How to Play the Iran conflict ?

Today's winner : Domestic Oil companies

The Oil is trading in range of 98$ to 105$ per barrel due to the recent war of words with Iran's Nuclear weapon program. It's a no brainier that the Iran conflict will drive the Oil prices to the range of 140$ plus not seen in the recent past. With world's 25 % of oil flowing through the Strait of Hormuz and half of them flowing to trading partners in raging economies of East, this makes it a very notable crisis .

 Chinese petroleum companies like Petro China has a huge exposure to the oil fields in Iran. India imports LPG heavily from Iran through this Strait.Even though Saudi and Iraq can transport close to 10 million barrels through pipelines ,any counter attack by Iran on U.S Air bases in Saudi, Iraq and Kuwait will put this pipelines in risk.
         Israel is a passive player in this since Uncle Sam is on the front of the Crisis, if Iran Ships are attacked, the Long Range missiles will be gunning for Israeli Bases and Jewish Settlements.  If the Israeli Air Defense comes into the Gulf , we have a full fledged war in the cards. 

 I have screened through many of Major Oil players with exposure to Middle East and one who are not.


Companies with Huge exposure to Middle East Oil


Exxon Mobil
Apache
Petrochina
Marathon Oil
Hess


Companies with Least exposure to Middle East oil can be categorized into 4 Regions.


East Europe and Northern Europe (Russia, Norway, Netherlands etc)
Companies in South America
Canadian Oil Sands 
U.S Domestic oil and offshore drillers (Alaska and Gulf Of Mexico)




With that in mind, these small players will be the first one to Rally followed by Big players since they are less leveraged across the world.


Based on the Exposure and Leverage i came up with Good Names to play in case of Iran Conflict or a Stand off in Middle East


Accumulate


Petro Brasil (PBR)
Canadian Natural Resources (CNQ)

Chesapeake Energy (CHK)

Sell

Exxon Mobil (XOM)

BP

Apache (APA)

Marathon Oil (MRO)

Hess (HESS)

Even though it is a very unfortunate situation and Millions will be impacted , the Good Old Mutual Funds and Hedge Funds would still be Reaping the Blood fromthis Desert  Sands by Hedging Oil futures and Oil Stocks across the Globe.  The Market will react negatively to this Crisis by selling Equities and  all World Currencies ,after Buying hoards of U.S Dollars, which would  drive the Oil prices still higher.


 The Best way to play this short term event is to Buy Oil companies with Least exposure to Middle East and ones which are closer to North American Shores.


Sit Tight and Play Safe.

Stock Picks for 2012 - Tibco

Today's winner : Technology Stocks


Wish you all a very Happy Trading in 2012  and All my readers a Very Happy New Year

I recently scanned through some beaten down Tech stocks of 2011 and came across some promising names

Let us see their valuations and charts for my first pick of 2012

TIBCO Software

The Reason why picked this names is that the company, it has a quite foothold in Cloud Computing and a great acquisition target for Big players like Oracle and IBM. The valuation is quite attractive and it's unfairly beaten up in the 2011 market crash.The company recently posted a net income of 112 million and  65 cents/share . The Total revenue was around $920 million. The Revenue is expected to be in line with the Analyst estimate for Q1  earnings.

Tibco's line of Business includes SOA, BPM, Business Optimization, Cloud Computing and Complex Event Processing companies using IT heavily.

Valuation and Growth Forecasts

Name	P/E (TTM)	P/E (Fwd 12 Mo.)	PEG	1 Year EPS Growth Rate	Next 3-5 yrs EPS Growth Rate
Tibx	23.4x	21.0x	1.57x	11.8%	28.8%
Software Industry	20.5x	17.2x	-0.25x	9.4%	17.3%
Technology Sector	18.7x	15.4x	-0.35x	9.7%	17.7%
S&P 500	16.6x	14.6x	-0.41x	14.3%	7.3%

Charts indicate that the stock has bottomed out and selling has subsided. The selling happened in very low volumes and bounces were on strong volume.

Based on the Growth estimate and valuation , this stock should bounce back to 30's in a month or two. That is a Good trade and 40's if Oracle acquires the company for a 40% premium.

I will continue this article covering the rest of the picks for 2012.

Which is the Best of Emerging Markets ?

Today's winner : INDIA

With a Population of 1.2 Billion and having the largest Middle Class spending like there is No tomorrow, India is poised to become the Next biggest Investment Destination excluding China...There are lot of factors driving the current Market conditions in India..Let me list out of the Pro's and Con's of Investing on India Equity markets

Pros

1,  Largest and Ever-growing Middle-class. India is adding at least 2 Million  new households to the Middle class every 2 years.

