front of us for last 18 months. Only few folks from technology - Peter Thiel being one of them (no wonder Peter made big money in Paypal, Palantir and Facebook).

So let's look at "Trump's campaign" as startup and evaluate its success:

• It was founded by Trump about 2 years back funded by his own money including sweat equity. After all he traveled all over USA and gave countless speeches
• He took on big establishment on GOP side as well as democratic side
• He raised money from grass-roots (aka kick-starter style)
• He smartly targeted spending of ad dollars where it could get maximum ROI similar to startups would do with limited resources
• He spent half what big company "Clinton Inc" spent
• Against every one's advice, he spent last few hours in Michigan/Wisconsin/Pennsylvania states where pundits had said it was impossible for Trump to win these states (and these are the states which made him President-elect)
• He ran the campaign single-handed and ruthlessly (don't we know the style in which Steve Jobs ran Apple during early years?). I think this may be necessary for startups.
• He effectively ended "Bush" and "Clinton" dynasties similar to what Amazon is doing for so many old-world businesses
• And it had a blockbuster IPO on Nov 8, 2016. 

Now that Trump Campaign Inc has gone IPO, it is time for Trump to behave like a public company and be accountable to his shareholders (American Citizens).

Trumponomics: DOW 20K

Now that I have started writing blog again, I have decided to get into habit of writing blogs every couple of weeks. Somehow I let complete election season go without writing much and expressing my views. Anyway, based on various bets I lost (4 to be exact), my friends (and family know) whom I was supporting in elections. I really wanted to see first Madam President. But alas, that did not happen due to some campaigning mistakes (and little bit of arrogance to ignore Michigan and Wisconsin).  Now that Trump is going to be our President, I am fully on board in supporting Donald Trump as President of USA starting in Jan.
What surprised me was the margin of his election victory and how markets took U-turn (for better) after hearing his acceptance speech. No-one would have thought that DOW would cross 19K if Trump wins. But here we are - all three indexes at all time high. Oil is back in action heading towards $60.

What is Trumponomics:

• Big tax cuts - hoping that trickle down effect would help everyone
• Big infrastructure spending
• Big defense spending
• Big noise on trade protections (this would be mostly noise to scare of many policy-makers in other countries to behave)
• Bring money parked outside US into US by paying small tax
• Low interest rates (FED would adopt go-slow as they have been doing over last 8 years)
• Symbolic job returns to US (similar to Carrier deal)
• General sentiment about "Make America Great Again"

With these basic principles of Turmponomics, I won't be surprised if DOW crosses 20K and all other indexes keep on reaching all time highs over next 3 months. The question is till when this merry-go-round will keep playing?
Given this, my current recommendation is to go long on energy stocks. Even if they have rallied recently due to OPEC announcement, there is still room to run. Normally I prefer small-caps because they outperform significantly if times are improving (but also have risk of going bankrupt). Few stocks I have been monitoring are: Sanchez Energy (SN: around $8.40), AMD (around $8), Sunpower (SPWR: around $6.50), CVRR (around $8), SWN (around $10-11) and ERX (at around $35)

That's all for now. I promise to write my blog more often. 

/Shyam

After-tax 401K to Roth IRA

Have you ever wondered how to save more (beyond $18K IRS limits) and also convert to Roth IRA? And how about having flexibility of using those funds for big-expenses like kids college? Well – thanks to recent tax-law changes, there may be an answer. However as always, it’s hidden in complex US tax code. Thanks to some excellent research by my colleagues Anand and Venkaiah, here is simplified version.

All of us know what 401K means and how it works. The standard limit on 401K contributions is $18K per year ($24K if you are 50 or older). However you can still contribute after-tax money to 401K. Limit for total contributions from all sources and to all retirement accounts is $53K per year ($59K per year if you are 50 or older). This includes 401k, ROTH 401K, after tax 401K and any employer matching contributions.

e.g. For an individual under 50, let’s assume following:

• ·      Employee contributes $18K per year
• ·      Let’s say at 5% employer match, employer contributes $10K per year (would depend on many factors so use this just as illustration)
• ·      That means, one could still contribute 53K – 18K – 10K = $25K in after-tax 401K
• ·      As a side note, if you contribute to after-tax ROTH 401K, it would be counted towards $18K limit

Now how to optimally utilize these after-tax 401K contributions?

Note that these are after-tax contributions means they are NOT tax deductible but any gains are tax-deferred. Also these contributions normally must happen from your regular pay-check means your company needs to have these in their 401K plans. Depending on the plans, you can convert these after-tax contributions to Roth IRA in following ways:

• When you leave company or retire or
• In-plan conversions (depending on your company plans)

When you convert, to make this a non-taxable event, you can opt for after-tax contributions to go to a ROTH IRA and any associated gains to go to a traditional IRA

Let’s continue the example we took:

• ·      Let’s say you are making after tax contributions of $20K per year for 5 years totaling $100K in after-tax contributions
• ·      Over 5 years this account had gains of say $40K
• ·      At end of 5 years you decided to convert this. Here is how it could be converted
• o   $100K would go to Roth IRA
• o   $40K would go to Traditional IRA

Traditional IRA withdrawals in retirement are taxed at ordinary income tax rates. Roth IRAs earnings and withdrawals are generally tax-free.

