Shesa's MARCH 2015 INVESTMENT BLOG

            15 March 2015

March 2015 Investment Blog

Shesa Nayak  

U.S. Stock Market Commentary

Hello and Welcome to my March investment blog.

The DOW Jones closed last Friday at 17,749.31, S&P 500 closed at 2053.40 and NASDAQ closed at 4,871.76 points. After 15 long years, NASDAQ composite went past 5,000 points on March 2^nd. Last time, it was in the year 2000 when NASDAQ went past this level. However, it’s yet to close with the all-time high of 5,048.62. Please note that the intra-day high was 5,132.52 on 10^th March 2000. However, it looks like it is within the striking distance of its all-time high (non-inflation adjusted). However, the Dow and S&P 500 are now negative for the year. Plunging oil prices and dollar making new 12 years high are the big reasons behind the stock market slump.

NASDAQ hits 5000, what next? Stock market has become more volatile. Obviously, when market moves higher the risk also goes up. It’s important to note how different the index has become and what kinds of companies are now leading the benchmark? If we recall, in year 2000, Cisco, Microsoft, and Intel were the top components. They are still within top 10 but Apple, Google, Facebook etc. are playing as game changer in this arena. Only Apple occupies roughly about 15% of the NASDAQ. I feel that NASDAQ will surpass all time high later this year. But as I said on my JAN blog, this year we can experience more volatile market. It can be noted that 80% of the time there is bull market and 20% of the time market goes through bear cycle. Hence it’s better to remain invested. But when required, we should be able to react quickly to the changing market situation. Let’s take a look to the metrics that I gathered from Circleblack with respect to S&P recovery period from its bear cycle:

• Great Recession: 2008-2009: took 2 Years for recovery
• Dotcom bubble (2000-05): 5 Years for recovery
• 1970 Recession: 3 years
• Great Depression (1930s): 7 years 

Why did the Stock market pull back in last few days?

Here are a few reasons that I can attribute to:

• Dollar hit a record 12-year high against the Euro that pulling down all commodity sectors (Oil, Gold, Silver, Copper etc.)
• U.S. stocks slipped on concern that Federal Reserve would begin to raise U.S. interest rates due to strengthening economy and low unemployment.
• Q4 earnings season is over. Earnings were good but nothing spectacular
• US Stock market DOW; S&P 500 did hit all-time high. NASDAQ went past 5000 after 15 years  

Is it time to Invest in India and China?

Yes, I feel so. The Indian stock markets have been going up since Narendra Modi government took over. There has been terrific economic growth and lower inflation in India. In contrast, China’s GDP growth has been slowing since past couple of years. India has been chasing Chinese economy. We can see the GDP comparison in the table below.

	2015 projected	2014	2013
India	8.50%	7.4% expected	5%
China	7% (revised)	7.40%	7.70%

However, the inflation rate has been coming down for both the countries. Thanks to the lower gas price. In addition, both these countries are lowering interest rate. In contrast, the US GDP growth is projected to be 2.5% for 2015. U.S. Federal Reserve is expected to increase interest rate in the foreseeable future. Usually, when the interest rate comes down with lower inflation the stock market tends to do well. Hence it may be time to look beyond U.S. market. As a matter of fact, I do have 3 new additions to my blog portfolio this month and two of those belong to India and China.

iShares MSCI India (INDA)

This Index is a free float adjusted mkt capitalization weighted Index designed to measure the performance of equity of companies whose mkt capitalization represents the top 85% of companies in the Indian securities market. The companies primarily include energy, financial & information technology sector. Some of the top holdings are Infosys, HDFC, Reliance, ITC, SBI, L&T, Hind Unilever etc. The performance of INDA:  

Year-to-date	1 Year	3 Year
11.75%	38.85	9.42

There are also other ETF such as INDY and IFN. Those are good funds too. But form market index point of view this is the biggest one and more steady. It has Net Asset of $2.99 billion and has more liquidity. Hence I prefer this one. I have invested in other funds too. But at this point, those will not be part of my blog portfolio. INDA is near its 52 weeks high.  But I believe to take a position and then keep accumulating over a period of time in a phased manner. I will avoid buying all at once. Current NAV: $31.94.