2, The Consumer Class is largely untapped, around 50+ percentile falls in the Young and Vibrant Spenders.  They spend around 30 % of their disposable income on Electronics and Food. The profit margins of KFC's , Domino's, Sony's ,Hyundai's  are through the Roof.

3, Continuously Clocking a 7% plus GDP growth for a Decade is no small task.  Most of the Growth is fed my Internal factors. The Agriculture output driven by rotation of crops and Innovation has led to Surplus Grains.

4, India Car Market is expanding like crazy...Recently a handful of well known companies have opened additional manufacturing plants worth more than 10 billion USD. In a Reeling world economy deprived of Cash, this is Phenomenal.

5, Every Middle class and Lower Middle class household has atleast 2 Mobile Phones. Consider 600 million subscribers and growing...That is a great potential for Mobile apps and Media content on Mobile.

6, The Government has raised the Interest Rates to so high, that when recession do hit the world economies. They have lot of room to cut rates and ease the Liquidity crisis.

7, Considering India being in the Midst of East - West Shipping corridor offers a great potential to be the economic hub for South Asia. Strategically placed between the Oil Rich Middle East and Free Economic  zones of South China Sea.

8, The Indian stock Market has matured a lot in the past decade, becoming more transparent and provides greater financial stability than the likes of China, Brazil or Russia. The banks are matured and higly liquid due to the Saving mentality of the Average Indian Household.

Cons:

1,  The state control on Financial Markets are extremely annoying.

2, Corruption has eaten up around $1 trillion of the GDP in past 10 years.

3, There is no established free Trade zones in India like Singapore. So the presence if Global Financial Firms are minimal.
4, The Indian Rupee is not free tradable due to the State Monopoly RBI.  Which cuts out the 6 trillion USD forex market from benefiting Indian banks.

5, Governance in Public Sector is a laughable to the point of Utter Ridicule.

6,  the OIL companies loose money irrespective of securing low price oil contracts secured a Decade back..Come one tell me which country in the world where you have Oil companies posting Loss every quarter. Check the Balance sheet of ONGC and Relaince Petrroleum, they are pathetic.

7, Disparity between price of Goods versus quality is way overstretched . I wouldn't buy a Ford ikon or Chevy Blazer in U.S even with all the discounts and freebees. I guess same goes for all the Korean and Japanise car makers pushing low quality products for price conscious Indian Consumer.

With above said and the Indian Markets and Consumer maturing,, the potential for fixing the Con's will be possible with political stability, International Trade agreements and Stable financial markets.

There are very few instruments in India to tap the Growth story of India ...For examples you can invest on ETF's like INP traded in NYSE,  or Catch the Good old Banks like ICICI, HDFC  or Go for stable IT services companies like INFY, WIT,PCS.  If you do, please stay invested for atleast next 15 years, because in 2025 India overtakes Japan to be the 3rd largest economy in the world with a Consumer base of 900 million strong...

I will in due course write about the rest of the BRIC nations

Have a fantastic Holiday season

Case for Gold , Silver and Mattress

Today's winner : Cash in King Size  Mattress

The Current Debt Ceiling Crisis can be traced all the way back to Bush and his Goldman Sachs Buddy Henry Paulson.  Well how about Alan Greenspan for a Change..The U.S Fiscal and Monetary policy stroked by Alan Greenspan to curtail Inflation and infuse Liquidity into the ailing U.S banking systems has created a mountain of U.S Debt circling around the World in Record numbers.   In Fact the Current European Financial Meltdown is caused by uncontrolled issuance of U.S Debt in exchange for increased Liquidity  and Borrowing levels in Western Bloc.
         The Result of Loose U.S Monitory policy and availability of Cheap borrowing cost for Financial Firms have resulted in Tremendous amount of U.S Debt within the World Financial System . The Result is

1,   Explosive prices in World Commodity - (futures Traded in Dollar)

2,  Increased Inflation in Developing Countries including China - (China holds 2Trillion in U.S Debt).

3,  Weak Euro resulting in panic buying of Dollar based commodity.

4,   Hoarding of Food , Oil and Commodity by BRIC nations due to Volatile Commodity Futures Markets.

Come Aug 2nd or August 11th (real date) ,  the World will be Staring at two diverse crisis points

1,  U.S Government passing a Bill to Curtail  2 Trillion in Deficit  - Gold, Silver and Oild Spiking 10 to 20% from here.