Depending on your situation, you can decide when to convert after-tax contributions but in general early the better if plan allows. Contributions in Roth IRA, can be withdrawn penalty free after 5 years and one could even withdraw the associated gains penalty free for some expenses (including college expenses) after 5 years.

Hope you got some useful information to think about. 

For more information, here are some references:

http://www.nytimes.com/2015/09/23/your-money/401ks-and-similar-plans/irs-ruling-makes-after-tax-contributions-more-attractive.html

https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans

http://news.morningstar.com/articlenet/article.aspx?id=682209

http://www.doughroller.net/retirement-planning/pros-and-cons-of-after-tax-401k-contributions

Disclaimer: This blog is only for information purpose only. Before you take any specific actions, please do your own due-diligence including discussing with your advisor.

/Shyam

Trumped and Berned

New Hampshire gave a notice to USA - be a ready to be Trumped and Berned!
Get months back no one would have thought that it would come to this. Everyone was thinking that it would be 1991 again where Bush and Clinton would cruise to win their party's nomination and eventually Hillary Clinton would become first Madame President. In my opinion, that would still be the case (Hillary becoming president) but the path looks much more curved than straight line. Of course that makes this election season very interesting. Anytime I put on CNN, they are only talking about primary elections - as if nothing else is happening in world (and CNN calls itself as world news headquarters!)
Similar to elections, markets are also becoming very unpredictable with hundred points move on DOW becoming norm. Banks, energy, new high-tech (like LinkedIn, Yelp, Twitter and so on), commodities, Chinese markets all of these are predictably going down. Currencies are doing exact opposite of what central banks are trying to instrument (check BOJ's negative rate impact on Yen). It feels like currencies are racing to the bottom to rejig their economies. Financial and investing world is much more scary than first half of 2015. So the question is - is trend of going down continue or we are near bottom. No one knows. But if "7-year" pattern continues, we may be near bottom as we had seen during March 2009. But in these uncertain times, it's best to be on sidelines till markets sort themselves out. Till then enjoy the political circus!
/Shyam

SuperBowl 50!

Welcome to Bay Area for Super Bowl 50. This much awaited yearly show is in town and just 3 miles from where I work (@Cisco). In fact it is so near of Cisco's campus that Cisco's parking lots could be used to park cars and walk. It's great to have such a major event in heart of Silicon Valley. Last week we went to SFO to enjoy the excitement. Tomorrow we would enjoy the show at one of our friends place (tickets are not available and affordable with lowest ticket price of $3000 if you could get it). By some estimates, Super Bowl would boost Bay Area economy by nearly $800 Million. Nice sum of change when tech industry seems to be losing some ground (especially when high-fliers like LNKD and DATA crash by over 45% in one day).
Given it's February and longest political show on earth is about to get into high-hear,  it's time for some predictions

• Carolina Panthers would win Super Bowl 50 (even thoughjwin by Denver Broncos would capstone Peyton Manning's illustratious  career)
• Next week's New Hampshire Presidential Primary could give clear direction to Republican nominee process and seal Mrs. Clinton as Democratic nominee. So here is my specific prediction
• Rubio would emerge as winner (and close 2nd) in NH primary - this double definably decelerate Mr Trump's momentum and could even de-rail his presidential aspirations completely. I am still behind my original prediction that Mr. Rubio would become Republican nominee against Mrs. Clinton as Democratic nominee. All of this would be sure decided on Super Tuesday (Mar 1)
• Markets would continue to be volatile (DOW going up or down by 100+ points) for next few weeks and may settle down in March. Once Fed gives clear indication that it is on hold for some time may give markets some breather and possible have a leg up in Spring/Summer

March is also critical for our family with Yash's college admission results coming in. Yash had worked really hard all throughout his school years and college applications. We are hoping that he gets into one of his dream colleges. Best of luck Yash!

/Shyam

Happy New Year 2016!

