Monday, June 29, 2009

Agriculture Sector – Food for Thought

“Like an ox-cart driver in monsoon season or the skipper of a grounded ship, one must sometimes go forward by going back.” John Barth

If one plough up this terrain as an investment avenue ,outcome would be a rich harvest . The vapid comments about the weather that have been the scorching the headlines for the last couple of weeks are bound to have a profound impression on the economy . The year 2009 so far has seen countries like China , Argentina , Africa, South America and the parts of US , which make up for the close to two third of the worlds agricultural output witness drought or drought like conditions. India with more than half of its of its population engaged in the agricultural sector is contributing appox 17-19% to the GDP . India is the seventh largest country in the world and have appox 43 % of its area under agriculture . It also accounts for 14 % of India’s exports .The delayed monsoon could definitely cast a shadow on the path of economic recovery apart from hampering the governments target of 4 % agricultural output .It would also be the cause of concern on the food security front .We had a great last food grain production season ,that would cater to any short term demand . It is a stark reality that our agriculture sector is predominantly rain fed thus it has no option but to bear the vagaries of the weather .The Kharif crops season runs from June till October end ,it is heavily dependent on the south west monsoon .The major Kharif crops are cereals , paddy ,Pulses , Soybean , maize ,millets, oilseeds etc .Food Grains have a weightage of 5 % in the a Whole sale price Index (WPI ) which is a measure of inflation in India. Though , WPI has moved in negative territory but the inflation in food grains prices in the index is a matter of concern .

The international prices of most of the commodities have been falling in 2009 , in comparison to their prices during the same period in 2008 .The benchmark Food and Agriculture Organization ( FAO ) Food Price Index though has been moving upwards for last three months; but it is still lower by 30 % from its peak in June 2008 .The FAO Food price index averaged 152 points in May 2009 . The increase in demand of agro commodities is proportionate to growth in population and per capita income (expected to grow by appox 14 % this fiscal ) . It has been observed that the food grain production rate is lower than annual rate of growth of population in India ; thus there would always be a tight demand and supply situation .The growth in foodgrain production has been falling significantly since 1990 . A glance at few commodities would give us the idea of the road ahead ; the poor rain in Assam and West Bengal has already affected the Tea production , coffee production in the regions of Karnataka has also taken a beating due to the similar reasons. . Tea and coffee prices remain firm in the India market . India is the worlds largest producer of tea .India’s Sugar demand is already being catered by permitting imports of sugar as there has been a shortfall of appox 7 million tonnes .Pulses are always in short supply due to huge consumption as it being the affordable source of protein .Rice - india have enough stock to control any kind of surge in prices . non basmati rice is also banned for exports ;though we would be shipping 2 million tonnes as aid to African countries .Cereal outputs is expected to see a slight decline in 2009 .Wheat ,Coarse grains , Oil seeds price are already on their way up . Agricultural food commodities price have seen a surge primarily due to lower global agricultural output ,diversion of agri commodities like Soybean, corn etc for generation of bio fuels , below average buffer stocks worldwide .As per the reports ; the India Food and Agri business market size in a decade would be in the region over USD 500 billion. There are opportunities existing in trading , production , warehousing , retailing ,logistics ,packaging ,processing etc which would fetch interest of many companies as well as entrepreneurs .This sector also influence the fortunes of companies engaged in fertilizers , farm equipments , pesticides and other allied industries .

