Financial Term Of The Day: “Bear Spread”
Posted on May 12, 2009
Filed Under Uncategorized | Leave a Comment
Bear Spread : An option strategy seeking maximum profit when the price of the underlying security declines. The strategy involves the simultaneous purchase and sale of options; puts or calls can be used. A higher strike price is purchased and a lower strike price is sold. The options should have the same expiration date.
Fresh news to think upon…
Posted on December 29, 2008
Filed Under Market News & Discussions, Todays Market | Leave a Comment
- Lok Sabha elections in April/May- Satyam defers buyback meet; to consider issues incl dilution of promoter stake on Jan 10.
- Satyam Promoters say institutions may have sold stake to cover margin calls.
- 3G auction process deferred by 2 weeks; last date for application likely around Jan 20: Srcs
- IBM, Accenture & Capgemini likely suitor for Satyam - ET
- Jet Airways to cut fares by 15-40% from today, raises Rs 1000 cr from banks
- Kingfisher Airlines To Cut Air Fares From Jan 1.
- Simplex bags order to construct 2 commonwealth stadiums for Rs 75 cr
- Suzlon’s 1800 cr rights issue cleared 2 months after the co suspended the plan
- Jindal Power to raise the capacity at the Chhattisgarh plant, plans to raise Rs 7000 cr - PTI
- BHEL bags Rs 5040cr contract from Jindal Power for the same
- Hind Zinc raises the price of zinc by Rs 1800/tonne to Rs 63400/tonne
- PSU banks told to shed SLR, lend more - ET
- Reliance retail set to offer big discount to drive up footfalls and beat slowdown - ET
- ICICI BK likely to cuts rates by 50-75 bps by Jan - ET
- US Co Travaxo wins case against Ajanta Pharnma, preventing from selling eye drop under brand name Travaxo in India - ET
- SRK promoted Red Chillies finalises comedy sitcom with NDTV imagine - ET
- Core Projects may acquire US based Princeton UK 12 for $25-30m - ET
- Rolta to buy US IT consultancy firm - ET
- Tata Power to buy 2000 MW from spice - ET
- 23 brokers opt to exit BSE derivatives biz since Oct as prices correct 90%, volumes hit a low of Rs 85 lakh vs Rs 1500 cr - BS
- Tilaiya UMPP bids to be opened today - BS
Note: The information in post is taken from www.moneycontrol.com
Analyzing companies before you invest…
Posted on December 8, 2008
Filed Under Investment Guide | Leave a Comment
The current situation in market is a chaos! Valuations of companies have fallen by about 50-60% for most of the companies and for some companied its above 95%! Yes, there are some real estate companies which have fallen that bad, for example, Orbit corporation once used to trade above Rs:1000 but now its trading around Rs; 50!
We need to analyze the companies before we invest in them, and the factors we are considering for this analysis will be robust and will be helpful in long term investing. I read an article some time back on http://economictimes.indiatimes.com/ and I am taking some part of it here which will help you a lot.
One tool that can help in identifying the right company is an investment strategy called CANSLIM. Developed by William O’Neil , the acronym actually stands for a very successful investment strategy. This strategy has been proven and has yield good returns in the past. CANSLIM consists of seven components. They are mainly quantitative parameters to be applied while selecting any company for investment. Each letter of the word CANSLIM denotes one parameter to be analysed in depth. They are:
C - Current quarterly earnings per share
It is important to choose stocks that have grown on a quarterly basis. For example, a company’s earnings per share (EPS) figures reported in this year’s April-June quarter should have grown relative to the EPS figures for that same three-month period of the previous year.
The percentage of growth a company’s EPS should grow by is subjective , but the CANSLIM system suggests around 18-20 percent. This suggests that basically all of the high performance stocks show an outstanding quarter-on-quarter growth.
A - Annual earnings per share
These figures should show meaningful growth over the past five years. CANSLIM stresses on the importance of annual earnings’ growth. The system indicates that a company should have shown good annual growth (annual EPS) in each of the last five years.