It has been few days since new year started. It's time to take stock of performance of 2015 recommendations and come up with some new recommendations for 2016. As I mentioned in my previous blog, 2015 has been bad - really bad. Overall portfolio performance was minus 10%. Only 3 winners and 12 losers. Best winner was SRPT (up by 240%) and worst was LNCO (down by 88%).
Nothing to be proud of except the fact that my inspiration in this field Mr Buffet was also down by 10-11%. Time to forget 2015 and look forward to 2016.
Even 2016 started with turbulence in markets with first two days markets being down significantly due to various factors - main being China. However IMO, this provides great opportunity for taking some positions. So here are my 16 recommendations for 2016 - most of them are concentrated again in Solar, Energy and Biotech.
Biotech: BLUE ($62), CMRX ($9), CLVS ($32), FOLD ($9), PTCT ($29)
Solar: SUNE ($5.5), TERP ($11.50)
Energy: OIL ($6.10), CHK-PD ($19), LNCO ($1.10), TDW ($6.6), WLL ($8.8)
Misc: WYNN ($66), VEDL ($5.5), NRG ($11), MU ($14.5)
As you would notice, most of these are unloved stocks for reason. So if they survive 2016 (and that's big IF), they could offer big upside (if you are willing to ate risk of equally big downside).
2016 is also interesting with Presidential politics. Most likely election would be between Clinton and Cruz with Clinton winning the presidency.
That's all for now. Happy New Year
/Shyam

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

Happy Holidays!

Happy holidays to all. Year 2014 is almost ending. As we close on 2014, it was interesting to see that last week became kind of historical week with 3 different "communist" countries in news for different reasons.

1. Russia - its currency ruble dropped by nearly 50% in last 6 months. Last week was capitulation when it ranged from 60 to 80. That's unheard in currency markets. Has ruble stabilized around 60. I doubt it. But worst may be over and it should hover between 40 to 60 for next few months unless Putin pulls up something like what he did in last spring. Oil dropping also did not hep Russia. 
2. Cuba - Cuba was in news for good reasons, After nearly 55 years, US and Cuba has re-opened discussions and started process of normalizing relations. This could be good news to Cuba and America. Americans would be flocking to Cuba for vacations and buying lots of Cuban cigars
3. North Korea - Looks like North Koreans found more effective way (than building nuclear bomb) to attack on "freedom of speech". SONY and theatre owners decision not to release movie "The INTERVIEW" is being interpreted as attack on "freedom of speech" which in a sense is correct. This could set dangerous trend unless countries and companies are ready for it and react to more wisely than what happened in this case

Oil continues to be on "slippery" slope. Last week it may have found some footing after nearly touching 5 year low of $55 (for brent). There was definitely fear in oil markets as well as any company dealing in energy. As Buffet said, be greedy when there is fear in market. So here are some potential stock picks which are very risky but could be rewarding (if they survive)

1. FEYE (around $30-$32) - Cybersecurity play
2. LNCO (around $11) - energy play with very large dividend. Even if dividend gets cut in half, could still be above 10% yield
3. EXXI (around $3) - this may not survive and hence it is selling at $3 as if it's going to declare BK which is real possibility. However if it survives (similar to what it did in 2008/2009), this could easily double
4. RBL (around $14) and GREK (around $14) - Bet on Russia and Greece not getting worse
5. PBR (around $7) - another oil play. All worst possible news about oil down, corruption, dis-appointment at election results in Brazil have brought down this by 60%. What else could go wrong?
6. CSIQ ($21) and JKS ($18) - Chinese solar plays which have come down in sympathy with energy sector. These two could go back above $30 by summer 2015

All of these are very-very high risk bets. So be careful.

Happy holidays to all. 

/Shyam

America's bubbles: Dot-com, Housing and now Oil

Looks like bubbles have 7-year itch. Every 7 years one bubble starts bursting based on recent history:

• 2000-2001 - Dot-com bubble started to unravel
• 2007-2008 - Housing/Finance bubble
• 2014-2015 - Could this be unravelling of great energy bubble which was forming around oil and shale gas

If oil price is any indication (down by nearly 45% in one year), that seems to be case. In capitalist system, there are always excesses which need to be adjusted by these bubble-bursting events. In today's WSJ, there is article about unravelling of oil boom which provides pointer to seed of this oil bubble. Ironically it was planted right when previous housing bubble started bursting. I am sure if we go back to 2000-2001, we would notice that similar seeds were planted for housing bubble. Are these 7 year bubble cycles would be new norm? Similar to technology bubble which mostly impacted high-tech areas like Silicon Valley, this time pain would be mostly around oil producing states like Texas, North Dakota and Middle-east, Russia etc. Consumers would get some well deserved relief in terms of lower gasoline prices. So as investor, what should one do? In midst of financial crisis, there were excellent opportunities (like buying BAC at $3 and Citibank at $1). Most of us could not benefit from these due to fear on street. IMO, similar opportunities would come in form of equities in energy sector. Challenge would be to find right ones (which would survive this mayhem) and showing the courage to take plunge. It's too early to recommend any individual stocks in Energy sector since many of those may not survive. Best bet would be to buy ETF like VDE or XLE in Q1CY15 which is when oil would hit bottom. 

Till then, Happy Holidays!

/Shyam

Time for Thanksgiving?

What a change few weeks can make? Just 5-6 weeks back, markets were collapsing and pundits were talking about possible recession coming and then come Oct 31, Japanese central bank started printing press to start printing yen. Suddenly market sentiment changed and all indexes are close to multi-year highs. So question is - what's next? Looking at historic patterns, holiday season has always been very good for markets. So I expect all clear to break some records and end the year on highs. In fact I would claim that DOW would break 18000 and S&P may touch (or come very close) to 2100. It may be little tougher for Nasdaq to break 5000 but you never know. So if don't do anything, you should expect 2-3% gain from here to year end. But having said that one could potentially start setting up for 2015. Here are some ideas with usual dis-claimers of watch out for risk.

