Seeking Alpha by Adding Beta

While I definitely believe that markets have bottomed out, I suspect that tech stars of past 3-4 years Apple and Google are in for a rough ride for next few months. Both are excellent companies and I love what they are doing in their fields. However as it happens to any momentum stocks, once growth slows down, these momentum stocks get punished on the down-side - same way they get benefited on upside when growth is good. With no major catalyst of new products from Apple and paid-search clicks slowing down (along with overall economy slowing down), Apr would be interesting month for both companies. Stocks of both companies are already down by close to 40% and there are quite a few headwinds facing these companies. My prediction is that investors would get an opportunity to buy Apple at $99 and Google at $399 sometime this year and when that happens, keep your "dry-powder (aka cash)" ready since it would be an excellent buying opportunity for long-term. /Shyam

Finally Oscars are over and as expected "No Country For Old Men" won best picture and directing Oscars. I had not seen the movie yet - would see when it comes on DVD. Democratic elections are heading into final phase and I think Mar 4 would more or less decide who will be candidate. Obama has the momentum and would be very likely Democratic candidate and eventually President of USA. Now that Ambac and MBIA is coming out of ratings penalty box, banks and markets can start their recovery. I predict that Dow 11500 on Jan 23 was bottom and Fed interest rate cuts, tax-rebates would help markets to start heading higher and by summer it would be near 13500. So what are the plays here: Asyt: Looks liks its ex-CEO is working with PE to take it private at $6. So at current price of $4, it provides good play for 50% return Aruba: At $5 it is steal considering it is #2 play in wi-fi networks and was trading over $20 not long ago Solar stocks like SOLF, CSIQ: These stocks are down by ne...

As expected Yahoo rejected Microsoft offer. I think it is typical negotiation tactic and will play out similar to BEA/Oracle and both companies will split the difference and settle the deal at about $35-36 (just right at the magic number of $50B). Yahoo does not any way out - they had last 2-3 years which they wasted in adding any shareholder value. It would be fun to watch all the drama along the way. In last few months, I was not tracking many tech stocks for active investments. But this year, techs are getting killed and once high-flying stocks are trading in single-digits. For example, SIRF which is leader in GPS chips is at $7 (used to be over $30). Aruba Networks which is only other player in wi-fi gear is trading below $5 (it used to be above $20). Granted that both these companies gave some serious revenue warnings but I think markets over-reacted to news and both these stocks would be up by 50% in next 12 months (and by the way, they are as attractive takeover targets as Yahoo...

What an exciting start of new month with one of the biggest deal announced with Microsoft bidding for Yahoo for $31. I think it's right move for Yahoo investors even though it will not work in long term (if you just count returns for Microsoft). I am doing M&A course with Prof Peter Goodson in my last semester at Haas. Mr Goodson does not believe in Synergy at all and he has challenged all students to show one major deal where synergy worked out for such deals. I agree with him. My prediction about this deal is that Yahoo will try to put some blockers to the deal but finally will agree to slightly higher price of $34 (aka Oracle-BEA saga). Disclaimer: I own some Yahoo stock just before earnings and now I am happy camper:-) Looking at similarly beaten down companies, I think following deal will make lot of sense. Bearing Point is one of the well known brands in IT and strategy consulting. I started following this stock few months back when it was trading at 5. Due to missed ear...

What a week - as soon as I wrote my last blog to take up some positions for 2008, market tanked by 4% and it's on way to crash another 4-5% when it opens up tomorrow. All world stock markets are down from 4 to 10% on Monday and Asian markets are again down on Tuesday. Is it start of bear market (some indexes are already down by 20% - classical definition of start of bear market) or is it another buying opportunity similar to Feb 2007. Stock markets have wiped out all the gains (and some more) of 2007 and trading like end is near. Here are my predictions (I am sure many of them would be wrong in few days:-) Markets will be very volatile for whole of week with triple digit moves on Dow (and possibly Nasdaq) Fed will reduce rates by 50 basis points definately by Jan 30. I won't be surprised if they lower the rates before market opens on Tuesday 1/22 Stock indexes will go down in early week and then recover ground later this week to break even for the week. Dow will test 11800 this...

