Seeking Alpha by Adding Beta

Next week Supreme Court of America would give ruling on one of the most awaited ruling in over 50 years. Would it strike out health care law in its entirety or would it hold it? Would individual mandate go but everything would remain? One way or other, this ruling would impact each and every American one way or other. Health care law is considered as one of the main policy initiative and could have as big impact as previous two initiatives - Social Security (passed in 1930s) and Medicare (passed in 1960s). So next week would not be only very important for President Obama for his re-election but most importantly for his legacy, it is also important for each and every American. With so much burden and expectations, here is I think Supreme Court ruling would come out: Would upheld most of the provisions in this law. Some of the important ones are like covering kids till age 26 on parents coverage and many others However it would strike down "individual mandate" on basis of ...

Finally Greece elections are over and pro-bailout parties winning slight majority over leftists should assure markets that Greece would remain in Euro and contagion to other PIIGS countries can be contained - at least for now! These elections could have profound impact on Greece, Europe and world economies and hence world markets. Lehman type moment has been avoided for now. Could this be a repeat of 2008 when Bear Sterns was rescued in March 2008 just to land into Lehman/AIG situation 6 months later in Sept 2008. Only time would tell. Hope European policy makers learn something from US policymakers actions back in 2008/2009 and take decisive actions to get ahead of crisis and provide a bazooka instead of patch-work rescue. ECB and Northern European countries has fire-power. What they need is will to use them. Whether Germans like it or not, they should start thinking of "United States of Europe" and start helping broke southern countries. Merkel may be most powerful per...

May deja vu - third time in a row. If you go back in 2010 and 2011, one could have almost predicted what would happen in 2012 and could have saved tons of money by moving to cash at end of Apr. While I almost knew what was coming in May, I did not act on moving my investments to cash (luckily I told few folks who may be smarter in acting on it). Well now that May has again proved true to old saying of "Sell in May and Walk Away" and month is over, what's in store for rest of summer? Given Facebook IPO fiasco (which was supposed to be savior for markets) and continued political and policy mess in Europe, things don't look very promising. Dismal labor market conditions in USA and sudden slowing down of economies in China and India are adding fuel to the fire which Europe's lack of action has created. Here is my prediction on how it would play out: Markets would be very volatile till elections on Greece on Jun 17. Most likely Greece results would be slightly pos...

Finally Facebook's IPO is here. One of the most hyped IPO (and it deserves all the hype it received) is finally here valuing Facebook at around $104 Billion - more than Cisco or Amazon as standalone or Dell/HP combined. Only time would tell if Facebook as company can grow into this valuation or is this top of its valuation! I am sure tomorrow's trading would be all about FB. I won't be surprised to see it pop over $50 at open. Interesting as I have predicted sometime back, savvy investors were taking profits out from Apple for investing in Facebook. Is it coincidental that Apple lost almost $100 Billion valuation from it's high - almost exactly same as Facebook valuation! After all stock market is all about capital moving from one company to another company. In late 1990s Yahoo/Ebay/Amzn/CSCO/MSFT were dominating stock market valuations. All the valuation moved to Google/Apple and now Facebook. It's just matter of time when capital moves from these companies to som...

It's becoming too predictable - first 3 to 4 months of new year economy start looking up and along the way stock markets across the world go up. Then comes April and economic recovery starts faltering and investors start following "Sell in May and walk away" advise. Then comes "same old same old" stories from Europe. Somewhere in the middle some bank loses couple of billion dollars in few days. It happened in 2010 and 2011 and it's again happening in 2012. When are we going to get out of this pattern? Last week was interesting week across multiple fronts. Let's look at them and see if we can predict how events would turn out next week: French election results were predictable - so no real reaction Election results from Greece were un-predictable. Could this be catalyst for finally Greece leaving Europe. If Greeks are hell-bent in electing radical left, they better start preparing life without Euro . Left leader Tsipras is playing dangerous game of ...

