Shesa's JUNE 2015 INVESTMENT BLOG

            14 June 2015

JUNE 2015 Investment Blog

Shesa Nayak  

U.S. Stock Market Commentary

Hello friends. Welcome to my monthly investment blog. Let’s take a quick look to the U.S. Stock Market Indexes.

The DOW Jones Industrial closed last Friday at 17,898.84, S&P 500 closed at 2094.11 and NASDAQ closed at 5051.10 points. U.S. Stock market has been going up and down for last several weeks and not really making any significant progress. The market looks lethargic and not many volumes are exchanging hands. If we see the indexes then they have not gone anywhere barring NASDAQ. For example, DOW is UP: .003%, S&P: .016% and NASDAQ is up .066% since the beginning of this year. It seems investors are in the sideline and not too keen on the market volatility. There is no market correction at this point but there seem to be sectorial rotation of money from one sector to another.

Important Economy News

• In last few weeks the main news is about Greece. Earlier this week the stock market zoomed up with the expectation that Greece has reached to a settlement on its financial crisis. However, on Thursday, the International Monetary Fund (IMF) stopped its bailout talks in exasperation that Greece may not implement the pension and other reforms that its creditors are demanding. In other words, the IMF is trying to pressure Greece into implementing pension and wage reforms. Moreover, it looks like IMF and Greece haven't made much progress to reach an agreement, so there are concerns that a deal won't be reached. As such, market turned into negative territory for the week. Eurozone finance ministers will meet coming Thursday, 6/18 in Luxembourg. That meeting is now viewed as the deadline for a decision on Greece’s fate. Let’s wait and see...
• On other economy news, producer price index (PPI) saw the biggest monthly gain in five years in May. The Index climbed 0.5% month-over-month versus expected 0.4%.
• On June 2, Reserve Bank of India cut .25% interest rate. This month I will discuss about Indian stock market little extensively. So let’ go straight there.

Why do I think India as an Investment Opportunity?

As we know, India is an emerging economy and has ample opportunity for growth. Let me try to put those facts in a brief and understandable fashion. First of all let me discuss the negatives and positives of Indian stock markets. 

Negatives:

• March quarter earnings were anemic and many companies did not able to meet the higher expectations. Hence, the valuations was on little higher side causing market to slide
• On June 2^nd, the Reserve Bank of India (RBI) cut .25% its key interest rate and met market expectations. However, the governor indicated that it might have done with monetary easing. Obviously, market did not like this news
• The threat of a weak monsoon and lingering doubts about an economic recovery this year have made investors nervous
• Prime Minister Narendra Modi‘s government failed to pass the landmark land acquisition and GST tax bill at the spring Parliamentary session casting doubt over people’s mind about his popularity
• China market keeps going up as Chinese Government keeps cutting rate. That’s drawing international liquidity away from India.

Positives:

• Despite the hiccups India’s long-term growth story has remained intact. India currently has 7.3% year-over-year GDP growth and it has surpassed that of China. It looks like the Investors overlook the likelihood that India economic growth expected to remain about 100 basis points higher than China’s in the next decade
• Foreign investment in India has picked up since the Modi government was sworn in last year, though it still remains low comparing to other countries. It provides a better chance for future growth. The prime minister’s visit to foreign countries and opening many sectors to foreign investors is a step in right direction
• Growing and powerful Indian middle class can contribute to growth not only for more income but also more consumption. About 60% of Indian GDP is consumed domestically and 40% is exported whereas only 40% is consumed in China and 60% is exported. Thus India has lot of opportunities to export
• The Indian stock market is down more than 5%, Bombay Stock Exchange (BSE) is almost about 1500 points lower comparing to start of the year. This provides a good entry point for investment

My final thought: Undoubtedly, there are many negatives and positives for the Indian market. But that’s true for any market in the world. Whether we see glass and half full or half empty depends on the perception. If we see U.S. stock market, it’s at all time high wherein GDP growth has stalled. For this year the expectation is U.S. will have 2-2.5% GDP growth. In fact, last quarter there was negative GDP growth. If we factor the foreseeable future then India can be a better bet for investment. Hence, today I am adding another very good mutual fund that caters Indian Stock Market. Let’s discuss about that…

Matthews India Investor (MINDX)

The Matthews India Fund, seeks to achieve its investment objective by investing at least 80% of its total assets in publicly traded common stocks, preferred stocks and convertible securities of companies located in India. The Fund seeks to invest in companies capable of sustainable growth based on the fundamentals. Some of the major holders in this fund are HDFC Bank, ITC Limited, Congizant, Emami Ltd, Kotak Mahendra etc.

