Saturday, November 10, 2012

Companies that I should have invested in.

Here is a list of companies I should have invested in, some five years back, if I wanted to have the millionaire life. (NASDAQ)

1. Activision
2. Nvidia
3. Netflix
4. Apple
5. Coach (The handbag manufacturer)

Closer to India, here are some of the firms, I wish I had invested in.

1. Mindtree
2. Godrej Consumer goods products limited.
3. Bharat Petroleum Corporation Limited
4. Hindustan Unilever Limited
5. Bank of Baroda
6. Bajaj Auto Limited

Now, if I were to invest somewhere between $5000 to $10000 in the companies listed on the NASDAQ, my earnings would have been in the range of $10000 to a maximum of $100000.

Similarly, if I were to invest in the Bombay Stock Exchange, in the stocks listed above, I would have earned nearly two times to as much as ten times the amount invested.

The reason I decided to write this post is this, to identify a pattern in the companies listed in the NASDAQ and the companies listed in the BSE/NSE.

Of the NASDAQ listed companies:
1. Four are California based companies
2. Five are technology companies, primarily dealing with e-commerce engines, computer hardware software.
3. There aren't too many lifestyle brands, or consumer products with the exception of Apple and Coach. But since Apple comes under technology, we can assume that a consumer durable company is Coach. And it was founded in New York in the 40s.

Of the BSE/NSE listed companies
1. Five out of my wishlist of six companies are old powerhouses.
2. Five out of six companies are old companies, offering banking, utilities, consumer goods among other things.
3. With the exception of Mindtree, none of the other IT companies have been able to really pull it off since 2008.

The reason I present such a comparison is this, India is a developing nation, and the demand of consumer durable goods will only increase. This might be a good time to invest in companies which produce such goods. Utilities demand will only go on increasing, hence that would be a good area to bet on. Infrastructure has always been a good bet, so I haven't mentioned it here.

In the US, start ups which offer something niche would be the best area to invest in at the moment. Standard run off the mill products might not be good places to invest in. But companies which are innovating new technology that is touted to be the next big thing needs to be measured with certain amount of care. It is a high risk market, but the returns if you place your bets right are outstanding.

The important thing I have learnt by observing such things are the following:
1. When investing in companies in the US, the stakes are high, and you need to have a certain amount of buffer to absorb the shocks which are to be anticipated. But if one were to honestly believe in the stocks and the companies, and hold on to the stocks, it can reap rich dividends. All the investor has to do is to hold on patiently for the P/E ratio to be phenomenal before selling.

2. When investing in the India, do what the herd does. The returns might not be great, but you will get a steady profit. In a sentiment driven market, you can't really take chances, and here is where you have to invest smart. Spread your risks, and ideally invest 5-8% of your money in start ups and relatively new companies.

And such trends, I think will continue in the future. At least for the next five to six years.

Tuesday, November 6, 2012

Search Engine Optimization

SEO, or Search Engine Optimization seems to be the latest buzzword in the world of Internet Marketing. If you don't do it, you are leagues behind the rat race.

The objective is to look at SEO, and what role it plays in the whole publicity dynamics of companies who are looking to reach out to a greater audience.

Have you googled something you are looking to buy from Amazon and found the first three links coming up as sponsored links? Most probably you have.

Well this is because these companies paid google to have their results come up first based on the string that you entered in the search box.

Now this tactic is quite fascinating. And quite scary if you stop to look at the flip side of such a thing.

Typically, what happens when you are searching via google or any other search engine is you log in with your credentials to make opening your mailbox or your facebook page easier.

The servers then maintain something called as analytic data against your username. They profile the users based on the web searches, your profile likes and dislikes.

The companies then pay these companies to analyze the data and create grids of users who might be interested in a specific set of products. They create profiles also known as clones. To elucidate, consider this example.

A and B are two individuals who are online "window" shoppers.They both look at multiple sites for rates of a similar kind of camera which they are planning to buy. They add the camera to their "wishlist".

Now the analytics engine records the data and stores it.

A company XYZ, is planning to start selling the same model of the camera but wants to reach out to a maximum number of online shoppers in quick time.

It approaches the search analytics company and gets the users information, on who might be interested. So that when A and B (now clones, since they are searching for a similar kind of camera) now search for the camera in the internet, they get a bunch of advertisements from XYZ which says they are selling the camera.

That is SEO for you.

Now I'd like to see what this holds for us mere mortals in the future.

This paves the way for a pressing moral question. Who decides what data the analytics firm can share with the companies! Because if we are private people, we do not want strangers to look at our browsing "profiles" and come up with schemes to woo us.

I feel, yes, this is something which makes a lot of financial sense, especially for start ups who do not wish to invest in quality market research. But it puts the customers at serious risk. Because most of our lives are spent online one way or the other, our privacy is our prime concern.

Now that is something to ponder about.

US Elections and what it means to me

I am not an American citizen, and I don't see myself becoming one in the near future.

So, to a casual observer, who gets elected as president hardly matters.

But to me, it does. There are things that it holds in store which can have rather far reaching consequences.

For instance, before Mr. Obama came into power in 2008, the IT scene in India was quite good, and Infosys stocks, an Indian IT bellwether, were at $57 a piece at the NASDAQ. As soon as he came into power, the stocks plummeted to $23. That is an almost 60% drop in share value.

Needless to say all companies followed suit. And it spawned what we now recall as the recession of 2009. Which co-incided with the Lehmann Brothers declaring itself bankrupt. The ripple effects are something which we still face today. It brought to light several crucial aspects of the global and especially American economy that would not only affect the USA but also India.

Lets rewind the clock to 2004, before Mr. Obama, Mr. Bush was re-elected to power. Let me go by the Infosys stock prices in the NASDAQ. The stock prices were low, at $21 per unit, but as soon as Mr. Bush got re-elected to power, the stock prices climbed steadily and reached $35 by 2005 which is a 66% increase. What followed was a period of prosperity for the global economy.

What I am basically trying to say here is, that the Indian economy though has strong fundamentals, and is capable of surviving a global crisis is sentiment driven. And, contrary to what people might think, is affected by who is in power in the US.

How does that affect me? Well, it's quite simple. It determines inflation, the cost of fuel, the cost of electricity, the chances of me going to the US for a visit among other things.

Now, the point of the blog, how does the future look?

We perhaps as an economy should focus on self sustenance and core sectors. The inflow of FDI in retail does come in with its own share of ups and downs. By encouraging FDI we are bringing in more money into the economy, but are also making ourselves more vulnerable to external variables, such as the American stock markets, and presidential polls, and American policies.

India needs to start perhaps with agriculture and infrastructure. If a nation is eating right, and eating well, more than half our troubles are solved.

If India has good roads, good transportation systems, and good connectivity, India can mobilize resources more efficiently and quickly.

How do we start with all this? Or how do we better the approaches taken so far?

Its quite simple. For all this we need to invest in education. Why you might ask and I would say, awareness.

The first step towards self sustenance is awareness. Aware of ones flaws, strengths, opportunities and threats, one would be able to assess the situation much better and plan a much better tomorrow.