My first blog update of 2008 - happy new year to all of you readers! I was watching the ups-and-downs of market for last two weeks and finally decided to write after I got convinced that we have seen the worst in stock market. Now that Dow is close to 10% down from its peak and Nasdaq is back below 2500, how worse can it get. There are some signs emerging which confirm my theory that we are very near (if not at absolute bottom) of the market. As promised, here is update on model portfolio I constructed at start of 2007 which has returned 15.7% compared to S&p returns of about 5.39% nearly beating it by 10%. Most of the contributors to this decent performance was mutual funds focusing on emerging countries and oil-sector. It's no wonder that my two stock individual stock picks ( Cisco and Yahoo) were worst performers - other than real estate mutual fund. Investment Quantity 1/5/2007 1/1/2008 Rate Amount Amount %Gain UUPIX 15...

As we are getting closer to enter into 2008, I started thinking about potential stock recommendations which could return 50% by end of 2008. Due to recent turmoil in financial markets, even after markets recovering in last 2 weeks (S&P is up by 7% in last two weeks), there are still quite a few stocks which would fit the bill. Here are my recommendations. Disclaimer: I may have positions in some of these recommendations US Stock Recommendations: VeriFone (PAY): This company's stock got penalized last week (down by 54%) due to accounting errors on how they accounted for inventory in first 3 quarters of 2007 even though they increased the revenue guidance. This company makes products which you come across almost everyday when you go shopping in malls or for groceries. They make devices which read your credit or ATM cards at the counter. This company is leader in that space. So fundamentally nothing has changed as far as business is considered. Credits cards are here to stay and...

After my trip to meet with Mr Warren Buffett, everytime I think about an investment idea, I take a pause and ask myself: What would Mr Buffett would do ? Hope I can make some wise decisions with this question. November was an unusual month where markets went down (only 2nd time in 13 years markets have gone down in November). Is it good or bad ? After strong and volatile October, it's good for markets to get excesses out, get the correction (10% down from peak) and get ready for another high. With major banks taking big writedowns, companies like Countrywide, E*Trade and many builders trading like they are going to declare bankruptcy, finally Fed and US Gov have realized that this sub-prime issue is much larger than they originally estimated. Late last week, things have started lining up for some kind of arrangement to avoid recession due to sub-prime meltdown. With that context in mind, here are my predictions and recommendations (Disclaimer: I may have positions in some of the r...

As part of Berkeley MBA, on Monday Nov 19, 2007, we had a trip to Omaha, Nebraska to meet with greatest investor of all time, Mr. Warren Buffett and I must say that we all were totally impressed by his intellect, sharp mind and simple life he is living. Students from Haas School of Business, UC Berkeley, London Business School and University of Arizona, Tuscon came to meet with him. Here are some observations, tips we heard from him about investing and life and photos: Even though he is one of the richest person on planet, he was so simple, approachable and down-to-earth person. He came driving his old Cadillac, had lunch with all students, spent 4 and half hours and went back driving his car He is extremely sharp with numbers and still remember numbers about his investments, various macro-economic statistics and how he makes money on every 12th coke bottle consumed in the world Mr Warren Buffett is funny and extremely good speaker. We wer all surprised when he started his talk with a ...

Finally October month is over and as every year, this year was no different as far as market volatility is considered. Let's see how my macro predictions are doing: India's BSE sensex crossed 20000 5-months before my target date HangSeng crossed 30000 Fed reduced target interest rate to 4.5% Dow almost reached 14000 before today's fall of more than 300 points So most of the predictions are on target. So where do we go from here. With credit markets still in turmoil, expect quite a bit of volatility for next few weeks. Almost all big banks are issuing warnings, taking big-baths, creating cookie-jars for future quarters and in the process cleaning up their books. This is good for economy and that's why I love US financial system. Companies/Banks are not kept on life-support as zombies the way other economies. For example, Japan kept their banking system on life-support for whole of 1990's which impacted overall economy and had multiple recessions. I think with Fed...