India is emerging as an attractive destination for the Food processing industry .This sector has been growing at a steady rate of 14 % .The rapid urbanization generally causes a shift in consumption behaviour from cereals to other high value agri , dairy , live stock products ,packaged processes food .India is among the top producers of cereals, milk , sugar , fruits ,pulses , tea etc .Thus availability of raw material along with investor friendly policies have attracted leading global players to to tap the Indian Market both in terms of manufacturing as well as exports .Few of the stocks from food Processing , Rice, Oil Extraction industry , other allied industry such as KRBL , Kohinoor Foods , LT Overseas , Tasty Bites , Temptation Foods , Kothari , KS Oil , Agro Tech ,IVRCL Infra , kirloskar brother would make a good long term investment





DISCLAIMER
This blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Monday, June 15, 2009

Logistics Sector – Encountering Transshipment Hazard

Transshipment in logistics parlance means when goods during their voyage from port of loading to the port of discharge are unloaded from one vessel to be reloaded on a different vessel for the final movement .If there is delay in connecting the onward vessel the consignment gets delayed .Logistics sector seems to have encountered a similar hurdle due to slackening domestics as well as global demand for goods and services .The consistent growth in manufacturing , retail as well as EXIM trade had put the logistics sector in a sweet spot. Logistics has assumed a tremendous importance in the economic system today and is intertwined with the GDP growth .A slowdown in growth across all industries has made this sector encounter an arduous situation .The logistics companies have been on a major expansion spree by investing in warehouse spaces, technology etc suddenly these asset heavy organizations are forced to anchor their capital expenditure plans. As the key driving verticals telecom, automobile and IT hardware are witnessing a slump , thus the companies that would be able to leverage existing infrastructure rather than creating new ones coupled with innovative solutions would be a able to ride the tide . The slow down in GDP ,increasing oil prices ,decline in container traffic , unprecedented drop in sea freight rates , entry of new players backed with VC/PE funding have further put pressure on the margins .The focus would now be on the low asset intensive companies offering value added solutions by leveraging technology thereby creating a niche for themselves.The sector has seen PE/VC investments in following unlisted companies Om Logistics , Quick Jet Cargo , Elbee , Direct Logistics , BLR India .The listed Logistics companies like Gati ,TCI , Gateway distriparks have all underperformed in the market for the quarter ended March 31,. The instances like the international buyer Arcandor‘s application for bankruptcy in Germany would result in non payment to exporter which in turn could delay the payments of the service providers will have an impact on the sector sentiments. Even the IATA figures have not been optimistic on the air cargo traffic.


I would term this as a short term aberration and would still like to sail with this sector. According to published reports ,India logistics markets is expected to be a USD 125 billion by year 2010 .The compound annual growth rate ( CAGR ) for the next few year is expected to be 7-8% .Indian logistics cost is expected to be around 13 percent of the GDP .The key drivers are going to be enormous infrastructure spending in terms of developments of roads , rail , airports, ports network .The expected implementation of GST by April 2010 will also give a flip to the logistics Sector . The stimulus packages to revive economies would also help this sector take off.

DISCLAIMER
This blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Friday, June 12, 2009

Get Well Soon Sehwag - Don’t Overlook your Portfolio Check up

The mysterious shoulder injury shrouding Sehwag has prevented him from playing at the Mecca of the cricket world and at the same time ruling him out of the ICC Twenty20 world cup. Friends ,We are just two weeks away from end of the first quarter of the current fiscal and would have reached the half way mark for the year 2009 .As a rational investor , it is pertinent to offset idiosyncratic risk by conducting a midyear or a quarterly portfolio check up .The following comments of legendary trader Jesse Livermore would definitely ring a bell . "...the fruits of your success will be in direct ratio to the honesty and sincerity of your own effort in keeping your own records, doing your own thinking, and reaching your own conclusions.”

A quick portfolio review would definitely have a significant impact on the returns for rest of the year . Indian growth story coupled with positive global cues have so far kept the momentum of the stock market intact ,albeit ,volatility at times pushed us to the limit .The indices so far has provided us with great respite after getting whacked in the year 2008 .I feel the economic environment of 2008 has converted everyone into prudent investing .There has been a paradigm shift in the investment behaviour ,no more overzealous garbage picking happening in the market .

