The Dividend Dogs

As on 26/09/2004

Small-cap: City Union Bank, Bajaj Auto Finance, Infomedia India, Sirpur Paper and Vardhman Polytex. The dividend yield of these stocks ranges between 6.2 and 6.7 per cent.

Mid-cap: Chambal Fertilisers, ICI India, Bongaigaon Refineries, Kochi Refineries and Bank of India. The dividend yield ranges between 6.5 and 7.4 per cent.

Large-cap: HPCL, Hindustan Lever, Indian Oil, BPCL and Hero Honda. The dividend yield ranges between 4.5 and 5 per cent.

Deadpresident's Tradepicks

Trade on Jain Irrigation Systems - you can also buy for a short term target of 99-105. Keep a stop loss of 87.

Trading Psychology: Knowing Yourself Is Key

Michael J. Mauboussin offers great advice to avoid the dreaded market despair:

Knowing yourself means understanding how you’re likely to behave under various circumstances. Over the past couple of decades, behavioral finance researchers have developed a clearer understanding of the psychological traps investors fall in. The best way for you to avoid these traps is to become aware of them, the forms they take, and which you are most likely to fall into.

Here are five common pitfalls:

• Over-confidence. Researchers have found that people consistently overrate their abilities, knowledge, and skill—especially in areas outside of their expertise. Investors must seek and weigh qualityfeedback and stay within their circle of competence.
• Anchoring and adjusting. In considering a decision, we often give disproportionate weight to the first information we receive, hence anchoring our subsequent thoughts. You can mitigate this risk by seeking information from a variety of sources and viewing various perspectives.
• Improper framing. The decisions of investors are affected by how a problem, or set of circumstances, is presented. Even the same problem framed in different, and objectively equal, ways can cause people to make different choices. Framing, too, plays a central role in assessing probabilities.
• Irrational escalation of a commitment. Investors tend to make choices that justify past decisions, even when circumstances change. To avoid this trap, investors must only consider future costs and benefits.
• Confirmation trap. Investors tend to seek out information that supports their existing point of view while avoiding information that contradicts their opinion. Psychologist Thane Pittman’s slip of tongue sums it up: “I’ll see it when I believe it.”

You must also understand how you tend to react under stress. People with different personality profiles behave in dissimilar ways when stressed. Here again, self-awareness and some basic techniques to offset suboptimal behavior go a long way. Pearson declares, “A gambler’s ace is his ability to think clearly under stress. That’s very important, because, you see, fear is the basis of all mankind....That’s life. Everything’s mental in life.”

IPOs in 2005

Public issues set to hit the market in 2005
Oil & Natural Gas Corp	10000.00
Reliance Infocomm	10000.00
Gujarat State Petroeum Corp	4000.00
Tata Teleservices	2500.00
Life Insurance Corp Of India	2000.00
Hutchison Max Telecom	2000.00
Tata Sons	2000.00
Bank Of Baroda	1500.00
Oriental Bank Of Commerce	1500.00
Jet Airways	1500.00
Power Finance Corp	1300.00
Punjab National Bank	1230.00
Videsh Sanchar Nigam	1000.00
Infrastructure Develop. Fin. Co.	1000.00
HDFC Bank	900.00
Idea Cellular	650.00
Power Grid Corp	500.00
Allahabad Bank	500.00
BPL Communications	500.00
Fortis Healthcare	500.00
Haldia Petrochemicals	457.00
IBS Software Services	450.00
Rural Electrification Corp	400.00
Telecommunications Consultants India	400.00
Central Bank Of India	400.00
GMR Energy	400.00
Jaiprakash Hydro Power	350.00
Indian Bank	300.00
WeP Peripherals	300.00
Yes Bank	300.00
Gujarat NRE Coke	250.00
Dena Bank	216.00
Emami	200.00
Syndicate Bank	200.00
Set India	200.00
Allied Computer International (Asia)	200.00
Sify	200.00
Shoppers' Stop	150.00
UTV Software Communications	150.00
Mahanagar Gas	150.00
Punjab & Sind Bank	150.00
IL&FS Investmart	150.00
IVRCL Infrastructure & Projects	150.00
Andhra Bank	140.00
Amar Remedies	100.00
Bank Of India	100.00
AB Corp	100.00
Musicworld Entertainment	100.00
Sasken Communication Technologies	100.00
CMS Computers	100.00
Shantha Biotechnics	100.00
Bajaj Hindusthan	100.00
The list includes only companies which have announced the issue size and those with issue size above Rs 100 crore. Source: Prime Database

Sourced from the Business Standard - Full article here

Deadpresident's Tradepicks

Visualsoft Technologies - showing tremendous strength over a very volatile last week. You might want to trade on it as well as take delivery for short to medium term. Also, apparent rumor that they got a big order from Motorola. Keep a strict stop loss of 120.

