Shesa's MARCH 2016 INVESTMENT BLOG

        20 March 2016

MARCH 2016 Investment Blog

Shesa Nayak

U.S. Stock Market Commentary: The stock markets have bounced back nicely and all the indexes have erased their losses for this year except NASDAQ. Particularly, the commodity sector has out-performed all other sectors causing the market to recover. This is a great relief for the investors. Can this trend going to continue further? We will discuss further later on. First let’s take a look to Market Indexes.  

U.S. Indexes	4-Jan 2016	Friday Close	Year-to-date change	YTD % Change	52 Week High	Change from 52 Week High (%)
DOW	17425.03	17602.3	177.27	1.02	18351.4	-4.08
S&P 500	2043.94	2049.58	5.64	0.28	2134.72	-3.99
NASDAQ	5007.41	4695.65	-311.76	-6.23	5231.94	-10.25

Economic Reports

We got many economic report this week on Retail Sales, PPI, CPI, building permits, industrial production, FOMC announcement, weekly jobless claims, and so on. Most of these reports were in-line or better than projected. For more details these reports can be found at the following location:

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

Source: Marketwatch.com.

Fed left Interest Rate unchanged

I have been writing on my blogs Fed is not going to hike interest rate in the foreseeable future. On Wednesday, 3/16, the Federal Open Market Committee's (FOMC) said that they decided not to raise rates during this month's meeting and left the rate unchanged between 0.25% and 0.5%. The committee told that they are still expecting to raise interest rates twice this year, in contrast to previous forecast of estimated four rate increases. There are still lots of uncertainties in the global economy despite the fact that domestic U.S. labor market and housing sector are doing better, it’s not enough to pressure the Fed into reversing their current stance. After the news the stock market around the globe reacted positively as market now sees less rate hikes than expected earlier.

Why is the market rallied in last few weeks? Is it going to continue?

If we analyze the economic data then U.S. stock market does not seem to be in a terrible state. In addition, concerns about China are beginning to die off. Europe, Japan and emerging markets have been bouncing back. Japan and Europe have gone to negative interest rates. Oil prices have shown signs of life over the past few weeks as the rig counts declined and a possible production freeze by OPEC member countries. As a matter of fact, oil recently surpassed $40 per barrel for the first time in months. Strangely, recent trend shows to have correlation between oil price and stock market. When oil price went up, the U.S market and other markets around the world also went up! Oil went as high as $41.20 per barrel on Friday before closing at $39.30. A few days ago Gold went as high as $1288 and closed this week at $1257.10. Please note that, the precious metals are on track for one of its best starts to a year since 1980. In my last blog I wrote that I would be a buyer with caution. Moreover, I found a very interesting analysis in CNBC. I am putting some analysis below for my readers benefit. Please see how the market behaved after the gold prices went up 10%+ in one quarter since 1990.

6 months after Gold jumped 10%+ in one quarter (Source CNBC.com).

Note: Bought at quarter end and sold after 6 months.

S&P 500	+7.4%
DOW	+5.9%
NASDAQ	+12.62%
Russell 2000	+12.18%

Best Sectors - 6 months after Gold jumped 10%+ in one quarter

Energy  (S&P 500)	+7.4%
Materials (S&P 500)	+5.9%
IT (S&P 500)	+12.62%
Consumer Discretionary (S&P 500)	+12.18%

Other Stock Markets - 6 months after Gold jumped 10%+ in one quarter

Hang Seng	+13.12%
Nikkei	+8.77%
DAX (German Index)	+11.51%
EURO Stoxx 50	+6.95%

Gold is already shinning. If history is any evidence then it’s time for equity to shine. Please note that, this is just a statistical analysis. But how far this rally will continue can’t be predicted. We are in the best six months period of the market. Next month we will start seeing earnings release from U.S. corporates. My guess is that, market may continue to be volatile. Thus, buying the right sectors, right stock and taking profit whenever required are of paramount importance. Visualizing the uptick in commodities prices, earnings from these companies/sector should look better, resulting a better earning for the overall market. Hence it could be bullish for the stock market. Only time can tell how it will play. Stay tuned.. Now let’s discuss about the mutual fund that I am including in my blog portfolio.

As the name indicates it is a Fidelity Mutual Fund. It normally invests at least 80% of assets in securities of companies principally engaged in providing information technology services. The fund invests in domestic as well as foreign issuers though majority of its holding are domestic (U.S.) companies.

Why do I like this fund? The IT sector in general keeps performing well under different condition. If the above analysis of 10% increase in gold in one quarter goes right then IT is one of leading sector that should perform well in next few months. The fund (FBSOX) invests in companies with market capitalization of over 10 billion that fund manager(s) believe to have the potential for growth. This is one of the best performing mutual fund that I find in IT services side which provides diversification to technology segment. The major holdings of this fund are Visa, Master Card, Cognizant, Accenture, PayPal, and Fidelity National. As far as performance is concerned, it has almost exceeded 75% better return comparing to S&P 500 over a period of 10 years. It has low expense and high return. Unless market tanks terribly, this is a mutual fund that we can hold for long term and expect a very good rate of return. The current NAV of the funs is $38.78 and 52 week high of $42.08. So, we get only around 8% discount now. As such, it’s better to buy some now and keep accumulating over a period of time. I have already invested in this fund since last few years and keep accumulating.  But when a fund grows larger it’s a better to re-balance whenever required. Now let’s see the performance below:

FBSOX performance as of 2/29/2016:

	1 Year	3 Year	5 Year	10 Year	Life of Fund
FBSOX	-0.59%	16.11%	14.70%	12.35%	11.59% (Since 1998)
S&P 500	-6.19%	10.75%	10.13%	6.44%	3.50%

NAV: $38.78.     NTF: No Transaction Fee in Fidelity. Please check your brokerage.