Deutsche X-trackers Harvest CSI300 CHN A (ASHR)

 The CSI 300 Index is designed to reflect the price fluctuation and performance of the China A-share market and is composed of the 300 largest stocks in the China A-share market. ASHR seeks investment results that correspond to the performance of the CSI 300 Index. Rather than investing in any specific stock this could be safer way to go and get suitable return to invest in Chinese market. It has 52 weeks return of 57.98%. But other than that we do not have more data to support. It has Net Asset of $1.05 Billion. There are also other ETFs such as FXI, PEK etc. But I feel this is better among the lot. This fund is also trading at around its 52 week high. But it may be time to keep accumulating some shares over a period of time in a phased manner. As I said, I will avoid buying all at once. Current NAV: $36.66

United States Oil ETF (USO)

I have been talking about Oil ETF since last couple of months but finally decided to add it to my blog portfolio. There is still lot of negativity surrounding oil and oil industries, particularly strong US dollar and higher oil supply. As I wrote in my FEB blog, there are still a lot of inventories due to higher oil production by US oil companies, Libya, Iraq etc. Also, the world economy particularly Europe, Japan, Russia and China are still struggling. Friday oil was trading $44.84 per barrel. Despite all these gloomy situations, I think it’s time to take some position in the oil sector. Why do I think so? Here are the reasons:

• Summer is coming which should increase consumer demand.
• The oil companies are shutting down some Oil rigs due to oversupply and lower gas price. This should gradually reduce the supply.
• Oil drilling field lose about 10% of the oil exploration each year
• Tremendous amount of negativity surrounding commodity

Visualizing above factors, I have started adding some ETFs to my portfolio and one of them is USO. This fund seeks to reflect the performance of the spot price of West Texas Intermediate (WTI) crude oil. It invests in futures contracts for WTI crude oil, other types of crude oil, heating oil, gasoline those are traded on exchanges. If we look to the performance it shows lot of negatives. Despite that fact, why do I add it to my blog portfolio? Since it invests in futures it has a greater chance to recover fast and provide better return. This is little aggressive and may not be treated a long term investment but certainly it’s good for trading for short/long term. Currently, it’s trading at $16.80. It may be time to keep accumulating some shares over a period of time in a phased manner. I already possess some and will keep adding with further correction.  Please note that recovery on oil price may take time and hence it needs patience. If you have a long-term perspective then it may be time to pull the trigger. More on oil; stay tuned for my next blog!

Blog Portfolio:

Equity	Suggested Price (USD)	Current Price (USD)	Suggested Date	% Changes	My Opinion (see disclaimer)
STOCK
AAPL	56.12	123.59	1/25/13	120%	BUY
BIDU	86.43	204.45	4/18/13	137%	BUY
GOGO	14	20.07	9/1/13	43%	BUY
SLW	22	18.85	10/1/13	-14%	HOLD - see update
FB	47	78.05	11/13/13	66%	HOLD
TSLA	135	188.68	11/13/13	40%	HOLD
AGNC	18.02	21.14	12/14/13	17%	BUY
MA	78.7	87.75	12/12/13	11%	BUY
NLY	9.52	10.5	2/2/14	10%	BUY
KO	37.33	39.91	3/9/14	7%	BUY
KNDI	19.4	13.23	3/9/14	-31.8%	BUY
AMZN	311.73	370.58	4/12/14	19%	BUY
BAC	14.64	16.09	5/11/14	10%	BUY
BX	33.33	37.95	8/24/14	14%	HOLD
VIPS	22.68	25.64	11/23/14	13%	BUY
GILD	102.21	99.61	1/11/15	-3%	BUY
ALNY	89.1	113.57	2/6/15	27%	BUY (took some profit)
ETF
GDX	27	18.07	4/1/13	-33%	HOLD - see update
NUGT	27.38	9.31	9/21/14	-66%	HOLD - see update
IYT	158.94	160.97	1/11/15	1%	BUY
INDA	31.94	31.94	3/15/15	0%	NEW - BUY
ASHR	36.66	36.66	3/15/15	0%	NEW - BUY
USO	16.8	16.8	3/15/15	0%	NEW - BUY
MUTUAL FUND
FBIOX	124	259.76	3/1/13	109%	Accumulate
PRHSX	55.17	76.69	2/2/14	39%	Accumulate
FSCHX	141.21	150.34	4/12/14	6%	BUY
FSCRX	27.3	30.15	10/25/14	10%	BUY
GASFX	29.71	28.73	12/20/14	-3%	BUY
PRMTX	63.52	66.38	12/20/14	5%	BUY
FHKCX	30.52	30.96	2/8/15	1%	TOP BUY
** DIV are included in suggested Price after end of the year. Hence price is adjusted.

Apple update (AAPL): Apple Watch: The Apple Watch will be available for pre-order beginning on April 10. Apple will also begin allowing customers to test the device in its retail stores on that date. Apple Watch Sport will cost $349 for the 38mm model and $399 for the 42mm model, the stainless steel Apple Watch will range between $549 to $1099, and the 18-karat gold Apple Watch Edition will cost between $10,000 to $17,000. There was also rumor that Apple will start manufacturing electric car in next few years! Though it’s a rumor at this point, I think it could be mostly true. Only time will tell, let’s see..

Update on NUGT, GDX and SLW: The commodities sector has been hit very hard due to strong dollar. Dollar has hit 12 years high against Euro. When dollar value goes up commodities values goes down as those are measured against dollar. As a matter of fact, NUGT, GDX and SLW that are part of my blog portfolio have also gone down. Particularly, NUGT has gone down significantly. It’s obviously little worrying. But I am waiting for bounce to get rid of these positions. Hopefully, it may happen in next few weeks/months.  You may be aware that, in the last budget presented by Govt. of India, now who has gold in bank can earn interest. Secondly, those who do not want to buy physical gold can buy gold bond and that can be withdrawn with the face value of gold trading at the time. These are very positive news for gold. Stay tuned!

Bank Of America (BAC): All U.S. banks passed the Federal Reserve’s annual stress test on March 11. Most of the banks passed the test except Bank Of America who was told of deficiencies in its internal controls and revenue modeling. This test aims to see if major banks can withstand another financial collapse. This is not good news for BOA. However, the company has declared that it will keep the current dividend and authorizes to buy $4 billion of its stock. I am not too concerned and hopeful that it’s still a good stock to won.

Economy News to watch next week (week 02/16/15)

Monday: Industrial Production

Tuesday: Housing Starts and Building Permits

Thursday: Initial Claims for Unemployment

Thursday: Index of Leading Economic Indicators

Also you can go to the following URL for more updates:

http://www.marketwatch.com/Economy-Politics/Calendars/Economic

Source: Marketwatch.com

That’s all for today. Wish you good investing! Stay tuned for my April 2015 blog. Thanks for your time. If you want to get alert on my action then please subscribe to shesagroup_invest@googlegroups.com. Please feel free to send me your comments and suggestions or alert request to shesa.nayak@gmail.com

Disclaimer: This blog is meant to provide my personal opinion rather than professional recommendation to buy/sell any stock, ETF, mutual fund or any other security(s). As an investor, it’s your hard earned money and you decide what is best for you. The above are merely my own opinions. Please contact a professional money manager to buy/sell any security. I do not earn any commission by writing the blog. I have position(s) on whatever security I write on my blog and avoid recommending any security that I do not own or follow.

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