• NFLX at $350
• YELP at $55
• SCTY below $50
• SPWR below $27
• CSIQ below $26
• FEYE below $30
• GILD below $96
• BABA below $100
• ISIS below $45
• ARWR around $5.50

These are all high beta stocks. Hence if you do plan to invest, plan to sell out of money calls for 10% gains. That's all for now.

Happy Thanksgiving!

/Shyam

Get Ready for "Fall" Season

We were at Berkeley campus yesterday for a course I am auditing and I noticed beautiful fall colors started appearing on trees.  Fall also brings interesting memories from markets in months of September and October. Historically September is worst performance month for markets. It is also filled with many events to remember (or not) from great recession of 2008/2009 which started with Lehman Brother's bankruptcy (anniversary of which is on Monday 9/15). So what it all means to remaining two weeks of September and upcoming October (which is normally most scary for markets) of this year.

Let's look at some of the major market moving events which is coming up next week and what could be outcome of those events.

• FOMC 2-day meeting wrapping up on Wed 9/17 - most likely Fed would give some indication of timeline for interest rate increase by removing "considerable" word from their statement. This means interest rate increases would start in 6-9 months (1HCY2015). Markets love today's booster shot of low interest rates. This change would definitely move markets downwards in short-term
• Then comes Scottish vote for independence on Thursday 9/18. Right now polls show that it is 50:50 chance. If Scottish vote for independence they would be ending more than 300 years of union with UK. This could be major unsettling event for markets - especially for currency markets and UK stock markets. My prediction is that "NO" will win with thin margin similar to what happened in Quebec/Canada (The referendum took place in Quebec on October 30, 1995, with 49.42% voting "Yes" and 50.58% voting "No"). if "YES" vote wins, consider this as small black swan event since markets were not pricing this till very recently. Sterling pound could crater below $1.50
• Then comes Alibaba IPO on Friday 9/19. This is biggest IPO world has ever seen and by the time all said and done, Alibaba would have raised close to $25Billion. If "BABA" (stock symbol for Alibaba) does well on first day, it could be boost for markets. However this could be temporary as markets may consider this as short-term top and start worrying about end of Q3 and corporate results
• And of course arrival of iPhone 6 and iPhone 6plus in Apple stores. I am personally eagerly waiting for this. Apple could sell over 10 million units of these new phones in Q3 and could sell over 60-70 million units in Q4. That would be blockbuster launch for any product in history of high-tech or any product for that matter.

So what should normal investor do. If you are in for long-term, don't do anything since markets would recover during holiday season. If you want to book some profits, that would also be good idea. One could sell in-money covered call options and enjoy the ride. Whatever you do, do your due-diligence and make informed decisions.

Enjoy the fall colors and fall season

/Shyam

In Biotech We Trust

Given the recovery of biotech stocks over last few weeks, investors can almost say "In Biotech We Trust". Monday started with big biotech buyout with Roche buying Intermune (ITMN) for $8.5 Billion. This is a deal for company which has less than $150M yearly revenue. But hey, when did those things matter when you have a promising billion $ drug waiting for FDA approval which could come as early as Nov 2014. One could have easily made some dough by buying ITMN stock when rumors started about 2 weeks back that some European drug giants are interested in this company. Luckily I have been studying, tracking and investing in this company since mid-30s.
This deal gave a major boost to other bio-techs which could be next buyout candidates. Here are some of my predictions for either buyout or positive response from FDA. Since these stocks are extremely volatile, I won't recommend them to anyone AT ALL since one could lose all their investments.

The reason I am even writing this blog on bio-techs is only because of my personal interest/study and putting out potential winners publicly. It is like testing my own bio-tech stock picking skills. The price mentioned is possible entry point when markets cool down

• ACHN - below $8
• ARWR - below $10
• FOLD - below $6
• ISIS - below $30
• JAZZ - below $140
• ICPT - below $220
• CLVS - below $37
• INSM - below $13
• SRPT - below $20
• RNA - below $8
• TKMR - below $15
• CLDX - below $12

Personally I feel that there are more than 50% chance that many of these companies would be successful in clinical trials and could be bought over (JAZZ may be due to tax inversion theme). There are some big stocks like GILD, REGN etc which also would do very well (20% gain). After all they are charging more than year's salary (in Bay area) per patient for some of their drugs ($84000 for Sovaldi - $1000 per pill)

Americans like their tech - whether it's high-tech or bio-tech or green-tech. And hence they are willing to fund these companies. That's why America is leader in all of these fields.

Have a great weekend!

/Shyam

Back to School - Time for beaten down Stocks!