Traditionally First weekend of May is start of summer movies and this time it started with a bang with Avengers breaking all records and becoming first ever movie to cross $200M mark for one Friday to Sunday collections @ Boxoffice. It broke the record by over $31 million held by last installment of Harry Potter. Myself, Yash and Guts saw it yesterday and looking at crowds, it was very apparent that this was going to break records. Regarding movie, for an action film, it was good. Main star was of course Robert Downy (aka Ironman). It would be interesting to see if Chris Nolan directed last Batman movie (which opens in mid-July) breaks this record! May is also start of another round of European roller-coaster. With two key elections wrapping up today, most likely direction of European policy would change. France is becoming socialist and Greeks are venting their anger on two main parties. It would not be surprising if Greeks had to face another election later this year. Would May 6,...

As Facebook IPO date (May 17 or 24) comes near, everyone is getting ready to buy into this most awaited IPO since Google's IPO back in 2004 (same year when Facebook was founded). Only lucky few with connections to Wall Street or big brokerage accounts would get it at pre-IPO prices. Most of common investing public would have to wait to buy it on first day and given reaction to recent tech IPOs, this would most probably open 30-50% or more higher. So how does one participate in this Facebook mania without access to pre-IPO prices. Here is one way: Based on today's updated S1 filing by Facebook, ZNGA is still major source of revenue for Facebook contributing nearly 15% of revenue. As Facebook devises various schemes to diversify its revenue sources, I expect this to come down to 8-10%. That's still substantial. If we apply same financial matrix, ZNGA should be valued at about 8-10% of Facebook due to similar nature and tight co-dependence on each other. At IPO prices Facebo...

Lot happened in last 3 weeks since I wrote on Sachin's 100th century. Romney sealed (almost) GOP Presidential Nomination. N. Korean had failed rocket launch (no surprise there). AOL made cool Billion $ by selling patents to Microsoft. Apple crossed $600 Billion market cap - only 2nd company to do so ever - first one was Microsoft back in Internet Bubble 1.0. But what caught my attention was Facebook buying 12 employee company Instagram for $1 Billion. This reminds heydays of Internet Bubble 1.0 when Time Warner bought AOL for $180 Billion, Cisco buying Cerent for $6.9 Billion. SJ Mercury News and WSJ were full of such news in those days. Is Silicon Valley back to its old tricks or glory days? Only time would tell but excitement would continue well into May when Facebook would have its first day of trading either on May 17 or May 24. It is one of the most awaited IPO since Google's IPO. Question to ponder is: Would Facebook be valued more than Google on it's first day of...

In the world of Cricket, history was made on Friday March 16  when Sachin Tendulkar made his 100th century in international cricket - 51 in test cricket and 49 in one-day format. The significance of this record is that it will never be broken for potentially next 100 years or ever! This goes right in the league of Sir Don Bradman's record of average of 99 runs per match which had not been broken till now and will never be broken. Sachin's century of centuries came after 22 years of cricket (he started playing when he was 16 years old). Last year he and Indian team made history by winning Cricket World Cup and since then all of India was eagerly waiting for this milestone. It was a long wait but worth every moment of it. Congratulations The Little Master for making India proud. We love you! What's next for Sachin? Given his form over last 2-3 years, he still has quite a bit of cricket in him (even if he is 38 years old). But given that many senior players (Rahul D...

Few weeks back I saw Brad Pitt's movie about Moneyball and I was really impressed with the concept, results and actual movie! If statistics can be applied to baseball and create a team of "undervalued" players which can break 106 year old record of continuous wins, why can't same principle be applied while selecting stocks to invest. I did Google on "Moneyball Investing" and not surprisingly found many well-written articles. So you must be wondering - why one more blog on same topic? Well - it's my take on this concept since I have been doing this in practice for last few years and in fact that's how I started my investing back in India. Here is my take on Moneyball approach to investing: Do detailed analysis and trust your analysis even if market signals are telling different story. That's how you discover "undervalued" stocks Don't go for "star" stocks e.g. Internet stocks in 2000, financing/housing stocks in 2005 and...

