Shesa's NOVEMBER 2015 INVESTMENT BLOG
15 Nov 2015
NOVEMBER 2015 Investment Blog
Shesa Nayak
Two Years of my Investment Blog!
Hello friends, welcome
to my monthly investment blog. This month, I
complete two years of publishing my blog. I hope that it has been
informative and helpful for the readers. I am not finance professional per se
but have a long background in finance and stock market for over 20 years. Please
suggest me how I can enrich this blog to make it more interesting and
informative for you. Thanks for your
continued support!
U.S. Stock Market Commentary
The
stock market remains volatile. The market may continued to remain volatile due
to the terrorist attack in Paris last Friday night where more than hundred
people were dead and several hundreds got injured. It was a horrendous act. Our
prayer goes to all those families. This incident could cause panic and
uncertainty in the stock market. Keep an eye on the stock market tomorrow, it
could take a hit. We have to be very watchful on the market going forward. If
we see the market indexes (see below) then Dow and S&P 500 have already
turned negative for the year.
|
U.S Indexes
|
2-Jan-15
|
Friday Close
|
Year-to-Date Change
|
YTD % Change
|
|
DOW Jones
|
17823.07
|
17,245.24
|
-577.83
|
-3.24
|
|
S&P 500
|
2058.9
|
2023.04
|
-35.86
|
-1.74
|
|
NASDAQ
|
4736.05
|
4,927.88
|
191.83
|
4.05
|
Key Economy News
- Unemployment Rate: In October U.S. employers added 271,000 workers to nonfarm payrolls blowing past the 185,000 jobs projected by the economists.
- Retails Sales: The retail sales were up a modest 0.1 percent last month against forecast of 0.3 percent.
- Producer price index: Fell 0.4 percent last month after dropping 0.5 percent in September. No sign of inflation yet!
- Interest Rate increase may happen in DEC 2015? The future market indicates that there are about 70% chances of fed increasing interest rate in their next meeting scheduled for DEC 15-16. The strong job report for October has pushed the probability of rate hike very high. Despite the fact that many of those jobs could be seasonal Federal Reserve could still hike the interest rate in December. But the Paris incident and chaotic situation could change the whole scenario. In case, interest rate is hiked then market could take a hit but it may bounce back. Therefore we may see some rally towards the end of the year. Let’s wait and see how it goes.
Is bull market finally over?
I do not think that bull market is over. However, I do not anticipate a
huge return. Hence, it’s better to keep a lower expectation and be happy to
beat the market. Let’s see my analysis below:
- Despite the fear of increase in interest rate it must be noted that we are in best 6 months of the Market (Nov 1 – April 30). These six months combined have produced an average Dow Jones gain of 7.5% since 1950 compared to an average gain of just 0.4% during the months May to October. Visualizing this market pattern, there is a saying in Wall Street that “Sell in May” and go away. This year, June, July, August and September had a lack luster performance in the stock market. During the best 6 months, Biotech, Consumer discretionary, transportation, and technology sector usually do well. But please keep in mind that consumer sectors have been beaten for last few days.
- We are in the pre-election wherein market tends to do well and generate positive returns. We have discussed in my previous blogs. Hence I would not like to elaborate more on this.
- On the corporate earnings, about 71% of companies have beaten earnings because of lower earnings expectations and just 44% surpassed revenue estimates. According to factset, the expected revenue decline would be about 3.7% for Q3.
Will Indian
economy reform be derailed?
Narendra
Modi government’s NDA party has been losing many Indian state elections off
late. Will this impact the economy
reform in India? I think so, let’s analyze:
Obviously, Investors would
have been very happy with NDA win as the party has to improve its strength in
the Upper House. The government’s weak position has created major roadblocks
for Mr. Modi to get some of the critical reforms push ahead. His vision is on
the right track but needs political support.
Are Chinese equities still a good investment?
- I may be wrong but I think so. Otherwise I could have removed those equities from my blog portfolio. Sometime investing needs patience.
- Chinese government’s next five-year plan has been outlined in the closed-door meeting but it’s yet to be published! It may happen soon. Let’s wait and see.
- There is a possibility that Chinese currency Yuen could be included as SDR by IMF in next
- few weeks. At this point, it’s still a speculation but probability is high.
Strong dollar continues to hurt around the World
The strong dollar
continues to hurt primarily the Emerging Markets, Corporate America and the
Commodity Sector.
The U.S. Dollar Index, which measures the dollar versus the reserve-currencies
such as, Euro, Japanese yen, British pound etc. is up nearly 10% so far only in
2015. Why is it happening? The economic conditions in the United States seem to
be better than other economy in the world. At this point, there is belief that
dollar is the safe heaven even comparing to gold despite the fact that
trillions of dollars have gone on quantitative easing! Since June, the Fed has
been indicating that net exports have been "soft". A typical currency
war continues and only time can tell where we land…In my view, some precious
metals in the portfolio is advisable as we do not know when the dollar can take
a U-turn on the freeway…Now let’s see this month’s inclusion to my Blog
Portfolio.
iShares MSCI Emerging Markets (EEM)
EEM is an Exchange Traded Fund. It tracks
the investment results of the MSCI Emerging Markets Index. The index is
composed of large/mid cap emerging market equities. Usually the fund invests at
least 90% of its assets in the index.