N - New things
The third criterion for a good company is that it has recently undergone a change, which is often necessary for a company to become successful. It could be a new management team, a new product, a new market, or a new high in stock price.
S - Shares outstanding
This should be a small and reasonable number. CANSLIM investors are not looking for older companies with a large capitalisation.
L - Leaders:
Buy market leaders and avoid laggards. In each industry, there are always those that lead, providing great gains to shareholders, and those that lag behind In CANSLIM analysis, distinguishing between market leaders and market laggards is of importance.
I - Institutional sponsorship
Buy stocks with at least a few institutional sponsors who have better-than-average recent performance records. Explore all the factors that should be considered when determining whether a company’s institutional ownership is of high quality.
M – General market
The market will determine whether you win or lose. So learn how to discern the market’s current direction, to interpret the indices (price and volume changes), and actions of the individual market leaders.The final CANSLIM criterion talks about market direction. When picking stocks, it is important to recognise the type of market.
The first two parts of the CANSLIM system are logical steps employing quantitative analysis by identifying a company that has demo strated strong earnings both quarterly and annually. By rigorously following them you have a good basis for a good stock selection.
I personally feel that the CANSLIM has the S and L factors contradicting eachother. S factors tells us that the shares outstanding should be low, that mean it’s not concentrating on small companies but the L factors says that copanies should be a leader in its segment, but hows that possible practically? How can a small company be a market leader? Take examples of market leaders of sectors, Infosys, Larsen and Toubro, Reliance, DLF etc all are market leaders but are huge companies. Anyways, I would rather give importance to S factor than the L factor because we should concentrate upon choosing the future market leaders rather than the current market leaders. If we modify the L definition a little bit then perhaps a better CANSLIM will come forward.
Changing definition of L: Let L mean to choose the future market leaders, rather than current market leaders. We can track the growth of market capitalisation of the companies which can give us an insight on this.
After you invest following this strategy and if the price falls and you become restless then again analyze the stocks you purchased and thereby again draw the conclusions whether you want to hold it or sell it or want to buy more!
Financial Term Of The Day: “Index ETF”
Posted on December 5, 2008
Filed Under Series - Financial Term Of The Day! | Leave a Comment
Index ETF: Exchange-traded funds that follow a specific benchmark index as closely as possible. Index ETFs are much like index mutual funds, but whereas the mutual fund shares can only be redeemed at one price daily, the closing net asset value (NAV), index ETFs can be bought and sold throughout the day on exchanges. Through an index ETF, investors get exposure to a large number of securities in a single transaction. Index ETFs can cover U.S. and foreign markets, specific sectors, or a specific class of stock (i.e. small-caps, ADRs, etc.) but all incorporate a passive investment strategy, only making portfolio changes when changes occur in the underlying index.
Market conditions not good for IPO’s
Posted on December 3, 2008
Filed Under IPO news & discussion, Market News & Discussions | 1 Comment
Not only US but world is in financial crisis. We are seeing job cuts all over and all the governments are feeling the pressure to support the financial institutions of the respective countries. People are fearing stock investments and hence this is a bad time for new IPO’s where the public is itself worried about it’s prior investments there is very little chance any one will be interested in fresh investments that too in the form of Initial Public Offerings.“Conditions are extremely non-conducive for IPOs of any reasonable size. Only those companies, which cannot abandon their projects midway will be seen making IPOs in the current market,” said Mumbai-based merchant banking firm Saffron Capital Advisors’ MD K Srinivas. Primary market conditions will continue to be dull until there is some improvement in valuations in the secondary market, he says.
According to data collated by Delhi-based research firm Prime Database, a dozen companies have received approval of Sebi to raise over Rs 13,000 crore. Of these, Future Ventures and Adani Power — the two large-sized issues with a combined size of Rs 8,300 crore — are understood to have received the regulatory nod in early September. Given that the validity period of Sebi’s approval is 90 days, bankers feel the two companies and others, which got approval around the same time may have to put their offers on hold and wait till market conditions improve.