As every year, October month seems to be keeping up with its promise of being one of the most volatile month for stock markets. It started with a bang with Dow reaching record level on Oct 9 just to fall back about 5% in next 10 days culminating on 20th anniversary of famous 1987 crash! What a day Friday was with all events like options expiry, India and China markets crashing and on top of it wide coverage of 20th anniversary of 1987 crash in mainstream media! No wonder people got little scary and that's when it presents great buying opportunities. As I predicted in mid-Aug, I think this slide presents another excellent buying opportunities for long-term investors. My hypothesis is based on following analysis: Even though results from companies from financial and to some extent industrial sector are weak, other sectors like technology are producing very handsome results due to weak dollar and exports. Employment is still very strong with no major layoff annoucements outside mortag...

Typically October month is notorious for market volatility since all major market crashes have come in the month of October. But looks like 2007 October has started with a big bang with 2 big market rallies on Monday and Friday with Nasdaq jumping nearly 2.9% in one week. Next week earnings season starts in earnest and since there are no major pre-warnings, this earnings season should be pretty good. International markets especially emerging markets are on fire with BSE sensex almost touching 18000. If I have to make bold prediction, I won't be surprised if BSE sensex touches 20000 by the time 2007 wraps-up. That would be more than 100% jump since I was in India in June 2006. Even though Shanghai market was closed, all Chinese ADRs trading in US were highly volatile. One day, they were down by 5-10% and next day they were up by 5-10%. Is trading in Chinese stocks is becoming like gambling or fundamental landscape in valuations of these companies is changing? I hope it is later and ...

Now that Q3 is over, as promised, here is readout on how the model portfolio (on paper) I constructed and published at start of 2007 year is doing. Investment Quantity 1/5/2007 9/30/2007 Rate Amount Rate Amount %Gain UUPIX 156 32.09 $5,006 57.85 $9,025 80.3% FXI 47 105.94 $4,979 180 $8,460 69.9% FSESX 80 62.69 $5,015 100.67 $8,054 60.6% TABRX 397 12.61 $5,006 17.73 $7,039 40.6% VEIEX 211 23.68 $4,996 32.75 $6,910 38.3% VGTSX 573 17.46 $10,004 20.67 $11,844 18.4% CSCO 527 28.48 $15,010 33.13 $17,460 16.3% VDMIX 803 12.46 $10,005 14.28 $11,467 14.6% VFINX 77 129.87 $10,000 140.61 $10,827 8.3% VSTCX 492 20.31 $9,992 21.28 $10,470 4.8% ...

Finally long-awaited interest rate cut is here and that also came with big bang. For many folks and even for stock market which tracks every word of Ben Bernanke, this looked like surprise. IMO, this was very much expected move and one of the reasons I wrote my previous article "is it time to buy", it was clear that mid-Aug provided ideal opportunity to make some bets. Here is report-card on how my recommendations did over 5 weeks - pretty good record considering one returning over 50% and only one in negative (which is housing stock and looks like we have yet to find the bottom of housing market) Symbol Price on Aug 17 Price on Sept 21 % Gain UUPIX 33.56 52.57 56.6% FXI 119 168.48 41.6% IBN 38 50 31.6% APPL 117 144.15 23.2% AA 32 37.4 16.9% LLNW 7.56 8.47 12.0% VGTSX 18.02 20.16 11.9% BX 23 25.32 10.1% FISMX 25.58 27.98 ...

I am a student of macroeconomics and like to read about various macro-economic factors such as inflation, interest rate, labor productivity, education and how it impacts long-term prospects of a country. Based on such analysis, I like to come up with investing strategy and find out mutual funds, stocks or ETF and recommend them and invest personal money to test out these strategies (put your money where your mouth is:-) Based on prominence of BRIC (Brazil, Russia, India and China) countries, I have been looking for ways to go beyond BRIC countries and look at other emerging countries. Countries in Laton America, Asia and Eastern Europe have been growing as fast or faster than BRIC countries and provide excellent investing opportunities. Check out following article - top 3 countries are non-BRIC countries in emerging markets with Peru topping with 168% returns Top 10 places to invest However investing in one country or index poses significant risks due to political, social factors which...