"The average man doesn't wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He doesn't even wish to have to think." ~ Jesse Livermore"

Snapshot of few suggested Parameters that can be adopted for a Portfolio Check up

Political Situation – National

Neighbouring Countries

Global Political Scenario

Fiscal Deficit of the Nation

Impact of Inflation , Currency ,GDP etc

Economic Scenario

Emerging / Sunrise Industries

International trade statistics / Balance of Payment

Impact on Existing Holding

Review Existing Holdings

Re- assessment of individuals Risk levels

Revision of expectations on return from the holdings

Portfolio returns versus market performance

Performance of peers

Tax liabilities

Future Investment strategy

Predicting Market Trends

Play an active part in investment eco system


I will close this post by saying whenever you possess any investment guidance “ DON’T STOCK JUST SHARE ”. I am looking forward to receiving investment strategies ,ideas that would further enhance sphere of investment goals for rest of the year

DISCLAIMER
This blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Tuesday, June 9, 2009

The Indian Textile and Ready to Wear Industry - Tailoring Hues of Expectations


While taking a stroll few months back , I noticed a banner “ loot hi loot " dangling outside a textile cloth merchant shop , clearly reflecting the plight of the stocks from the textile industry .I ventured inside and picked up few trouser lengths . The hunt for the Tailor landed me at the shop from which during my schooldays; I used to get the trousers stitched . To my utter surprise , I saw traditional indian women wear hanging outside his shop .We both could place each other ,he blurted out that in the times of ready to wear they are only left to do is alteration work , thus he diversified into the women wear .I quite apprehensively gave him my symbol of support for the industry . He delivered a masterpiece .Similarly ,when the size of the Indian Textile and ready to wear industry is shrinking due to the global economic meltdown ; the industry is looking forward to a stimulus package in this budget constituting of favouring policies like better infrastructure, cheaper loan and interest rates , strengthening of technology up gradation fund , reduction of customs ,excise duties , protection from forex losses etc, ; that can not only assist the vibrant Manchester of india regain its slowly loosing sheen but could also revive the industry . The textile and ready to wear industry plays a vital role in the Indian economy .

Indian textile and ready to wear industry contributes 4 percent to the GDP. It offers livelihood to an estimated 35-40 million people ,in addition there are millions employed in the allied industries , thus making it second largest employer after agriculture . The activities encompass from production of raw materials like jute , cotton , silk to finished garments made of natural as well as man made fibres .Its share in international textile trade is close to 4-5percent . it is the largest producer and second-largest exporter of jute goods, the second-largest producer of silk ,the seventh-largest producer of wool .India is the third-largest cotton producer both in terms of bales produced and in metric tons, Indian Textile Industry contributes about 10 percent to industrial production, 14 per cent to the manufacturing sector, and makes sizeable contribution to the country's total export earnings. It has a total domestic market size of US $25-30 billion apart from export market worth to be close to USD 15-20 billon. It is expected that market should touch USD 100-110 billion with the return of buoyancy in the economy.

Few of the textile stocks that got weaved into an upward spiral in last few months in anticipation of government unveiling sops to revive the languishing sector

Name of the Company

52 week High /Low

CMP

Arvind Mills

44/11

31

Bombay Dyeing

782/110

372

Gokaldas Exports

226/43

121

Zodiac

455/148

311

SEL manufacturing

757/38

82

Raymonds Limited

238/68

163

Alok Industry

52/11

25

Welspun India

49/13

40

There are options galore in textile industry stocks , thus the above information focuses on why to buy than what to buy ,One can look at creating a bespoke textile portfolio keeping in view that the gradual improvement in domestic as well as international economy will reflect on this sector quite instantly.