2,  U.S Governement Passing a Bold Measure to cut 4 Trillion in Deficit - Cuts Commodity demand in Major markets and full stop to all Development activities in the world's largest Consumer market .

Either Way China will start offloading the U.S Debt which in turn will raise the Treasury yield's exponentially provoking a massive exit from U.S financial market into Commodity again..


In Either  way the charts Suggest that Gold is headed to 2000$ and Silver to $55 an ounce. Oil could spike to  110$ when U.S dollar drops to lows...

by far the Best option is buying a king Size mattress and hiding all the cash (make sure you use a Good Bug spray ..)..


Good Luck investing

S&P 500 Support and Trend

Today's winner: Cash

I apologize for a long break between my Blogs.  The Stock market have been behaving pretty badly for past couple of months. Especially the U.S Government debt ceiling and Inflation in Emerging markets has finally spill over to the stocks. While the Governments are struggling to keep up with rising debt and inflation, the Companies are sitting on a historic amount earnings and cash. Companies are not able to decide on a stable market to Invest and grow their investments. But the inflation is creeping up across the world and companies cannot sit on  un-invested cash for too long. There is only so much of Gold and Silver to hedge on the inflation. Those two are in historic highs . Let us look at the S&P 500 behavior for the past couple of months. As i have noted in my April Blogs when the stock market headed up on very low volume with least amount of Institutional Investors participating in the rally.

You can see from the above chart that S&P was down 9 out of 10 sessions on high volume. But the small positive not is that the Volume was weaker than the May crash to 1249. We are 30 points away from the Lows established in May. The Overall trend is very negative. We are yet to test the 52 week lows , Most of the downtrend is caused by recent spike in Oil Prices and Spiraling Debt crisis in the Western block.

The Recent oil reserve Data and Saudi efforts to increase output will recent in Supply exceeding demand in the Oil markets. Once the Summer driving season is over, we would see a 15% drop in Oil prices and create a temporary Commodity crash, which bodes well for the financial Markets.

Based on my recent analysis, S&P 500 has short term support around 1250 (may 2011 low) and if we continue sliding , we are looking a 52 week low of 1160. I would advice to stay in commodities (Gold , Silver and Oil ) until the low is established and switch back to Equities around the time we start seeing signs of Summer Rally.

The S&P 500 will see a 1400 by the end of this year if the Middle East and European Debt crisis Subsides.

I am Staying on Corporate Bonds, Oil stocks and Municipal Bonds until things are clear ..

Good Luck with your Investments...and Please check out my Novel "Life to Life : Journey to the Other side" in Amazon 

Time To take profits - Global Unrest

This is the synopsis of all chain of events in Middle East.. A Great read if you are not tracking the Middle East turmoil day by day

http://edition.cnn.com/2011/WORLD/africa/03/04/middle.east.africa.unrest/

Market Momentum

I have been watching the Market in past 30 sessions since the beginning of the Middle East Crisis. This is what i see

1, The  Oil Price has been extremely Volatile

2,  Around 25% of Global oil Supply is at Stake during the Crisis.

3,  No visible Leadership from U.N or any of the Superpowers (Existing and Emerging)

4,  Market pricing in a $125/ barrel Crude oil price.

5,  Gold is Surging towards $1600 /ounce with Hedge Investor buying spree.

6,  U.S and EU on the sidelines due to the Economic and Fiscal Deficit dictating their Global and Economic policies.

Lets watch the Market momentum for past week.

Market Momentum		Advances	Unchs	Declines	20-Day MA	50-Day MA	100-Day MA	150-Day MA	200-Day MA
Today	-0.78%	920	108	3142	50.53%	59.59%	70.74%	79.73%	81.22%
Yesterday	+1.94%	3400	79	691	61.58%	65.01%	74.72%	81.31%	82.59%
Last Week	+1.83%	3537	73	559	58.07%	62.70%	73.92%	81.14%	81.96%
Last Month	+0.30%	2164	122	1883	57.81%	65.99%	77.40%	82.77%	81.12%

Lets see how many Distribution days we had in past 30 sessions

$INDU - Daily Candlesticks: "
via StockCharts.com
"

Seems like we had 4 sessions of Heavy selling and not even one Session of heavier buying..

This shows couple of Red flags

1, The Market is definitely in a negative Trend.

2,  Institutional Investors who create heavy volume is on the Sidelines.