The New Convergence Paradigm

This article appeared on Business Today Jan 16 2005 Issue as a part of INDIA IN 2020

Gives us a peek into what the man is thinking and what Reliance is planning to do and is doing.

The New Convergence Paradigm

By Mukesh Ambani, Chairman and Managing Director/ Reliance Industries Limited

We are in a world of convergence brought about not just by technology, but also by the process of globalisation, by the sharing of information and by the fusion of knowledge domains. The manifestations of convergence therefore go beyond the confines of products to people, practices, ideas and even ideologies.

Globalisation-led convergence promotes collaborations, information-led convergence enables connectivity, technology-led convergence stimulates creativity and knowledge-led convergence builds competencies.

Globalisation is inducing greater collaboration and convergence across borders. The pressure to increase efficiency and productivity is forcing companies to collaborate like never before. In manufacturing, different components of the production process are being located in different places of competitive advantage. In research, an explosion of knowledge and greater specialisation is forcing science-based collaboration. In business, a move to standardise common business processes is improving efficiency and productivity. In new initiatives, increasing risks are entailing strategic alliances for risk mitigation.

The ubiquity of global communications is forging new communities bonded by common goals and interests. The concept of the nation state is slowly getting obscure, with bilateral and multilateral trading blocs, greater migration of professionals across borders and increasing acceptance of dual citizenship. Greater global scrutiny is questioning the concept of sovereignty as a right to do whatever a government likes to do within its borders.

Technology represents, by far, the most tangible and dramatic manifestation of convergence to create new ways of living.

Genomics, molecular biology and bioinformatics are converging in nutritional genomics to create smart foods. An understanding of how genes, proteins and nutrients interact at the cell level is helping determine which types of foods cause what kinds of diseases in order to prevent them with altered diets and lifestyles.

Globalisation-led convergence promotes collaborations, information-led convergence enables connectivity, tech-led convergence stimulates creativity and knowledge-led convergence builds competencies

Embedded sensors and optic communications are coming together to create smart shirts. Undershirts made with conventional textile material, but embedded with optic fibres and sensors connected to a wearable data transmitter, and linked wirelessly to any receiving device, can help monitor body functions on a real-time remote basis or be used in medical and military applications.

Networking and automation technologies are uniting to create smart homes. Semiconductors and sensors connected to household devices can help us talk to our refrigerators, program microwaves, control washing machines, alter lighting and air-conditioning systems, and see who is knocking at the door-all from our cell phones-remotely and while on the move.

Mobile phones are integrating with other devices to enable smart working-global positioning systems to pinpoint a person's location, cameras to enable remote observation of a person's environs, sensors to enable remote monitoring of a person's body functions, and electronic pens to capture and convey a person's written word.

Materials science is intersecting with information and communication technologies to create smart products ranging from electronic paper to the electronic pen.

The coming together of the internet and wireless communications is leading to an information-led convergence. The internet is getting to be more about connecting people to people than connecting people to portals and web sites. It is taking the form of a network of identities and relationships that transcend corporate or national affiliations.

At one plane, the creation of new communities is coming about by associations of shared interests and goals, brought together in the virtual world. At another plane, new social networking software are coming into vogue, which are mining web traffic and looking for new relationships to acquire customers. They are also helping analyse patterns of behaviour among existing communities to help improve the value of relationships through, for example, higher sales. Social networking software is also optimising the organisation of social interactions. This is taking the form of shared purchases and unified articulation of issues.

