Should you invest in funds aimed at Europe, Japan?

A theme should never have more than 20% allocation in your portfolio. The rule is not different here.
US Funds were successful in 2013. Will dedicated funds for other region also be equally successful?

To read the full story click here

http://businesstoday.intoday.in/story/asset-management-companies-new-funds-invest-in-europe-japan/1/201788.html

Portfolio building for 2014

The New Year offers great investment opportunities for retail investors as the country's economy looks to emerge from a prolonged lean phase. This is, therefore, time for investors to make smart decisions to reap the benefits of a reviving economy.

To read the full story click here

http://businesstoday.intoday.in/story/investment-tips-sectors-outlook-instruments-for-2014/1/201892.html

Electronic stamping or E-Stamping

Paying stamp duty is an essential part of almost any transaction you do in India, from buying or selling a house to setting up a business agreement or even registering your many insurance policies.

Read the full story-here or copy paste the below given link

http://businesstoday.intoday.in/story/electronic-stamping-is-a-convenient-way-to-pay-stamp-duty/1/201780.html

Summary Notes - One up on Wall Street

This is not a review but a summary notes. The most important things that the writer, Peter Lynch, has said.

Company classification

While companies can be classified in many ways and they are in all over the world Lynch suggests only in two baskets.

Large companies: Multiple products; well diversified product portfolio. The success of no single product will alter its performance massively.

Small companies: Smaller company size, limited product portfolio. A huge jump in the sales and margin of one product/service can result in major change in the company's fortunes.

Definition of a growth company: There is overall high growth in successive years. Sales, production and profit -- all will witness high growth.

Then companies are segmented in Six Categories 

1. Slow growers: Large aging companies are expected to grow slightly faster than the GNP. This could also be because the entire industry has aged and is growing slow.

Another sign of a slow grower is that it pays regular and generous dividends.

Expected Annual Earnings Growth 2-4 %

2. Stalwarts: These are also large companies but they haven’t  lost all the steam.

Aim to buy stalwarts for 30-50% gain and then sell them off and repeat the process whenever you find an opportunity. These companies are not meant to be held forever.

They should be kept in the portfolio because they offer protection during recession and hard times.

Expected Annual Earnings Growth 10-12 %

3. The Fast Growers: Small, aggressive new enterprises that grow at 20-25% per year. This has nothing to do with the industry. There can be a fast growing company in a slow growing industry as well.

The smaller fast grower risk extinction and the larger fast-growers risk devaluation when they falter.

Look for a company with strong balance sheet and are making substantial profits. The tricky part is to figuring out when they will stop growing, and how much to pay for the growth.

Expected Annual Earnings Growth 20-25 %

4. The Cyclicals:  This type of company will witness a rise and fall in its sales and profit in regular if not predictable fashion.

Auto, airlines, tire companies, steel companies and chemical companies are all cyclicals.

Coming out of recession and into a vigorous economy, the cyclicals flourish and their stock price tends to rise faster.

If you buy a cyclical in the wrong part of the cycle then it can result in loss of your portfolio. Timing is everything in cyclicals, and you have to be able to detect the early signs that business is falling off or picking up.

5. Turnarounds: Turnaround candidates have been bettered, depressed and often can barely drag themselves into chapter 11. There aren’t slow growers, they are no growers. These aren’t cyclicals that rebound; these are potential candidate for trouble.

Bail us out or else --

Who would have thought of it -- Satyam

Little problem we didn’t anticipate -- Wockhardt

Perfectly good company inside bankruptcy --

6. Asset Play: Real estate written off the books because of old holding, high cash with negligible debt. Look for companies which have been in existence for a very long time. Then check if they are still holding to their assets.

It requires understanding of the company’s assets, and once understood it requires patience.

What to avoid --

If I could avoid a single stock, it would be the hottest stock in the hottest industry, he one that gets the most favorable publicity. If you are not clever in selling the hottest stocks then you’ll soon see your profits turn into losses, because when the price falls, it’s not going to fall slowly, nor is it likely to stop at the level where you jumped on.

Broad Numbers

Before you buy a stock, you might want to track its p/e ratio back through several years to get a sense of its normal level.

Even for a high PE company, the PE relative to the growth rate made it look cheap.

Also look at the broader market P/E. Lunacy across the board can be traced from this aspect of P/E.

For developing story

Find out how a company plans to increase its earnings (net profit) and track if it is going according to plan. There are five ways in which earnings can be increased:

1. Reduce costs
2. Raise Price
3. Expand into new markets
4. Sell more of its product in the old markets
5. Revitalize, close or otherwise dispose of a losing operation

Slow-growing company: you are in for dividend.

Increased earnings for last 10 years

Attractive yield

Never reduced or suspended a dividend and has in fact raised it including last 2-3 down cycle of market

What will add to the growth rate?

Cyclical

Business conditions: Slump till now but sales have picked up

Inventories

Prices

Asset play

            What are the assets?

            How much are they worth?

Turnaround

            How has the company gone about changing its fortunes?

            What is the next plan of action?

Stalwarts        

            What is the PE ratio?

            Has the company seen dramatic rise in price?

           

Some Famous Numbers

Sales: product’s weight in its profit?

PE Ratio:

Compare the earnings growth rate against the PE ratio.

In general, a P/E ratio that’s half the growth rate is very positive and one that’s twice the growth rate is very negative.

To calculate the annual earnings growth -- calculate the earnings growth per cent from one year to the other.

Or

Long term growth rate, add dividend yield and divide by the p/e ratio.

Interpretation: less than 1 is poor, and 1.5 is okay, but what you are really looking for is a 2 or better.

Cash positions:

Always check the cash position and see if the cash per share after paying all debts. (For Indian companies also check the FCCBs and other debt mentioned in notes)

Also check the approx value that is being earned by its unlisted subsidiary. And how is it adding to the parent company’s balance sheet.

Debt equity ratio

Normal is 75% equity and 25% debt.

Also check on the type of debt – Bank, Commercial paper or Funded.