Stock Markets: I am Buying!!
Saturday, March 31, 2007 Permanent link to this post
Where are Markets Headed?
It has been more than a month since that fateful Feb day when markets tanked and like many other, my dream year soured a little. Till then, in just 2 months of the current year, I had made (actually booked profits!) around 12%. Since then I have lost most of it - although for the year I am still positive. This is the time to make decisions - and here is my decision - I AM BUYING!! and here are my reasons:
1. First of all, I don't mind too much when good stocks drop. How else are you ever going to get good opportunities to get into them! I am convinced that the stocks I have chosen are strong ones and I am going to stick with them till they recover - and because I am buying at every decline - when they finally recover I would have made a decent sum.
2. It takes conviction and patience to win long term in the market - and I am fully behind my stock picks. Fortunately my cash flow situation for the rest of the year is quite decent so I can afford to be patient and even put more cash into the market.
3. The current market weakness is mainly because of US economic slowdown, housing market worries and dollar value concerns. I have been aware of these risks and have focussed on creating a portfolio that includes quality developing world stocks and stocks with US stocks with significant international exposure. I am convinced that when the current market starts separating real risks with hidden gems, my picks will flourish. I am willing to wait till that happens.
4. Almost all my stocks are very reasonably valued (no Google for me!). These values give me confidence that there is a floor for them. Many of my stocks have forward PEs of low teens and even single digits. There is only so much that they can go down.
5. US Economy is in real danger of getting into a recession in near future. This will bleed the markets and there would be pain. I am sure that in spite of my quality portfolio - the pain will spread to me. But then - these are the best buying opportunities. I am willing to wait till the recession hits and leaves. Most recessions are less than 4-6 quarters - so a wait of 3 years to recover all my investments and get incremental returns on all my buying on the down ride. Not bad!!
My Portfolio
So now that I have professed my confidence in my portfolio - what is my current portfolio. Here are my main holdings. I am buying each of these stocks at every available opportunity: AMD, CAT, CX, FTE, HMC, IBN, SCSS, STX, TNE, TTM, TTMI and UL.
My Dream Stock
The one stock I am most excited about is Tata Motors (TTM). I have worked in this company, I have followed it for more than decade now - and I know this market inside out. And - in my opinion - the current PE of 13, with forward PE of 12 is a steal!! The current decline from 22 levels to 15-16 levels present an excellent buying opportunity and I am buying big time. A PEG of 0.66!!
TTM is the market leader in one of the fastest growing commercial vehicles market! It owns that market with more than two thirds market share with hardly any challenger in sight. TTM's foray into the passenger car market was successful beyond expectation and TTM is now the third largest car maker in India. Now, the recent push to make the world's cheapest car is going to thrust into a position of cost leadership all across the developing world. Look at this Forbes story (hosted on Rediff) for the magnitude and importance of this project. I am convinced that if anyone can pull off making a modern car for $2500 - TTM can. When this product finally hits market - TTM will skyrocket. On the other hand, even if that project fails, the commercial vehicle and mainstream car volumes are enough to justify current valuations. So - buy on.
From the Forbes article, here is a comparison of previous low cost leaders in automobiles:
Think about where the next big push in automobile sales volumes will come from - its not US Japan or Europe - these markets will likely contract in coming decade. The future of car market is in China, India and the rest of the developing world. This market is crying for a low cost car - and Tatas will give them one.
It has been more than a month since that fateful Feb day when markets tanked and like many other, my dream year soured a little. Till then, in just 2 months of the current year, I had made (actually booked profits!) around 12%. Since then I have lost most of it - although for the year I am still positive. This is the time to make decisions - and here is my decision - I AM BUYING!! and here are my reasons:
1. First of all, I don't mind too much when good stocks drop. How else are you ever going to get good opportunities to get into them! I am convinced that the stocks I have chosen are strong ones and I am going to stick with them till they recover - and because I am buying at every decline - when they finally recover I would have made a decent sum.
2. It takes conviction and patience to win long term in the market - and I am fully behind my stock picks. Fortunately my cash flow situation for the rest of the year is quite decent so I can afford to be patient and even put more cash into the market.
3. The current market weakness is mainly because of US economic slowdown, housing market worries and dollar value concerns. I have been aware of these risks and have focussed on creating a portfolio that includes quality developing world stocks and stocks with US stocks with significant international exposure. I am convinced that when the current market starts separating real risks with hidden gems, my picks will flourish. I am willing to wait till that happens.
4. Almost all my stocks are very reasonably valued (no Google for me!). These values give me confidence that there is a floor for them. Many of my stocks have forward PEs of low teens and even single digits. There is only so much that they can go down.
5. US Economy is in real danger of getting into a recession in near future. This will bleed the markets and there would be pain. I am sure that in spite of my quality portfolio - the pain will spread to me. But then - these are the best buying opportunities. I am willing to wait till the recession hits and leaves. Most recessions are less than 4-6 quarters - so a wait of 3 years to recover all my investments and get incremental returns on all my buying on the down ride. Not bad!!
My Portfolio
So now that I have professed my confidence in my portfolio - what is my current portfolio. Here are my main holdings. I am buying each of these stocks at every available opportunity: AMD, CAT, CX, FTE, HMC, IBN, SCSS, STX, TNE, TTM, TTMI and UL.
My Dream Stock
The one stock I am most excited about is Tata Motors (TTM). I have worked in this company, I have followed it for more than decade now - and I know this market inside out. And - in my opinion - the current PE of 13, with forward PE of 12 is a steal!! The current decline from 22 levels to 15-16 levels present an excellent buying opportunity and I am buying big time. A PEG of 0.66!!
TTM is the market leader in one of the fastest growing commercial vehicles market! It owns that market with more than two thirds market share with hardly any challenger in sight. TTM's foray into the passenger car market was successful beyond expectation and TTM is now the third largest car maker in India. Now, the recent push to make the world's cheapest car is going to thrust into a position of cost leadership all across the developing world. Look at this Forbes story (hosted on Rediff) for the magnitude and importance of this project. I am convinced that if anyone can pull off making a modern car for $2500 - TTM can. When this product finally hits market - TTM will skyrocket. On the other hand, even if that project fails, the commercial vehicle and mainstream car volumes are enough to justify current valuations. So - buy on.
From the Forbes article, here is a comparison of previous low cost leaders in automobiles:
Think about where the next big push in automobile sales volumes will come from - its not US Japan or Europe - these markets will likely contract in coming decade. The future of car market is in China, India and the rest of the developing world. This market is crying for a low cost car - and Tatas will give them one.Labels: Investing
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