Wireless technologies are forcing their way into more and more sectors. Today, wireless is used mainly to move information. In the future, it would be used to promote collaboration.
For businesses, convergence is an opportunity to enter new domains, improve productivity, expand collaborations, enhance capabilities and, above all, help transform humanity

Knowledge-led convergence is creating new competencies. For example, the marriage of digital technology with the art of illusion is opening endless opportunities for the world of entertainment. So far, different forms of entertainment-music, radio, movies and television-were offered through distinct devices and different settings. Digital entertainment is converging them to one platform in the virtual world. Not only that, it is bringing the same platform to games, education and healthcare. This convergence is creating new domains such as animation, gaming, edutainment and virtual tourism.

In a similar vein, knowledge-led convergence is bringing about the emergence of several new domains-geomatics, precision farming, molecular electronics, tissue informatics-to name a few.

Reliance is an enterprise driven by larger opportunities in the marketplace. Reliance Infocomm has been conceived to play on the convergence of information technology and communications. It is founded on the power of information and communications to transform Indian society. It is engaged in bringing about a digital revolution-led convergence of information, communication, education and entertainment.

The wireless platform offers Reliance an opportunity to converge transactions in retailing, financial services, capital markets, entertainment, travel and a host of other sectors for all participants. Equally, it helps collaborations among people brought together by common goals or interests. r-school, an interactive platform for teachers, parents and students on the wireless platform, is a case in point. With the rollout of broadband in the ensuing future, Reliance would have created a new platform for collaboration among businesses and people.

Reliance is working towards converging several energy forms-from petroleum products, natural gas, coal bed methane to electricity-at the consumer level in the form of common systems and processes. Eventually, this will include financial and information and communication services as well.

Reliance is an enterprise known for its international competitiveness. Convergence technologies are helping improve competitiveness by raising productivity and enhancing reach in manufacturing and in the supply chain. Global positioning based fleet management systems have helped better logistics management across all businesses. Information technology-enabled automation systems in the petroleum retailing business are helping improve customer care and gross retailing margins. Likewise, 3d seismic imaging has significantly helped improve discovery efforts in the upstream oil and gas business.

Globalisation offers Reliance an opportunity to converge markets and collaborate across borders. The acquisition of Trevira in Germany, coupled with a relationship with DuPont, is helping converge global research in polyester with Reliance in India. In a similar perspective, the acquisition of Flag Telecom is helping integrate information and communications markets overseas with the Reliance network in India.

The impact of convergence, in diverse fields and settings, can be far-reaching. Convergence will diffuse boundaries. Convergence will enhance human abilities. Convergence will bring out new consumer complexities. Above all, convergence will make societies clever.

For businesses, convergence is an opportunity to enter new domains, improve productivity, expand collaborations, enhance capabilities and, above all, help transform humanity.

Market Term - Rule of Eighteen

This rule applies to the DOW Jones Industrial average and so it can be skewed a little bit for the emerging markets. Also, the fact to be taken into consideration is that DOW just has old economy stocks and no tech stocks.

Basically, this rule states that sum of Inflation and P/E of the Index determines how the stock market should move. If its greater than 18, then the stock market moves down, if its less than 18, the stock market will move up.

When Fear and Greed Take Over

There is an old saying that the market is driven by just two emotions: fear and greed. Although this is an oversimplication, it can often be true. Succumbing to these emotions can have a profound and detrimental effect on investors’ portfolios and the stock market.

In the investing world, one often hears about the juxtaposition between value investing and growth investing and although understanding these two strategies is fundamental to building a personal investment strategy, it is as important to understand the influence of fear and greed on the financial markets.

There are countless books and various courses devoted to this topic. Here our goal is to demonstrate what happens when an investor gets overwhelmed by one or both of these emotions.

Greed’s Influence

So often investors get caught up in greed ("excessive desire"). After all, most of us have a desire to acquire as much wealth as possible in the shortest amount of time.

The Internet boom of the late 1990s is a perfect example. At the time it seemed all an advisor had to do was simply pitch any investment with a ".com" at the end of it, and investors leaped at the opportunity. Buying activity in Internet-related stocks, many just start-ups, reached a fever pitch. Investors got greedy, fueling further greed and leading to securities being grossly overpriced, which created a bubble. It burst in mid-2000 and kept leading indices depressed through 2001.

