HOT SECTORS AND TOPICS FOR 2013

Promising Sectors for 2013

I apologize for not updating this Blog in a long time..I Still see quite Good traffic to my Blog with such long break in threads, i relate to my previous threads on some great companies who are still one of the Hottest stocks in 2013 such Netflix (NFLX) and Baidu (BIDU) which has given the investors double digit returns if picked up during November Election fiasco. For stats Bidu has returned around 30 % and NFLX has returned around 60% due to the recent earnings burst. For Institutional investors timing is immaterial since they cost average highs and lows all through the year, while Hedge funds seek out short term opportunities 

on both long and Short positions in the same sector.

For small investors like us its i imperative that we time the Market right and exit as quickly as you see double digit returns on paper. Not only does timing helps make us good profits but sector rotation and Frequent portfolio balancing is quite critical to sustain the market swings or survive sudden crashes. 

Let us look at some promising sectors for this year. I scanned through some of the Hot sectors of 2012 and surprisingly Home builders on average returned double digit profits for investors. Oil industry was stagnant as the threaten of Gulf war and instability in Middle East has ceased to be the center stage. I guess it has direct correlation  with Election opinion polls and November results towards the end of the 2012 and a Democratic President back in office. (see my early blog on Obama versus Market)

Now i see some hot topics for the  year 2013 which will drive the Markets.

• Fiscal cliff - Fancy term to describe if U.S can survive/fail the Government borrowing limits from federal Reserve and Debt ceiling.
• Syrian Unrest and Geopolitical crisis .
• Renewed Threats from North Korea
• China Standoff with Japan over disputed islands
• Cut in U.S Military Spending
• Greece,Ireland and Portugal in 2012 replaced by Spain and Italy as the center-stage of EU crisis.
• China revamping growth using its Internal demand/domestic Economy.
• Brazil and Russia going into stagflation.
• Death of Apple and Face Book shares - will Tech ever come back to rule the Wall street.

With a political stability in White house and increased focused on domestic issues, U.S Government is on war footing to patch up its Ailing economy with new world economics . What it means for the Global economy is  decreased spending from worlds Largest Economy . This will result in less production and consumables from China and Other Service based economies pointing to low GDP growth among BRIC countries .Most of the offshore money flowing back into the U.S economy (i am talking about trillions held by major U.S and European companies abroad in low income generating assets to high risk assets) will bring back more Jobs and high pay slips to the U.S economy. Recent Immigration policy will have a profound impact on the Service and Hotel sectors, Tourism and Mass migrations to Big cities.

If you put together the above in plate and you will start getting the BIG picture. Most of the stock markets will depend on regional policies and consumption. Right out of the bat sectors that comes to my mind are Domestic oil companies,Retailers and Commercial Realtor in U.S, National Banks in Europe , Cyclical ,Auto industry, Financials in BRIC nations such as India , China and Brazil. Manufacturing and Petrochemicals in Russia.

Some of the dead sectors will be Solar Power , Mining, Shipping and Aerospace. 

Do your math and preserve your Nest egg before risking it.!!!

Good Luck and Happy New year

Wizard

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