In last post titled "Is it Time to Buy", I recommended 11 stocks. My post was so timely as markets have returned to normaly with discount rate cut of 50 basis points and Fed and Bush Government all assuring that they are not going to let market turmoil impact economy. Q2 GDP also came in very strong at 4%. Let's see how my recommendations did in last 2 weeks: Recommendation Symbol Price on Aug 17 Price on Aug 31 2-week Gain Target Price Profunds Ultraemerging funds UUPIX 33.56 45.41 35% 50 Ishares Trust FTSE/Xinhua China 25 Index FXI 119 150.31 26% 150 WCI communities WCI 7.76 9.32 20% 12 Apple AAPL 117 138.48 18% 150 ICICI Bank ADS IBN 38 44.45 17% 47 Alcoa AA 32 36.53 14% 40 Limelight Networks LLNW 7.56 8.25 9% 14 Fidelity International small cap FISMX 25.58 27.68 8% 2...

What a week with so much volatility, Dow falling below 13000 and having almost 10% correction from its peak. In my previous posts, I did predict that Dow would touch 13000 again before heading back to 14000. So now question to ask: Is it time to buy again ? To get to an answer, let's consider some macro factors: World's economy is having one of the strongest growth it has seen anytime in history. Almost all countries (save few countries in Africa) are growing at 2 or more percentage with some of the big emerging countries like India and China growing closer to 8-11%. Given right policy by central bankers, almost all countries are seeing relatively moderate inflation unlike in past when Latin American countries were known for their hyper-inflation Global economy is more integrated than any other time giving rise to productivity as there is most optimal use of capital not within country boundaries but across world Dow and all other indexes are going to stay here - they are not he...

It was Harry Potter mania which has engulfed world forced me to come out of my summer hibernation and start writing on my blog again. I also went with Yash and Isha to buy final installment of Harry Potter series book. I must admit that it went just for the fun and till now have seen only movies (not read the first 6 books). I started reading the book and the plot is really interesting. We saw hindi movie called "Partner". It is loosely based on Will Smith movie Hitch with all ususal bollywood masala. All of us did liked the movie - nice dance numbers at exotic locations and good comedy. If you are into bollywood movies, I do recommend this movie. In last 6 weeks, I was more active on contributing articles to SeekingAlpha site. In fact couple of my articles did got published (editors of this site decide which ones to publish). Check them out: 1. Six reasons Yahoo should buy Joost http://internet.seekingalpha.com/article/39271 2. Seven Reasons Why ICICI Bank is a Better Invest...

I thought I will write anout something else today. Now that summer is almost here, I have break from my MBA classes and studies, kids are also wrapping up their school year, we love to go to Farmer's markets on Sunday morning. One of best Farmer's markets I have seen is at Santana Row, San Jose It's all year round every Sunday from 10 am to 3 pm. They have lot of varieties of fresh fruit and vegetables. My most favoruite is of Ana's Corn. You should take a corn with butter and spices and relax on chairs nearby. Near Maggiano's they have band playing. Overall it is a great experience to spend Sunday afternoon at Santana Row - you should definately experience it! Quick Commentary on Stocks: As I predicted earlier, correction in Chinese markets have started with Shangai Index falling from 4300 to 3800 (as of Monday Jun 4 morning). That's about 12 % correction. I think it would go down till 3500 before rebounding in major way. Fortunately this time it has not brough...

Recently one of my stock recommendation Teledata has been on a roller-coaster ride. In recent times, it has been locked in either upper or lower circuit limit of 5% (in India, many smaller stocks have circuit limits of 5 to 20% to avoid extreme fluctuations). When I recommended it first time on one of my post, it has gone from 47 to 96 and back to 63. As per previous news, it should be demerging in 3 different companies by end of May. My recommendation is to HOLD and BUY more if it goes below 50. From financial point of view, it has excellent balance sheet and is winning orders from many state governments. It has good product in education and shipping management software. Unfortunately there is not much information available on management. So at this time I am giving them benefit of doubt and would hold onto these shares for potential windfall. I recommended Zee news at 40 and finally it has started moving. Last week it was trading at 46. Finally market has started realizing the pote...