I went into summer hibernation from updating my blog. After Modi's spectacular win, I could not find interesting enough topic for me to come out my hibernation and write about it.
Finally now kids are back in school, summer trips are over, it's time for me to get into blog-writing mode. Yesterday I started auditing course at Haas School of Business, UC Berkeley (along with my friend). That is also motivation for me to write my blog which I started during my MBA days.
Markets are all time high. Nasdaq is within teen percentage of all time high and it's just matter of time (most likely in early part of 2015) when Nasdaq would break it's all time record. So in such exuberant markets, what should an investor do? Go with the flow and invest in markets, sell all holdings and sit tight in cash (which may not be a bad decision given historically scary months of Sept/Oct) or pick-n-choose your stock selections.
I am leaning towards 3rd option. While in long-run, efficient market theory work, in short-run, behaviors of individuals (and markets which are made of we all irrational people) play much strong role. This is where stock-picking opportunities would come. I won't claim I am good at it but I could make an attempt. After all one has to make his/her own decisions while investing real money. With that in mind, today's theme is "beaten down" stocks due to various factors. These companies got hammered due to change in strategy (Sprint - S) , investments going bad (Portugal Telecom - PT) or market factors (VIP). But as long as these companies survive, there is strong chance that these investments could return between 25 to 50% by Dec 2015. Here are 10 such stocks and prices at which they could make good entry points:

1. Sprint (S): $5 to $5.50
2. Portugal Telecom (PT): $1.70 to $1.90
3. Vimpelcom (VIP): $8.40 to $8.80
4. Covisiant (COVS): $4.40 to $4.90
5. Rite-aid (RAD): $6 to  $6.50
6. Bank of America (BAC): $15.5 to $16
7. Alcatel (ALU): $3.20 to $3.30
8. National Bank of Greece (NBG): $3.30 to $3.40
9. Jive Software (JIVE): $6.90
10. RenaSola (SOL: $2.60

Many of these are high-beta stocks so you need to be careful while investing. However if you do your own research and come to conclusion that these companies would survive (using common sense approach), you could possibly make investments and sell covered calls every quarter which are 10-20% above stock price. Regarding details about covered-calls, you can check out my previous post 

Hope you had great summer!

/Shyam

Abhinandan Modiji

Today is historic day for India. After three decades, one party has won majority on its own and should be able to provide a strong government free of coalition politics pulls. And all credit goes to Mr. Modi who single handedly created the history by his and his party BJP's historic win. My father would have been so happy since all his life he had been RSS/BJP member. He used to be BJP President of our small city for some time. He passed away 4 years back on exact day (16th May). I am sure his soul would be happy to see his dream of strong BJP government is getting fulfilled by Mr. Modi.
Now that Modi and BJP got historic mandate, I started thinking of how this new government should be run. History provides very good lessons (and I like History). The situation in India is almost exactly same as that in USA in 1980. During those years, USA had a weak government and weak President (President Carter). India has same today. USA economy was in problem and inflation was rampant. Situation in India is exactly same today.  Reagan was promising hope by asking people "are you better off today than 4 years back". Modi has promised "better days are coming". Foundations of both Republican party (of USA) and BJP are very similar - conservative, business friendly, less government, less taxes, strong foreign policy and strong national defense. With so many similarities in party policies and leadership styles, if Modi adopted some of the tried and tested policies from Reagan Era, it would do wonders for India. Here are some suggestions.

1. Keep Mr Rajan as RBI governor to keep lid on inflation (similar to Reagan keeping Volker as Fed chairman)
2. Reduce taxes across the board to give boost to personal incomes
3. De-regulate price controls on petroleum products (same as what Reagan did)
4. Follow principles of supply-side economics
5. Fix basic issues like power for all 24x7 by investing in power infrastructure (as he did in his home state) and world-class roads
6. Build strong national defense and achieve "peace through strength" - would be looking for bold statements as what Reagan did "Tear down this Wall" which lead to unification of Germany. How about Modi calling Pakistan PM to say something like "LOC as international border" and solve Kashmir problem once for all and create a economic zone between south asian countries (India, Pakistan, Bangladesh and SriLanka). If that happens, that would be crowning achievement
7. Earn trust of Muslim community the way Reagan earned trust with black community (increased from less than 10% to 30% during 8 years)
8. Increase India's economy to $ 5 Trillion in 10 years

There are many many aspirations goals and I am confident that Modiji would do his best to make many of these real. Today I am proud that inspite of all contradictions and problems India face, the democracy in India works. This is proven by Indian citizens by participating in biggest show on earth (800+ million being part of this election) and electing a chai-wala as India's Prime Minister.

Dhanyawad!

/Shyam

Modinomics: Namo, Namo!