This get-rich-quick mentality makes it hard to maintain gains and keep to a strict investment plan over the long term, especially amid such a frenzy, or as Federal Reserve Chairman Alan Greenspan put it, the "irrational exuberance" of the overall market. It’s times like these when it is crucial to maintain an even keel and stick to the basic fundamentals of investing, such as maintaining a long-term horizon, dollar-cost averaging and avoiding getting swept up in the latest craze.

A Lesson From "The Oracle Of Omaha"

It would be remiss to discuss the topic of not getting caught up in the latest craze without mentioning
a very successful investor who stuck to his strategy and profited greatly. Warren Buffett showed us just how important and beneficial it is to stick to a plan in times like the dotcom boom. Buffett was once heavily criticizeed for refusing to invest in high-flying tech stocks. But once the tech bubble burst, his critics were silenced. Buffett stuck with what he was comfortable with: his long-term plan. By avoiding the dominant market emotion of the time, greed, he was able to avoid the losses felt by those hit by the bust.

Fear's Influence

Just as the market can become overwhelmed with greed, the same can happen with fear ("an unpleasant, often strong emotion, of anticipation or awareness of danger"). When stocks suffer large losses for a sustained period, the overall market can become more fearful of sustaining further losses. But being too fearful can be just as costly as being too greedy.

Just as greed dominated the market during the dotcom boom, the same can be said of the prevalence of fear following its bust. In a bid to stem their losses, investors quickly moved out of the equity (stock) markets in search of less risky buys. Money poured into money market securities, stable value funds and principal-protected funds--all low-risk and low-return securities. In fact 2002 saw the largest amount of outflows, about US$40 billion, from the equity markets since 1988, a year after one of the worst stock market crashes in history, and a record $140 billion flowed into the bond market.

This mass exodus out of the stock market shows a complete disregard for a long-term investing plan based on fundamentals. Investors threw their plans out the window because they were scared, overrun by a fear of sustaining further losses. Granted, losing a large portion of your equity portfolio’s worth is a tough pill to swallow, but even harder to digest is the thought that the new instruments that initially received the inflows have very little chance of ever rebuilding that wealth.

Just as scrapping your investment plan to hop on the latest get-rich-quick investment can tear a large hole in your portfolio, so too can getting swept up in the prevailing fear of the overall market by switching to low-risk, low-return investments.

The Importance of Comfort Level

All of this talk of fear and greed relates to the volatility inherent in the stock market. When investors lose their comfort level due to losses or market instability, they become vulnerable to these emotions, often resulting in very costly mistakes.

Avoid getting swept up in the dominant market sentiment of the day, which can be driven by a mentality of fear and/or greed, and stick to the basic fundamentals of investing. It is also important to choose a suitable asset-allocation mix. For example, if you are an extremely risk-averse person, you are likely to be more susceptible to being overrun by the fear dominating the market and therefore your exposure to equity securities should not be as great as those who can tolerate more risk.

Buffet was once quoted as saying, “Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.”

Easier Said Than Done

Keep in mind this isn’t as easy as it sounds. There’s a fine line between controlling your emotions and being just plain stubborn. Remember also to re-evaluate your investment strategy and allow yourself to be flexible to a point, and remain rational when making decisions to change your plan of action.

Conclusion

You are the final decision-maker for your portfolio and thus responsible for any gains or losses in your investments. Sticking to sound investment decisions while controlling your emotions, whether it be greed or fear, and not blindly following market sentiment is crucial to successful investing and maintaining your long-term strategy. But beware: never wavering from an investment strategy during times of high emotions in the market can also spell disaster. It’s a balancing act that requires you to keep your wits about you.

Article sourced from Investopedia

Stock Tips: A Big Waste of Your Time and Money

We all get stock tips and we dont think twice before giving one or two ourselves too. This article now will probably end the visitors to this site :-) and the tip asking/giving on messageboards. You must remember that the tips/recommendations on this site should not be taken for granted.

From the famous turtletrader.com ( a must visit site - if you already haven't, go there now ! ). This is another and weird way of looking at the market. So the mantra is buy when its going up and sell when its going down. Simple isn't it ? So, enjoy the reading.