Challenges: As we know emerging markets are not really doing
well at this moment. China was growing almost double the current GDP few years
ago. Off late, GDP growth is just about 6.5%. China
was a huge buyer of emerging markets commodities. When China economy cooled off
who consumes those goods being produced by emerging markets? China is the 2nd
largest economy in the world. So when it sneezes, emerging markets often get
the flu. Another major challenge is that of Debt. When U.S. stock market
collapsed in 2008-09, the government printed trillions of dollars and landed
those to the emerging markets cheaply. This cheap money attracted a lot of
emerging markets and the debt level ballooned from about $4 trillion to $18
trillion. Now that U.S dollar has been
going up and up it’s becoming very difficult for the emerging markets to repay
their debt because they have to pay much more for the loan despite the fact
that they are selling less goods. And that is the main problem!
Why do I like
this fund? With all the above challenges why do I still like
this fund? The top 6 countries in the EEM are China, Korea, Taiwan, India,
South Africa and Brazil. India and China mostly have local customers and do not
depend much on export. China is also trying to become a consumer driven
economy. Manufacturers in S.Korea and Taiwan are benefited because of low raw
material prices. Also, the low commodities prices are helping India, China and
other nations to have low gas prices and lower inflation. IMF estimates that
emerging markets can grow at 4.2% comparing to U.S. GDP of about 2.5%. There
could be currency reversal and when that happens it would help all these
countries. Emerging markets contain 3/4 of the world’s land mass and nearly 85%
of the people. The middle-class populations in the countries like India and
China are growing fast and making a strong consumer base. For example, Alibaba sold $14.3 billion
worth of goods in a single day on 11/11/15 comparing to U.S Cyber Monday sales
of just $1.3 billion. That’s the power of consumers!! The
items that are necessity in developed nations like housing, automobiles,
healthcare, credit cards, computers, cellphones, and insurance gradually becomes
the necessity of emerging markets. Also, the countries like India, China,
Brazil etc. are not going to let Western firms just come in and pick all the
low-hanging fruits! If the developed nations want to reap the benefit of EM
growth than they have to be part of it. Emerging market equities currently sell
for just 10 times prospective earnings for the next 12 months. U.S. stocks sell
for over 15 times prospective earnings. In other words, U.S. stocks are 50%
more expensive than emerging market stocks. Add to that, Emerging Markets have
much better growth rate viz. China 6.5%, India 7% GDP growth and so on.
Investment
Performance: Last 5 years were not great for
EEM. If you see the performance then one can find negative return. However, since
its inception, it has returned 11.5% beating S&P 500 despite all these
negatives. The
fund’s expense ratio is less than 0.7%. It may still take some time before the
emerging market start growing again. Moreover, this is an investment for
long-term. I would certainly not buy all the shares at one go. I have invested
a small amount now keep accumulating over a period of time. This is advisable
for the philosophy of investing with patience. Currently, it’ trading at
$33.54 and has 2.4% yield. I think
there could be an opportunity to buy below $33.
Risks:
There is still further chance that the fund may come down if the market remains
sluggish and U.S. dollar remains strong. At this point, emerging markets are
still in disarray but this can be a first step in that direction for long haul.
Market changes very first and we should be prepared to adapt to that, whether
good or bad!
Blog Portfolio
|
Equity
|
Suggested Price (USD)
|
Current Price (USD)
|
Suggested Date
|
% Changes
|
My Opinion (see disclaimer)
|
|
STOCK
|
|||||
|
56.12
|
112.34
|
1/25/13
|
100%
|
BUY
|
|
|
86.43
|
193.95
|
4/18/13
|
124%
|
HOLD
|
|
|
14
|
15.54
|
9/1/13
|
11%
|
HOLD
|
|
|
22
|
12.4
|
10/1/13
|
-44%
|
HOLD
|
|
|
47
|
97.54
|
11/13/13
|
108%
|
HOLD
|
|
|
135
|
207.19
|
11/13/13
|
53%
|
HOLD
|
|
|
16.54
|
17.88
|
12/14/13
|
8%
|
SOLD on 10/30
|
|
|
78.7
|
96.86
|
12/12/13
|
23%
|
HOLD
|
|
|
8.92
|
9.57
|
2/2/14
|
7%
|
BUY
|
|
|
311.73
|
642.35
|
4/12/14
|
106%
|
HOLD
|
|
|