I hope you remember the two IPO’s of Emaar MGF (size Rs 5,436 crore) and Wockhardt Hospitals (Rs 564 crore) were withdrawn after poor initial response. Stay away from the IPO’s till the conditions in secondary market improves and India once again sees good FII investments.
Celebrating 1st year!! Happy Birthday Indian Equity Investment Guide! :)
Posted on December 2, 2008
Filed Under Know this blog more.. | Leave a Comment
Dear Readers,
Today this blog has completed 1 year! 
I started this blog on 2nd December 2007 as a result of my interest towards finance and investment world. So lets cut the cake!! here it is…
Some facts…
Total No. of Posts: 68
Categories: 13
Total PageHits: 9090
I have enjoyed posting here and would like to here from the readers too. Please tell what you liked and what not, so that I can write more articles of the arenas you are interested in.
Waiting for birthday gifts!!
Cheers!!!
Saurabh Patil
Financial Term of the day- “Preferred Equity Redemption Stock - PERC”
Posted on November 20, 2008
Filed Under Series - Financial Term Of The Day! | Leave a Comment
PERC: Preferred stock with special provisions limiting the value of its convertible shares and the mandatory redemption value at maturity. PERCs generally offer a higher yield than common stocks. However, they can be called at any time, generally at a higher price than the cap price. When the PERC matures, it must be redeemed into either cash or underlying shares.
Oil can bounce back to $100 a barrel in a year: Pickens
Posted on November 12, 2008
Filed Under Global happenings affecting Indian Economy | Leave a Comment
NEW YORK (Reuters) - Oil tycoon T. Boone Pickens said on Wednesday that crude prices may be near bottom and could bounce back to near $100 a barrel a year from now.
Pickens, in an interview with CNBC, also said his hedge fund was down $2 billion since July and that he had taken the money from his equity fund and put it into cash.
source: Reuters
What to do in such turbulent times?
Posted on October 14, 2008
Filed Under Investment Guide, Market News & Discussions, Todays Market | Leave a Comment
The stock market is a see-saw these days. Plummeting 900 points on one day and growing 700+ points on the next. What does this imply? Simply- Nothing can be guaranteed and anything can happen. That’s easy to say but hard to accept when you have your life’s savings at stake and when your stocks are in deep dark red sinking more than 50%. Here are some guidelines which may help you to get out safely from the current turbulent Indian stock market scenario.
1. Indian Economy is strong. When you invest in stocks of Indian companies, you invest in their business, and to know whether really your investment is endangered you should check whether the business of the companies you invest in is endangered or not. And currently for most of the companies it’s not! So chill!
This single point is enough for some potential investors to breathe easy, but for others here are some points.
2. If your investments are drastically down by, say greater than, 30%, then do fundamental analysis on the stocks you have, if their business is still good with good future cash flows, BUY MORE! Yes, they are on sale. But if you do this, be prepared to see some more downside and wait patiently for at least 2 months.
3. If your investments are down by 1%-30% - keep a close watch on those companies which are down the most and follow the same strategy I told above. For other stocks, hold – don’t buy don’t sell. Keep the cash with you.
4. If your investments are in profit by 0-10%- book profits. But don’t take entire cash out. As nothing can be said about the future. It’s better to be safe. As many legends say, don’t try to time the market.
5. If your investments are in nice profit..like above 20%, why are u even reading this??
Try to hedge your investments. If you had read this post about gold a month back you must have invested in it after some analysis, which may have proved a boon right now. Remember, fundamental analysis is crucial at this point. If you can’t do it, hire someone! Do not speculate in such times.
Financial Term Of The Day- “Credit Score”
Posted on October 11, 2008
Filed Under Series - Financial Term Of The Day! | Leave a Comment
Credit Score: A statistically derived numeric expression of a person’s creditworthiness that is used by lenders to access the likelihood that a person will repay his or her debts. A credit score is based on, among other things, a person’s past credit history. It is a number between 300 and 850 - the higher the number, the more creditworthy the person is deemed to be. A credit score plays a large role in a lender’s decision to extend credit and under what terms.
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