DISCLAIMER
This blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Monday, June 1, 2009

Don’t get tempted by the flight

The great leg spinner Shane Warne has the ability to astound the batsman with the variation in his bowling .When he is bowling you never know what’s going to happen ! He has the ability to bowl six different deliveries . He can entice the batsman with the heaps of flight making him come out of the safety zone and get stumped. It required the great experience and relevant skill set of master strokes man Sachin Tendulkar to play rollicking innings against him .Similarly ,don’t get ostentatious by the current flight of the Sensex , don’t leave the safety zone , be prudent and may be use this as an opportunity to get healthy not anorexic by shedding some extra flab .To be precise ; in the words of Warren Buffet –“ Why potential buyers even look at projections prepared by sellers baffles me. Charlie and I never give them a glance, but instead keep in mind the story of the man with an ailing horse. Visiting the vet, he said: "Can you help me? Sometimes my horse walks just fine and sometimes he limps." The vet's reply was pointed: "No problem - when he's walking fine, sell him." The seller of a business practically always knows far more about it than the buyer and also picks the time of sale - a time when the business is likely to be walking "just fine."

Have a devoted look at your holdings , May be ,its time to reshuffle your portfolio ! A quick assessment could reap great benefits !The volatile market environment could make you chance upon some real gems in the emerging sectors at an attractive valuations .Ignore investment seers espousing market trends ,just pick up fair value stocks with great business lineage during such market fluctuations .One can also take cue from the investment being made by the financial institutions in other emerging markets like Russia .The pendulum swing is going to differentiate investor from a speculator .Keep your interest alive in the Test Match …………

Delivery of the Day India Glycols Limited

DISCLAIMER
This blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Thursday, May 28, 2009

The Indian Education Market – Scoring High Marks


India, with an estimated student population of 400 million, is one of the largest education and training markets in the world. Indian Middle class spending on education forms a large chunk of their expense. Government focus on improving the education system in India is only going to intensify. As the Government considers education, a key in sustaining economic development, education in India is witnessing increased government support with the budget having an increased allocation for education by 20 % to Rs 34, 400 crore (€5.4 bn) during FY 2009. Government is planning to spend 6 % of the GDP in next few years on education.

Private education market in India is assessed to be USD 40bn -50bn . The K-12 segment alone, which includes students from kindergarten to the age of 17, is estimated to be more than US$20 billion. The market for private colleges is appreciated at US$7 billion while tutoring is valued at US$5 billion. Other territories such as test preparation, pre-schooling and vocational training significance is US$1-2 billion each. Textbooks and stationery, educational CD-ROMs, multimedia content, child skill enhancement, e-learning, teacher training and finishing schools for the IT and the BPO sectors are some of the other noteworthy sectors .

Presently, the key players in this segment are NIIT Ltd, Everonn Systems India, Aptech Education, Educomp Solutions, Core Projects and there are other private players who are now venturing into this burgeoning market to tap the immense opportunities. The kindergarten to 12th grade (K -12 ) along with vocational training segment offers an exciting opportunity for the private business houses.

These companies are seeing huge growth in terms of volume as well as value. For instance, Educomp has seen its revenue is up by 130.7%, EBIDTA by 97.4% and PAT is up 61.4% on consolidated basis despite the current global slowdown in Q3 of 2008-09. Although. NIIT Ltd has reported 60 % drop in its net profit for the third quarter of 2008-09, to Rs 5.5 crore but that has been mainly due to higher depreciation and forex losses incurred by an associate firm and is had seen increased profits in the previous quarter which shows a great potential.

India predominately is a service driven economy with services contributing over 60% of the GDP; hence there would always be a need to develop a reservoir of skilled human resource to meet demand and supply gap. Declining BPL (Below Poverty Line) rate and increasing per capita income of Indian households is a very optimistic harbinger to the increasing demand in the education sector. As increasing number of families enter the economic echelon wherein they can afford to send their children to private schools, tutorials centres, vocation training centres etc, demand for these institutions in a brick and click model would only increase with time. As the scalability of the business model involves replication of an existing model at a fresh location; thus the growth trajectory would be very fast and successful.