14.64
|
17.2
|
5/11/14
|
17%
|
HOLD
|
|
|
33.33
|
30.61
|
8/24/14
|
-8%
|
HOLD
|
|
|
22.68
|
13.6
|
11/23/14
|
-40%
|
HOLD**
|
|
|
102.21
|
102.57
|
1/11/15
|
0%
|
BUY
|
|
|
89.1
|
102.57
|
2/6/15
|
15%
|
BUY
|
|
|
10.5
|
7.81
|
4/12/15
|
-26%
|
HOLD
|
|
|
9.95
|
7.57
|
6/14/15
|
-24%
|
BUY
|
|
|
3.4
|
3.19
|
7/17/15
|
-6%
|
BUY
|
|
|
80.91
|
71.2
|
8/16/15
|
-12%
|
HOLD
|
|
|
MO
|
52.59
|
56.28
|
9/13/15
|
7%
|
BUY
|
|
ETF
|
|||||
|
27
|
13.61
|
4/1/13
|
-50%
|
BUY
|
|
|
270
|
25.51
|
9/21/14
|
-91%
|
Ready to Sell
|
|
|
31.94
|
26.9
|
3/15/15
|
-16%
|
HOLD
|
|
|
36.66
|
36.18
|
3/15/15
|
-1%
|
BUY
|
|
|
16.8
|
13.06
|
3/15/15
|
-22%
|
HOLD
|
|
|
INCO
|
34.46
|
31.12
|
5/15/15
|
-10%
|
HOLD
|
|
139.39
|
120.89
|
8/16/15
|
-13%
|
HOLD
|
|
|
78.36
|
77.73
|
8/16/15
|
-1%
|
HOLD
|
|
|
69.71
|
69.84
|
10/18/15
|
0%
|
BUY
|
|
|
33
|
33.54
|
11/15/15
|
0%
|
NEW BUY (below $33)
|
|
|
MUTUAL FUND
|
|||||
|
117.73
|
236.86
|
3/1/13
|
101%
|
Accumulate
|
|
|
55.17
|
72.9
|
2/2/14
|
32%
|
HOLD
(Trim)
|
|
|
137.34
|
135.86
|
4/12/14
|
-1%
|
HOLD
|
|
|
27.3
|
27.67
|
10/25/14
|
1%
|
HOLD
|
|
|
28.51
|
25.98
|
12/20/14
|
-9%
|
HOLD
|
|
|
63.52
|
72.57
|
12/20/14
|
14%
|
HOLD
|
|
|
30.52
|
29.34
|
2/8/15
|
-4%
|
HOLD
|
|
|
MINDX
|
26.94
|
26.19
|
6/14/15
|
-3%
|
BUY
|
|
** VIPS rating may change
after its earnings on TUE, 11/17.
|
|||||
Company Updates
VIPS stumbled 27% after it declared preliminary result on Friday. It
reduced Q3 guidance to RMB 8.6-8.7 billion from RMB 9.1-9.3 billion, below the
consensus of RMB 9.3 billion. The company said that warmer-than-expected
fall weather in China caused customers to delay purchases. VIPS will report its
actual earning coming Tuesday, 11/17/15 after market close. It
dropped 27%. My rating may change after the earnings announcement. I still feel
it’s a very good stock. <HOLD>.
AAPL: Apple's net income rose to $11.12 billion, or $1.96 per
share, in the fourth quarter, up from $8.47 billion or $1.42 per share, a year
earlier. Revenue rose about 22 percent to $51.50
billion. Analysts had expected a profit of
$1.88 per share and revenue of $51.11 billion. Apple forecast revenue between
$75.5 billion and $77.5 billion for next quarter. < BUY>.
GILD: Gilead said net income rose to
$4.6 billion, or $3.06 per share, up from $2.7 billion, or $1.67 per share, a
year earlier. EPS came to $3.22. <
BUY >.
FB: Earnings per share came in at 57 cents, while revenue came in
at $4.5 billion. The analysts expected earnings of 52 cents. It saw a big
bump in daily active mobile users to 894 million in the month of September,
rising 27 percent from the same time a year earlier. I am not too excited at this price. <HOLD>
TSLA: Reported EPS of $0.58 on adjusted revenues
of $1.24 billion. In the same period a year ago, the company reported adjusted
earnings per share (EPS) of $0.02 on revenues of $932.35 million. <HOLD >
BUDU: Revenue rose 36% to 18.4 billion yuan,
or $2.89 billion, in line with street expectations. Earnings per share came in
at $1.43, ahead of street consensus of $1.24.
< HOLD >
MA: MasterCard reported net income
of $1.03 billion, up from $1.02 billion in the same period a year ago. It
earned EPS of 91 cents excluding that one-time charge, compared with 87 cents a
share a year earlier. < HOLD >
AMZN: Amazon reported earnings of $79 million or $0.17 per share against the Analyst
expectations of 13 cents. Revenue came in $25.4 billion, up 24% from same
period last year. Its revenue guidance for the next quarter is in the range of
$33.50 billion to $36.75 billion. <HOLD>.
NUGT: I will be prepared to sell it any time before the end of the year
and take capital loss and move on. Am
still waiting with patience to see some bounce back before the end of the year.
But I can pull the trigger any time.
Major Economic Report next week (week 11/16/15)
Tuesday: Industrial Production
Wednesday: Housing Starts and
Building Permits
Thursday: Initial Claims for
Unemployment, leading indicators
Also you can go to the following URL for more
updates:
Source: Marketwatch.com
That’s all for today. Wish you good
investing! Stay tuned for my DEC 2015 blog. As I said earlier, I may get little
late in publishing my next month’s blog. Thanks for your time. If you want to
get alert on my action then please subscribe to shesagroup_invest@googlegroups.com. Also, 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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