Since the movie "Ides of March" came, I was intrigued by word "Ides". This is when my son Yash explained meaning of Ides to me and what it meant in context of "Ides of March". In brief,  a  seer  had foreseen that Julius Caesar would be harmed not later than the Ides of March and he warned him about this as "beware the Ides of March". And as we know from history, this is when he got stabbed 23 times in Roman Senate by group of conspirators. So how does this fits in today's investing world? Since Oct, stock markets have been on a tear ignoring so much uncertainty and geo-political risks around world. Last week, Dow crossed 1300 twice (but failed to close above it), S&P is at 4 year high, Nasdaq is as 11 year high. This is happening despite following: European debt mess Tensions around Iran's nuclear program - this week's economist article details risks around this. Some are predicting around 50% chance that Israel would take pr...

This week Apple stock reached milestone price of $500 per share putting valuation of nearly $470 Billion to Apple. While Apple deserves every bit of this valuation, as investor one has to wonder how much more upside there is to Apple stock? I am sure you must have seen many articles on how Apple is still "cheap" at  $500. While on current valuation basis, I agree that it looks cheap, there are many potential dangers one has to worry if considering for long-term investment. Let's look at some of the past historical perspectives. Most valuable companies in recent past Microsoft in 1999 Cisco in 2000 (for few days) GE in 2000 Walmart (at some time in past one decade) GM - sometime in past 5 decades IBM - I don't know fact but I am sure it git this title at some time Exxon - Company which had this title for longest time in recent history Apple - current king of valuation Let's look at this differently: Current valuation of Apple ($470 Billion) is more than G...

Jan month of 2012 is almost over and to stock investors, this month is turning out to be a pretty good month. This also means that 2012 overall would be a good year to be in stocks (as per statistics over decades). The markets are becoming more and more "stock pickers" markets. Forget about index investing in 2012. It's all about picking up right trends and stocks. Keeping that in mind, here is one idea of screening potential picks. I called it as "75% Club". The criteria is simple: Identify stocks which are down by at least 75% in last 12 months (52 week high/low should be 4:1) Research why stock is down by 75%. There can be multiple reasons for stock to go down by that much -  fears of bankruptcy (EK), change in business conditions or competition (SHLD, solar sector), stupid mistakes by management (NFLX), regulatory environment (BAC), macro-economic conditions like housing downtrend (MTG) Find out if companies identified are going to run out of money and h...

Markets have been on tear for first 3 weeks of 2012. I decided to create a mock portfolio based on recommendations from my first post of 2012 by mock buying these picks in first 2 weeks at or below the prices mentioned. This portfolio is up by nearly 11% assuming all picks have equal amount of investment. Highest returns are BAC with 25% and then STX with 23%. So with yearly target of above 10% returns achieved in 3 weeks what should one do? All indexes are heading towards highs of 2011 which were reached in May and July before European mess pulled the indexes down for a flat year. European mess is no where near resolution (see debt negotiations between Greece and bondholders). These worries are again going to come to front lines in Feb/Mar. So at this time best course of action to take some gains off the table by selling some of the winners and keeping some dry powder. There would be quite a few buying opportunities when DOW would go below 12000 sometime in next 3...

Bye-bye/Alvida 2011. It was a gut-wrenching year with so many Geo-political events all across the board and associated stock market moves. What started as a promising year with DOW reaching yearly high by late Apr turned out to be whimper by end of year with S&P barely moving at all. Someone who had gone into hibernation may not even notice the dramatic stock market movements (like 250 points moves on so many days). Personally my stock market returns were dismal (basically all 2010 gains were wiped out in 2011). Unfortunately my weekly/bi-weekly picks also did not do very well. So with that dismal track-record, I ought to change my stock picking/investing strategy. Let's start with some macro predictions. 2012 being election year, first some election predictions: Mitt Romney will wrap up Republication nomination by Mar 2012. Democrats would lose control of senate by margin of about 2-4. Republicans would lose seats in house reducing their majority to single-digits/teens. M...