In the last few years the majority of the general public seems to have accepted online stock chat rooms as somehow useful. Some of the over-hyped chat boards and news services include:

• CBS MarketWatch
• The Street
• Motley Fool
• Raging Bull
• Silicon Investor

Let us be blunt. Imagine you are at Motley Fool and you receive a stock tip. You now know it is time to buy whatever the tip is. Big problem here now. When do you sell? How much do you buy? Of course, the tipsters never try to answer these questions. Stock tips are kissing cousins to the ever-popular lottery tickets. They might feel good, but stock tips are for losers (just like lottery tickets).

For example, the stock market crash painfully proved the worthlessness of stock tips. No tip predicted the NASDAQ crash. How in the world could an opinion of some anonymous message poster, that only knows how to yell BUY, ever be useful?

Trend Following trading does not attempt to predict the market. We couldn’t care less what a company does or what its new economy potential might be. It does not matter what a company's business plan is or even whether they have a potential to make money. When you trade properly, your only concern is price. If the price is going up you buy. If it's going down you sell. Don’t waste your time trying to determine the potential of a company. And don’t waste your time looking for tips on chat boards. You will only lose money if you go down the stock tip path.

The comments section is open for some screaming ;-)

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Bhavin's Numbertalk -Nava Bharat Ferro Alloys

Nava Bharat Ferro Alloys trades currently at 343.8 and has Book Value of Rs. 127.6. Buy with a Target of 500

Support
350 and 310

Resistance
375, 390 and 425

Recommendation
Uptrend to resume.

E.P.S for last year
41.88

P/E Ratio
8.20

E.P.S for last two quarter
57.03


Bhavin Mehta lives in Mumbai and can be contacted at bhavin_mht(at)yahoo.com

Valueresearchonline Learning Centre

Learn about mutual funds - very impressive and informative at Valueresearch Online Learning Centre

Markets: Follow the fundamentals!

After a tumultuous 2004 that saw the Indian stock markets crash from their historically high levels (mid-May) only to create history as the year moved towards its close, there has been growing apprehension in investors' minds whether this rally would continue into 2005.

Before moving any further, let us take a note of key reasons that led to the rally in 2004 and the factors that might determine the fate of the same in 2005.

Liquidity was one of the biggest factors helping the markets to sustain high levels of a considerable period of time in 2005. This liquidity was spurred by huge FII inflows that followed the Indian growth story. The depreciation of the US dollar against the rupee under pressure from a huge US current account deficit played a major role in this depreciation of the dollar. One might wonder that, as against expectations that the rise in US interest rates will lead to FIIs diverting their money back to the relatively safer US T-bills and bonds, nothing of that sort has actually happened.

What more, FII activity has heightened during the second half of the year. One important reason for this is the fact that despite the rise in US federal funds' rates (2% currently), the real interest rate (adjusted for inflation of around 4%) is still a negative 2%. This means that it is still beneficial for US investors to borrow at negative rates and invest in attractive emerging market equities and debt.

Now, the looming danger of rising inflation in the US economy spurred by a slide in the value of the dollar might, thus, be an important factor that Indian investors need to keep in mind. Fears of inflation rising out of proportion might lead to the Fed raising interest rates 'faster than anticipated'. And this might then lead to the much-touted FII inflows to reverse their flow towards the US.

Now, apart from this big 'negative' there are some (positive) factors that are likely to continue to help the cause of Indian markets in 2005. Key amongst these are -

1. The reform orientation of the incumbent government

2. Strong credit-offtake from the non-farm sector

3. Improving 'measurable' risk-taking capacity of India Inc.

4. Lowering of trade barriers across nations

5. Rising internal demand for goods and services

All in all, while 2005 might witness a continuation of the trend that was witnessed in 2004 with respect to strong growth across sectors and robust FII inflows, we believe that just banking on the latter to take the markets to new highs is fraught with risks. Over the long term, even FIIs will chase fundamentals (read, earnings growth).

Courtesy : Equitymaster Newsletter

Deadpresident's Valuepicks

Buy Bharat Electronics - good company with many defence projects. Will be doing/announcing some interesting projects in near term.

Deadpresident's Valuepicks

Strong Buy for Nava Bharat Ferro Alloys - and hold for medium to long term. Very strong financials and a good business to be in the current year. Very impressive list of clients and well diversified company.