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.

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