Namo, Namo! It has become equivalent of Namaste in some sections of Indian society during these election times. Namo = Narendra Modi. After long time (nearly 20 years), one person has captured imagination, hope (and hatred on other side of aisle) in Indian politics. This reminds me US elections in 2008 when Obama ran for President. Every 5 years, there is biggest show on earth called Indian Elections when nearly 1 in 8 person on earth (815 million) have right o cast their vote and decide future of one of the most important country on earth. And the show normally carries on peacefully and reflects mood of country and generally create a viable government. Despite so much illiteracy, Indian voter have shown such level of maturity and intelligence which sometimes is missing in many developed countries. The elections which would start on Apr 7 wold finish by May 12 and counting would happen by May 16. By morning of May 17, most of the results would be out and next government formation would start.
I am strong supporter of Modi and BJP and they deserve at least one shot at central government after 10 years in opposition. My support is mainly due to development record Modi and other BJP governments have demonstrated at state levels. While BJP brings strong Hindu undercurrent, this election is all about effective government to enable development. India lost critical 5 years of sup-par growth and rampant inflation, corruption under current government. Current PM Dr. Manmohan Singh was completely in-effective in providing anything to people of India. In contrast Modi's authoritative/corporate style government is what India needs and deserves. I like the slogans "toilets first, temples later" because that's what India needs in 21st century. For last 60+ years, India could not provide basic amenities to her people due to ineffective governance. Time has come to change that.
Unfortunately western press (read Economist, WSJ and so on) is biased against Modi and BJP. In particular I was disappointed with editorial comment by Economist (I am not renewing my subscription to Economist).
While Modi's economic policy is not formally published yet, if his government just follows what he had done in Gujrat and repeat it across India, it could reap great returns and could be called as "Modinomics" similar to Japan's "Abenomics" and UK's "Thatcherism"
Looking forward to Modi becoming next Prime Minister of India!
Namo, Namo!
/Shyam

Should Apple buy Tesla?

Almost 9 months back, I wrote in my blog on how Tesla is like Apple of car industry. That was when TSLA stock was around 80+ with market cap of around $10 Billion. Fast forward 9 months and TSLA stock is hovering around 210 with market cap of close to $25 Billion. And during these 9 months lot of things have changed for US economy as well as Silicon Valley. Bubble type valuations are back with FB buying WhatsApp for $19 Billion (nearly 1000 times annual revenue) and market rewarding FB in taking this bold step. While all this is happening, Apple lovers (including myself) are patiently waiting for iPhone 6 and iWatch (not for iTV). Apple as company is doing great but in these growth hungry world, stock is not getting any love. It's trading at P/E of less than 10 (after accounting for cash on balance sheet). Why? Because heyday of growth are over at Apple. Even to grow at 10%, Apple needs to not only maintain the momentum in iPhone and iPAD but also find additional product category which could bring in $20 Billion in a year. There are not many industries which could provide such type of revenue growth. This is what started me thinking?
How about Apple buying Tesla to solve it's perceived growth problem and open up a new product category which has potential to become $100 Billion category. Here are some points to consider for this hypothesis.

• Car Industry is one of the biggest in world when it comes to annual sales of over $2 Trillion
• It is going thru inflection point where major technological changes are happening first time in nearly century (note that Henry Ford had combustion engine nearly 100 years back and 90% cars are still being same engine technology)
• Tesla has built leadership position when it comes to new EV space 
• Tesla has similar goals as Apple - focus on design, simplicity and branding
• Tesla strategy: Focus on up-scale market and then bring costs down for mass consumption
• Tesla as company seems to be gaining momentum with growth of nearly 40%. With recent expansion in China, it should continue the growth momentum 
• Apple has enough cash to buy Tesla outright even if they have to pay $40 Billion (nearly $400 per share). Cash on Apple's balance sheet is drag for Apple stock. 
• Buying Tesla would provide a brand new product category for Apple with potential of $100 Billion revenue if they are able to grab just 5% of market share.
• This would be a very bold move for Apple given that they have never done such a big deal. But this would be transformative for Tim Cook's leadership and Apple as company
• As a bonus, Apple could look at new generation CEO Elon Musk taking helm at Apple after Tim Cook retires!

This sounds way out-of-box but hey who thought a company with 55 employees would get bought for $19 Billion. So anything can happen in Silicon Valley.

/Shyam

Thank You Mr. Bernanke!

It is very rare to say public thanks to a public official But given what Mr. Bernanke has done as Fed chairman over last 5 years during financial crisis and almost single-handedly saved America (and to some extent) world economy from another depression, he deserves Thanks. Mr. Bernanke retired on Jan 31 and effective today he has become private citizen. I am sure he is proud of his achievements of saving world economy and most importantly saving millions and millions of jobs when politicians in Washington were fighting each other and doing nothing. We should consider ourselves fortunate that we had a student of depression era has Fed Chairman and was daring enough to follow un-conventional (and many times controversial) policies to prevent America from falling into another depression. For that Thank you and wish you best of luck Mr. Bernanke!
This weekend is SuperBowl weekend. While we are little dis-appointed that 49ers did not make into SuperBowl, it's always fun to watch the Big Game and interesting advertisements which companies are paying nearly $4 Million per 30 second slot. This is 2nd time in last 20 years when teams with best record (13-3). So here are my predictions for game and next week:

• The game would be close. Broncos would win SuperBowl
• Next week Twitter is going to announce it's first ever results as public company. Given the lessons they learned from FB IPO and post-IPO, Twitter's results would be outstanding (after ll FB had outstanding quarter - letter late than never)
• Emerging markets would continue to struggle but US markets would find footing with DOW around 15500 and then slowly and steadily resume it's upward march

Have a great game party time.