Education is one sector which has recently seen surge in interest by the private equity players and venture capital funds. As they assess a considerable demand and supply gap in this space that offers a promising opportunity for the existing companies to scale up their operation and the private companies to venture into this arena. It is also considered as a recession proof industry. There are investment already made by SAIF, Helix in the domestic education services companies like Mahesh Tutorials, Career launchers etc

Government initiatives like Sarv Siksha Abhiyan , Focus on girl education , free and compulsory education for all 6-14 year old ,comfortable access to schools for children would result in substantial increase in number of class rooms along with the new schools ,this would also open up opportunities for the Public Private Partnership for the private enterprises through build-own-operate-transfer (BOOT) model under the Sarva Shiksha Abhiyaan and ICT Schools programmes. This demonstrates both the scale of the challenge and also the massive opportunities that will arise for education suppliers over the coming years . Recently, the central government invited private participation in over 1,000 of its industrial training institutes and offered academic and financial autonomy to private players. Companies such as Tata, Larsen & Toubro, Educomp and Wipro have shown keen interest in participating in this initiative

The share prices of NIIT LTD , EDUCOMP Solution , Everon Systems ltd , Aptech Ltd , Core Projects have witnessed a remarkable surge in last few weeks.

The endeavour in the post is to highlight investment theme without employing arithmetic ,in case, any one requires detailed analysis of individual stocks would be glad to forward the same .At this moment , I am reminded of a Chinese proverb - If you are planning for a year, sow rice; if you are planning for a decade, plant trees; if you are planning for a lifetime, educate people







DISCLAIMER
This blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Friday, May 22, 2009

Measuring Tape - The Baltic Dry Index


To achieve tangible results in the realms of the stock market ,it is vital to discern between the factual and the esoteric information .The Baltic Dry Index is a great tool to gauge the market environment, at the same time assisting in offsetting the perennial market volatility .

The Baltic Dry Index ( BDI ) is a real time indicator of the global demand for commodities and raw materials as it is also a measure of what it cost to ship raw materials around the world .The demand and supply of raw material provides insight into the future trends of production and consumptions of goods .Compared to other parameters like inflation indices etc, it is difficult to influence the BDI , as a growing economy reflects instantly with the increase in price of raw materials , commodities , as well as commodity based currencies .The index is not tradeable ; it indicates the price in real time on daily basis , thus bringing in more reliability to take an informed investment decision.

The BDI started plummeting in the middle of year 2008 ,subsequently global equity market tailed it .The first quarter of 2009 has seen the index moving higher ,clearly putting emphasis on the basic principle of supply and demands bolstering the global economy .Though the index has gone up by more than 140% till now in the year 2009 .However, at the same time ,it is still off close to 80 % from the high it achieved in middle of 2008 .There are contrary views also existing to this philosophy, but my fetish to track this while making investment has yielded optimistic results.

FISH OF THE MONTH HEG LTD

Monday, May 18, 2009

Emotional " Atyachar "

There was no chequered flag this Golden Monday, but the stock market hastened at a breath taking speed, with stocks galloping to take the pole position .The moment it hit the upper circuit, twice during the day ,stock market history was made .

My phone was buzzing again constantly, after a long hiatus, and emails started pouring in, from friends and acquaintances ,everyone shouting ,“ Show me the Money ”, straight into my face . Is this the sign of emergence of a successful Investor ! They all wish to own something when it is in a speculative landscape, instead of focusing on a rainbow scenario when the market was somber for over a year . I still appreciate their optimism ,and I assure them they are on the road to success as they are willing to plunge in spite of being witness to the economic tsunami, when the indices dashed from the historic high in January 2008.

There is a tenet that is apt for the stock-market - “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change”.

It is clearly evident that investing in stock market is more of an emotional endeavor rather than a Structured, well thought- out approach .Everyone today is carrying the burden of having missed the boat once again with the sharp rise of the indices.

The metaphorical explanation of the stock market is the derivative of the farming approach. To initiate farming ,it is very important to own a piece of land ; due diligence is imperative to pick up the correct stock. You can only make money in the stock market if you remain invested.

You need to sow the seeds and wait for the harvest . This illustrates endurance and focus on the big picture, coupled with optimism.

Fruit of the Month HAVELLS LTD