Net Asset: $1.9 billion

Fund Inception:  2/4/1998   

Morningstar Rating:  ***** (5 Star)

Minimum Investment: $2500.00

Load: No Load and No Transaction Fee in Fidelity.

Expense Ratio: 0.81% (LOW)

Beta: 0.94 è Risk: This is little less volatile than the market move.

Fund Managers: Kyle Weaver since 2/1/2009, Daniel C Sherwood since 10/1/2015.

Risks: The mutual fund invests in stock. If the overall stock market does not perform well, fund’s major holdings do not perform, sector does not perform well then ultimately the fund performance will be impacted. If that happens then we should re-visit our allocation. But as it stands I believe that this fund is a winner.

India and China market: A couple of weeks ago China presented their 5-year plan. They did not elaborate much but their emphasis will be on Innovation, growth, opening up a few sectors for foreign investment, accelerating growth of rural area, generating more employment and so on. They anticipate 6.5% GDP growth for next few years. Meanwhile, Indian GDP growth is anticipated to be 7.5% for the year. Both these markets have recovered from their lows. I believe it’s better to have some exposure to these markets despite many challenges.

Shesa’s Blog Portfolio

Equity	Suggested Price (USD)	Current Price (USD)	Suggested Date	% Changes	My Opinion (see disclaimer)
STOCK
AAPL*	54.09	105.92	1/25/13	96%	HOLD
BIDU	86.43	187.92	4/18/13	117%	HOLD
SLW*	21.8	17.78	10/1/13	-18%	BUY
FB	47	111.45	11/13/13	137%	HOLD
TSLA	135	232.74	11/13/13	72%	HOLD
MA*	78.06	92.31	12/12/13	18%	HOLD
AMZN	311.73	552.08	4/12/14	77%	HOLD
VIPS	22.68	12.29	11/23/14	-46%	HOLD
GILD*	100.92	90.27	1/11/15	-11%	HOLD
ALNY	89.1	59.8	2/6/15	-33%	HOLD
SFUN*	9.57	5.78	6/14/15	-40%	HOLD
MO*	52.03	61.54	9/13/15	18%	BUY
ILMN	171.15	150.24	1/15/16	-12%	BUY
SKX	31.88	32.94	2/21/16	3%	BUY
BABA	67.28	76.25	2/21/16	13%	BUY
ETF
GDX*	26.88	20.61	4/1/13	-23%	BUY
INDA	31.94	26.51	3/15/15	-17%	BUY
ASHR*	28.46	24.69	3/15/15	-13%	BUY
INCO	34.46	30.14	5/15/15	-13%	BUY
IHF*	139.1	120.24	8/16/15	-14%	HOLD
XLY	77.76	78.09	8/16/15	0%	BUY
PJP	69.43	58.28	10/18/15	-16%	HOLD
EEM	32.5	34.03	11/15/15	5%	BUY
MUTUAL FUND
FBIOX	117.73	161.26	3/1/13	37%	HOLD
PRHSX	55.17	59.23	2/2/14	7%	HOLD
FSCHX*	135.91	132.06	4/12/14	-3%	BUY
FSCRX	27.3	27.32	10/25/14	0%	HOLD
GASFX*	28.31	27.05	12/20/14	-4%	HOLD
PRMTX*	63.38	68.68	12/20/14	8%	Accumulate
MINDX	26.94	24.91	6/14/15	-8%	BUY
MCDFX	14.11	13.08	12/9/15	-7%	BUY
FSRPX	95.46	103.07	1/15/16	8%	BUY
FBSOX	38.78	38.78	3/20/16	0%	NEW BUY
* Indicates dividend adjusted

Positions closed in after my last blog: NONE.

Major Economic Report next week (week 3/21/16)

TIME (ET)	REPORT	PERIOD	FORECAST	PREVIOUS
MON, March 21	Existing home sales	Feb.	5.30 million	5.47 million
WED, March 23
10 A.M	New home sales	Feb.	523,000	494,00
THU, March 24
8.30 A.M	Weekly jobless claims	19-Feb	N/A	N/A
8.30 A.M	Durable goods orders	Feb.	-2.7%	4.9%
FRI, March 25
8.30 A.M	Gross domestic product (GDP)	Q4	0.8%	1.0% (Q4)

Source: Marketwatch.com. Also you can go to the following URL for more updates:

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

That’s all for today. Wish you good investing! Stay tuned for my APRIL 2016 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 and some of the information provided may not be correct. 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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