/Shyam

Happy New Year 2014!

Year 2013 is ending on a very positive note and upbeat mood. Personally we just came from our relaxing vacation with two more families on Big Island. It was a great vacation.

US Stock markets had their best run since 1997 and all indexes except Nasdaq is ending at all time highs. The yearly gains are outstanding with DOW 28%, S&P 32% and Nasdaq 41%. Instead of individual stock picking or investing in exotic hedge funds or PE, one would have done extremely well by just buying regular index funds with lowest costs. So how did my 2013 recommendations did?

Here is report card (based on Happy New Year 2013 blog)

• Best recommendations: BBY (250%) and MTG (225%)
• Worst recommendations: VVUS (-31%), CRUS (-27%)

Others like MBI, BAC, KBH, ITB also did ok. Overall if one had invested about $10K per stock, the portfolio would have returned 41% which would have beat S&P by 9 points. Not bad!

During the course of year, I started tracking solar sector but since I had yearly recommendations, I could not change those (personally I did invest in solar and did ok)

So what's ahead in new year 2014?

Let's look at some macro view before jumping into 2014 recommendations:

• All major world economies seem to be doing good and picking up speed
• US, Japan, Europe are finally gaining some steam with less concerns on horizon
• BRIC countries still have some headwinds but most likely they would be able to deal with them (possible election results in India could be one catalyst for Indian markets and economy - on that sometime later)
• So in all except Debt limit discussions in late Jan, there are no major clouds on horizon
• Predictions for stock indexes:
• DOW: 18000
• S&P: 2014
• Nasdaq: 5000 (may break all time high)

With that in mind, here are my 2014 recommendations (buy price in brackets) - total 14 stocks.

ALU(4.4), BAC (15.5), GE (28), GRPN(11.7), MTG (8.4), NOK (8), SAN (9), SOCL (21), TAN (35), ARIA (6.8), SRPT (20), YHOO(40), NBG (5.60), RAD(5)

These are mostly my recommendations and I may or may not invest in these personally. You should do your own research before investing. 

Happy New Year to all of you and your families and friends!

/Shyam

World-Series:Red-Sox vs Cardinals - who will win?

Normally I am not into baseball. But given history buff and always trying to find some interesting co-relation, I start following it in Fall when playoffs start. I definitely follow world series since that's kind of movie climax (for readers outside USA, don't fret over calling it as world-series. Americans always thought that America is world and hence they end up calling most of their game finals as world-something). This year Baseball world series started with Boston Red Sox and St. Louis Cardinals tied at 1:1 each. Another 5 games to go and it's about time to start predicting winner!
Let's look at some interesting connections. I was reading an article in WSJ. As expected "Blue" states are supporting Red Sox (with exception from Texas) while majority of "Red" states are supporting Cardinals. Even New-yorkers who consider Red Sox as arch rival to Yankees are supporting Red Sox. So given this co-relation between politics and sports, I am predicting Red Sox winning their 8th world series championship. Now that would be good news for markets. I did some data mining. Out of 7 years Red Sox has won World Series, 5 of them DOW had significant gains (10-20%). So with democrats winning political debate (except botched roll out of healthcare.gov), DOW climbing to all time high, Red Sox had another shot at winning World Series. Knowing my political alignment, you know whom I would be supporting!
Earnings cycle is on full throttle with most of the companies giving good results. Next week two most important earnings would be released. Apple and FB. My prediction is both would beat earnings and revenue projections. I am most excited about FB earnings. It could surprise markets by first $2 Billion quarter. That could propel FB stock towards $60. Nov could also bring some excitement with Twitter IPO. Upto $20 Billion valuation, Twitter would be a good company to invest. Many companies in my favorite sector Solar would also be reporting next week. I am especially bullish on SPWR and under $30, it could provide good long-term entry-point.
That's all for now. Go Red-Sox!

/Shyam

Finally the mess is over!