Why do I like this fund?

As I said above, India market has lot of growth potential and a great emerging economy. That’s the reason I am emphasizing on this market. On my previous blogs I have included INDA, INCO and IBN as part of my blog portfolio. MINDX has been performing very well. If we want to take benefit of possible Indian growth then it’s one of the very good funds. It carries 4 star rating from Fidelity and has a strong buy Rating from Zacks investment research. Also, the fund is currently trading around 12% low from its 52 week high.

The minimum investment for this fund is $2500 and subsequent investment is $250. I have already invested in the fund and keep accumulating with further pullback.

Let’s look at the fund’s performance as of 5/31/2015:

	Year-to-date	1 Year	3 Year	5 Year	Life of Fund
MINDX	4.42%	37.07%	27.62%	11.89%	13.95%

NAV: 27.63.     NTF: No Transaction Fee.

Fund Inception:  10|31|2005   

Morningstar Rating:  ****

Minimum Investment: $2500

Load: No Load and No Transaction Fee.

Expense Ratio: 1.12% (LOW)

Beta: 0.91 è Risk: This is almost same volatile with the market move

Fund Managers: Sunil Asnani since 10/29/2010 and Sharat Shroff since 6/26/06.

Note: This fund is managed by Mathew International located on 4, Embarcadero Center, Ste. 550, San Francisco, CA.

SouFun Holdings Ltd. (SFUN)

SouFun Holdings Limited is a real estate Internet portal and home furnishing and improvement website in China. SouFun obtains its advertisements from online real estate advertisers. It has built a large and active community of users who are attracted by the comprehensive real estate, home furnishing and improvement content available on its portal which form the foundation of the Company's service offerings. SouFun Holdings Limited is headquartered in Beijing, China.

Why do I like this Stock?

As I have written on many of my previous blogs, China has been aggressively cutting interest rate and marching ahead with its monetary easing program for last several months. It would continue to do so going forward. Also the Chinese government is opening the door for foreign investors. As a matter of fact, China stock market has been attracting enormous foreign investments. The Shanghai stock market has gone up almost 60% in 2015. So, is the Chinese market in bubble? I do not think so. Wherever, there has been quantities easing the markets have hit new highs. For example, USA, Japan, Germany, UK, Australia etc.  Please note that China market had all time high of about 5960 points in 2007. It means that, it has further potential to grow another 12-15%. Coming back to SFUN, it’s a real estate company. When interest rate cut takes place, the real estate business tends to do well as people have more affordability to buy real estate. This stock has gone up about 30% since the beginning of the month and the time I bought. However, it is still trading around 20% below its 52 weeks high. So I do not think it’s too late to get invested. I have already bought the stock and keep adding with any correction. I always prefer to buy such volatile stock in a phased manner to mitigate risk. Now let’s analyze the fundamentals:

Market Cap: $4.1 Billion

Revenue: $705.11 million

Profit: 217.8 million

Earnings Per Share (EPS): $0.49

PE Ratio: 20.24

Forward PE: 23.23

Institutional Holding: 53.3%

Return on Equity (ROE): 42.2%

Total Cash: 667.72 million

Risks: Chinese stocks are highly volatile. There accounting method is different than U.S. standards.  Also, we do not have exact visibility of their fundamentals. Hence these are little risky. So I would not invest more than 2-4% of my portfolio value. I personally feel that it is worth getting invested in this stock. But it is extremely important to take profit or cut-down losses on such equity whenever required. We must have risk mitigation strategy before buying such stock.

Company Updates

Apple Inc. (AAPL): Apple organized its WWDC 2015 in San Francisco Moscone center from June 8-12. Some of the key announcements Apple made were related to

OS X 10.11: El Capitan, iOS9, Apple Pay, WatchOS for Apple watch, Apple Music etc. Meanwhile, Analysts are expecting that Apple watch is selling better than expected.