3, End of Earnings season.

4, Arrival of Summer Driving season which naturally boosts Gasoline prices.

5,  High $3+ Gasoline prices for past 4 months cutting into Consumer spending.

Looking at all of the above and possibility of IRAN revolution happening anytime which happens to be the Top Oil producer in the region after Saudi . We have one Toxic Brew of bad news to kill the World Economic Growth .

If Stock market is look ahead for 9 months of Economic conditions , the sell of will not stop until we see a 10% drop in coming  months.

I would suggest to Exit out of High Flying /High Beta stocks and head to Dividend paying and conservative Bonds...

As Always Cash is the King

Baidu -- Growth Stock of the tomorrow

Baidu, Inc. provides Chinese and Japanese language Internet search services. Its search services enable users to find relevant information online, including Web pages, news, images, multimedia files, and blogs through the links provided on its Websites. The company also offers online community-based products and entertainment platforms; an instant messaging service; and a consumer-oriented e-commerce platform. In addition, it designs and delivers online marketing services and auction-based P4P services that enable its customers to reach users who search for information related to their products or services. The company serves online marketing customers consisting of small and medium sized enterprises, large domestic corporations, and Chinese divisions or subsidiaries of multinational corporations primarily operating in the medical, machinery, education, franchising, electronic products, e-commerce, ticketing, tourism, information technology, consumer products, real estate, entertainment, and financial services industries. It sells its online marketing services directly, as well as through its distribution network. The company was formerly known as Baidu.com, Inc. and changed its name to Baidu, Inc. in December 2008. Baidu, Inc. was founded in 2000 and is headquartered in Beijing, the People’s Republic of China

Analysis

BIDU is single best stock for Investors to take part in the China's Super hot economy.   There are many stocks in this sector like SOHU, NTES, SINA which are all doing very well in recent few years.

BIDU is filling the need of 1/6 of the world population which is not served by Google. The middle class in China is twice bigger than the entire population of United States.

If Google lessons are true, more youngsters use the search engine on the typical day than any other age group.  With Google out of the way and Yahoo/MSFT being sidelined in mainland china. Bidu is poised for APPLE like growth.

Lets see the fundamentals of Baidu Company and valuation based on its recent earnings.

Valuation Measures

Market Cap (intraday) : 40.39B Enterprise Value (Feb 24, 2011): 42.96B Trailing P/E (ttm, intraday): 75.65 Forward P/E (fye Dec 31, 2012): 32.11 PEG Ratio (5 yr expected): 0.89 Price/Sales (ttm): 34.90 Price/Book (mrq): 32.86 Enterprise Value/Revenue (ttm): 35.77 Enterprise Value/EBITDA (ttm): 66.22

	2010-12*	2009-12	2008-12
Income Statement
Revenue	7,915	4,448	3,198
Operating Income	3,959	1,605	1,097
Net Income	3,525	1,485	1,048
Earnings Per Share	10.10	4.27	3.02
Shares Outstanding	349	348	347
Balance Sheet
Current Assets	8,782	4,843	2,852
Non Current Assets	2,266	1,314	1,086
Total Assets	11,048	6,157	3,938
Current Liabilities	2,552	1,400	849
Total Liabilities	2,643	1,404	849
Stockholders' Equity	8,406	4,753	3,089
Cash Flow
Cash From Operations	—	2,279	1,746
Capital Expenditures	—	-450	-477
Free Cash Flow	—	1,829	1,269

You can see that the EPS has tripled in last four years.. The stock price did Quadruple in past four years, with the rest of the Market...With a projected annual growth of 75% YOY (year over Year). This stock will be $400 in next 5 years. Recently the BIDU jumped almost 25% post earning seasons. But the stock got beaten up in last few sessions due to Middle east turmoil. But one that should be clear to investors is that Oil price increase will not affect the revenue of a search engine company like BIDU or GOOGLE. Any dip in this stock is a great buying oppurtunity.

Five Year Shows that the stock is well above its support lines

BIDU - Weekly Candlesticks: "

via StockCharts.com
"





With tremendous growth and doubling EPS every year with limited threat from Google/Yahoo/MSFT  BIDU is a real winner long term

My Target price for Baidu is $160 by end of the Year 2012.

The best entry points are below

First Buypoint if the Market shows signs of turnaround :                $109
Second Buypoint if S&P cracks the 50 day average :                    $101
Third buy Point if Market crashed another 1000 points:                  $97



Please comment ,it helps us to see different viewpoints.


Happy Investing