Finally the mess Washington politicians (mainly tea-party hard-core republicans) created had ended for 3 months with Government shutdown over and debt-limit increased. As always it came down to 11th hour and solution had to come from US Senate leaders. Grand Old Party (GOP) managed to destroy itself by falling into traps of likes of Ted Cruz and lack of leadership skills by house Republican leadership to stand against tea-party hostage-takers! What Obama could not do it in last 5 years (of bringing down Republican Party's approval rating), Ted Cruz managed to do it in 2 weeks. As they say, be careful about who are your real enemies. In this case GOP's main problem is not President Obama but their own party members.
President Obama came out winner in this - not only he stood firm against ransom demands of few crazy politicians but also got what he wanted without giving in much. Looks like President Obama having good success in last few weeks - first in Syria where he made Assad agree to get rid of all his chemical weapons without any bloodshed and now he had managed to marginalize his political opponents in the brinkmanship of debt-limit saga. Good going President!
During this saga, markets were relatively calm since almost everyone knew that politicians are not that stupid to let USA default. Now that dark clouds of default are gone for 2013, all is clear for DOW to touch 16000 (and S&P 1750 and Nasdaq breaking 4000). It could happen even before Thanksgiving.
Right now I am still bullish on solar sector alongwith mortgage insurance. Some of the picks are SPWR ($29), JASO ($10), YGE ($8), MTG ($9), SOL ($5). GNW($13) and so on.
Now that Washington mess is over, let's focus on earnings!

/Shyam

Random Walk Through Foreign Policy Maze!

Since Aug 21 incident in which Syrian Government supposedly used chemical weapons on its own citizens, President Obama's foreign policy looked like a random walk through middle-eastern politics. But if Sept 14 agreement  between USA and Russia turned out to be effective (only time would tell), it would turn this "random walk" or "on the fly" diplomacy most effective since Nixon/Kissinger times in early 1970s. This could would bring USA foreign policy in tune with times in which everyone need to adopt to changing situations on a moment's notice. We see that in corporate world (especially in startups) almost on daily basis. While some hard core old-timers (aka conservatives) may not be happy that Putin may get all the credit and it has put down USA in world politics, what matters is how end results can be achieved without more blood-shed (if there was Republican President, I am sure USA would have got it's 3rd war). While I was not happy in the way President Obama handled this issue (I was almost going to write my blog titled "President Obama: You blew it"), I would give him and Kerry  credit that they seem to have achieved the end goal of neutralizing Assad's chemical weapons so that there are no more horrible deaths of Syrians due to these weapons. Lot needs to happen from now till 2014. But now that Putin's credibility is also on line, I am sure this agreement would hold.
Of course these was not expected last week when I wrote about markets and get ready for "fall" in September. Now that use of military force in Syria is gone, markets would start looking to Fed "taper" and since it is already priced in, there is possibly less risk of downside to markets. What a change 5 years can make. Exactly 5 years back on Sunday, all world markets were in shambles with Lehman Bankruptcy on that fateful Sunday. These markets not only recovered fully but they are already forming next bubble (at least if you see house prices in some parts of Bay Area). But that's not new. After all markets are full of bubbles and busts. As long as one can spot peaks and valleys, he/she would be OK.
Have a great start to fall season!
/Shyam

September: Get Ready for "Fall" Season!

September is known to market watches as the month when stock markets do worse. Statistical analysis of 100 years data has shown that September is only month when on average markets are down 1% whereas other 11 months it has been positive. Looks like markets align themselves with start of "Fall" season in September! With markets close to all time high this year and generally very positive till early Aug, how would they fare this September. Let's see what events are going to unfold in next few weeks:

• Syria attacks - next week Congress after much debating would most likely pass resolution granting President Obama authority for limited attack on Syria to send a message to Assad to maintain America's credibility as international police (whatever that means). This would really give markets a jolt and most likely cause quite a bit of volatility. However unless the war escalates (due to Iran attacking Israel or Western Embassies in Lebanon which real possibilities), long-term effects of this war should be muted due to limited nature of attack.
• Fed "taper" talk - Fed has been preparing markets to get ready for less dosage of stimulus medicine. This has reflected in 10-year treasuries touching 3% yield mark first tine in 2 years. So markets are prepared but is Fed prepared to take the action it said it would take. Given by Sept Employment report, most likely Fed would go cautiously and just reduce the purchases from $85 Billion to maybe $60-70 Billion and watch out the economic indicators over new few months. So in summary, Fed "taper" talk would continue and Fed stimulus would continue well into 2014. Bond market (and stock market) should like the news. Expect REIT stocks (like MORL, AGNC, NLY) to pick up steam again and recover 5-10% over next few weeks
• Emerging Markets currency crisis - remember Asian crisis of 1998. This is very similar to that except it is happening slowly and spread across most emerging countries from Brazil real to Indian Rupee to Turkish Lira. Most of these currencies are down by 10-20% which is complicating jobs of their governments and central banks. But these currencies should find their footing within 5% of their current values once Syria crisis is on back-burner.

So in all, expect markets to be volatile for next 4-5 weeks after which clouds would subside and markets would be celebrating holiday season. My prediction for DOW for year end is 15500 (about 5% up from current). I am still bullish on Solar stocks - but this time on Chinese solar stocks since recent changes in demand/supply have created favorable conditions for many players in this sector. I like SUNE, JASO, YGE, TSL to name a few.

That's all for now. Have a great weekend!

/Shyam