Vipshop Holdings Limited (VIPS): There were some law suit against VIPS that the company is exaggerating it’s revenue and that its report for US ADR is different than what it’s reporting in China. But this is not a concern for me cause the reporting process in China and USA is different as each country has its own rules and regulations. If I feel concern then I will send flash alert to my shesagroup_invest google group.

Direxion Daily Gold Miners Bull 3X ETF (NUGT): Despite a major loss on this I am still holding this ETF with patience. I still think that there would be a bounce in the Gold market by end of the year or early next year. These are more of trading rather than investing. So it could have been better to cut-down the losses earlier and move on. However, I have been reading some news that China is coming up with a new currency in October time frame that can be used for global trading like USD, Euro, Yen and British Pound. If that happens that could be very helpful for Gold. I may write more details on this sometime in future.

Blog Portfolio

SOLD IYT: Off late, the transportation sector has not been doing well. For last few months it has not gone anywhere but down. Hence I have SOLD my IYT positions and took 6% loss. One of the key reasons is that Oil prices have gone up and that’s not good for transportation industry. If a sector does not perform well then there is no point of being invested and incur more losses. If anybody wants to hold it then that’s OK but it will not be part of my Blog portfolio going forward. If situation changes, I may re-visit again.

Equity	Suggested Price (USD)	Current Price (USD)	Suggested Date	% Changes	My Opinion (see disclaimer)
STOCK
AAPL	56.12	127.17	1/25/13	127%	BUY
BIDU	86.43	207.6	4/18/13	140%	HOLD
GOGO	14	22.08	9/1/13	58%	BUY
SLW	22	18.36	10/1/13	-17%	HOLD
FB	47	81.53	11/13/13	73%	HOLD
TSLA	135	250.11	11/13/13	85%	HOLD
AGNC	18.02	20.11	12/14/13	12%	BUY
MA	78.7	93.77	12/12/13	19%	BUY
NLY	9.52	9.93	2/2/14	4%	BUY
KO	37.33	39.96	3/9/14	7%	HOLD
AMZN	311.73	429.92	4/12/14	38%	BUY
BAC	14.64	17.49	5/11/14	19%	BUY
BX	33.33	42.5	8/24/14	28%	HOLD
VIPS	22.68	25.35	11/23/14	12%	BUY
GILD	102.21	117.66	1/11/15	15%	BUY
ALNY	89.1	130.28	2/6/15	46%	BUY
IBN	10.5	9.8	4/12/15	-7%	BUY
CIM	15.9	14.48	4/12/15	-9%	BUY
SFUN	9.95	9.95	6/14/15	0%	NEW BUY
ETF (Exchange Traded Fund)
GDX	27	18.55	4/1/13	-31%	HOLD
NUGT	27.38	9.37	9/21/14	-66%	HOLD**
IYT	158.94	148.96	1/11/15	-6%	SOLD @148.96
INDA	31.94	28.57	3/15/15	-11%	BUY
ASHR	36.66	55.17	3/15/15	50%	BUY
USO	16.8	20.27	3/15/15	21%	HOLD
INCO	34.46	32.15	5/15/15	-7%	STRONG BUY
MUTUAL FUND
FBIOX	124	262.36	3/1/13	112%	Accumulate
PRHSX	55.17	80.49	2/2/14	46%	Accumulate
FSCHX	141.21	148.68	4/12/14	5%	BUY
FSCRX	27.3	29.78	10/25/14	9%	BUY
GASFX	29.71	28.56	12/20/14	-4%	HOLD
PRMTX	63.52	70.18	12/20/14	10%	BUY
FHKCX	30.52	38.59	2/8/15	26%	Accumulate
MINDX	26.94	26.94	6/14/15	0%	NEW BUY (TOP)
** DIV are included in suggested Price after end of the year. Hence price is adjusted.

Major Economy News to watch next week (week 05/15/15)

Monday: Industrial Production

Tuesday: Housing Starts, Building permit

Wednesday: Initial Claims for Unemployment

Thursday: Consumer Price Index (CPI)

Friday: 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 JULY 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.

Note: Click on Blog archives to read all my Blogs and updates.