Year 2011 is coming to an end. What started as promising year both on economic front as well as Geo-political front with Arab Spring is ending with recession clouds and European "Fall". What a mess our elected politicians have made in managing affairs of their countries. Everywhere you look, politicians are failing in delivering what they were supposed to deliver. Enough said about European circus - every few weeks they meet, make lot of promises after long meetings and then go their own ways without implementing these promises. Already 4 countries have changed their Prime Minister(s) (Ireland, Spain, Italy and Greece). Next round could be France US is in gridlock which is likely going to be intensified in election year 2012. So nothing would happen on economic front other than political posturing. Obama started as great promise but coming up way short than what his Presidency could have been. India is stuck in non-stop corruption/Lokpal/Anna's fast. This has started ...

Another week of European drama - only difference from last week that center stage moved from Athens to Rome. The economic crisis cost one more powerful prime minister his job (don't feel sorry for Silvio Berlusconi  since he had 3 years to fix Italy's problems)  With crisis finally moving from PIG (Portugal, Ireland, Greece) to PIIGS (with addition of Italy and Spain), Euro has reached cross-roads. Both Italy and Spain are "too big to fail and too big to bail". This means both these countries need to fix their problems on their own with some support from ECB. Germany/France cannot bail Italy/Spain otherwise they risk getting engulfed by crisis themselves. Already France is at brink of losing its prized AAA rating. European politicians are at least taking steps by installing technocrats like Mario Monti in Italy as prime minister. Since he is short-term prime minister, he has nothing to lose. He should convert crisis into opportunity and forcefully move in freei...

Watching last weeks events in Greece, I was curious to find out origins of following three words and to my amusement all of these three words have Greek origins. Democracy -  δημοκρατία  – ( dēmokratía ) "rule of the people Drama -  Classical Greek :  δρᾶμα ,  drama Tragedy -  ( Ancient Greek :  τραγῳδία ,  tragōidia , " the - goat - song " [1] ) is a form of  art  based on human  suffering  that offers its audience pleasure No wonder these three words represent what is happening in Greece in particular and in Europe in larger context. It all started when Greece joined Eurozone in 2001 by falsifying its government debts and lost control of its financial destiny. While people of Greece benefited in last 10 years by joining the Euro club, they started living lavishly without paying proper dues which comes with this membership. Finally in started catching up with them in 2009 and continue to muddle thru one crisis after anoth...

Finally Qaddafi is dead! In Arabian world, 2011 would go as historic year. What started as Arab Spring movement would most likely end rule of 4-5 dictators who have been ruling various countries from 30-40 years. On economic front, European mess continues and that keeps world stock markets on roller-coaster ride. Oct is turning out to be much better than Aug/Sept but wait till European leaders miss the opportunity on this weekend again. Markets are hopeful that finally Europe would put some credible plan to resolve its mess. But most likely people are going to be dis-appointed with the news coming out on Monday and markets would sea-saw again! So be very careful with your investments. Right now its better to be in cash or cash-generating investments. This is where I would recommend considering some high-yielding mREITs. These stocks are risky investments but due to their yields, they at least provide some kind of cushion against downside. Here are some names: AGNC: $27 Yield: 19% CI...

Steve jobs passed away today morning. World lost a visionary and one of the most loved human being. Steve Jobs made America and all of us as Americans proud. Many of us (including kids) felt that he was a close and dear friend even if none of us ever met him in person. With his genius creativity, he made people happy through his products like MAC, ipod, iphone and iPad at Apple, movies like Toy Story and Finding Nemo @ Pixar. Many kids in far flung countries know and love America only because of products like iphone and ipods. He was Thomas Edison and Henry Ford of our generation ! We will miss you Steve. May your soul rest in peace ! /Shyam