The 7 Gems you can invest in

These seven companies should see their earnings double in the next three years, which in turn should positively reflect on their respective stock prices.

The steep fall in stock valuations, the day-to-day gyrations in the market and increased uncertainties globally, have all sent shivers down the spine of domestic investors, while largely keeping foreign investors at bay.

While there aren’t any conclusive signs of market sentiments turning positive, the current scenario provides long-term investors the opportunity to take a plunge into the market and buy high-quality stocks at far cheaper valuations.

Although the current turmoil is more to do with global events and to some extent due to the fears pertaining to earnings slowdown, one can still pinpoint companies capable of delivering an earnings growth of 25-30 per cent annually for the next three years. In other words, their earnings should double over the same period.

While experts have always suggested investing in the domestic growth story including in sectors such as FMCG, retail, media, financial services (including banking), telecom, infrastructure and, oil and gas, the answer to superior returns lies in one’s ability to pick the right stocks.

A good investment would ideally be a combination of robust fundamentals, sound promoter/management, market leadership in the business (preferred), healthy growth prospects, reasonable valuations and minimum downside risk, all of which put together should help achieve above-market returns.

The Smart Investor brings to you a few of such stocks, which with the exception Reliance Petroleum (due to no past track record as it is yet to commence operations), largely meet the criteria.

The current market turmoil is only making things more attractive. Even if the market goes for a toss, their relatively high-quality characteristics should act as a cushion.

Aban Offshore
The record high crude oil prices, worldwide shortage of rigs and investments to spruce up domestic oil production will benefit Aban Offshore, which provides rigs and allied equipment to the oil and gas industry.

The company’s well-timed fleet expansion in a tight supply, high demand scenario and renewal of longer-duration contracts at higher day rates would boost earnings over the next few years.

Aban is set to add five assets (four new jack-ups and a recently acquired semi-submersible rig) between CY08 and CY09 to its existing fleet of 16 offshore assets (post the acquisition of Sinvest).

Further, the company has renewed its longer duration contracts at much higher day rates, which means higher growth in profits.

For example, its two contracts with ONGC for three years each – one commencing from March 2008 and another already commenced from December 2007 – have been renewed at $150,000 per day each as against $45,000 and $28,000-$56,000 a day respectively, reflecting a more than three-fold rise in value of contracts.

Another contract, for six years, with Oriental Oil, which commenced from October 2007, was renewed at $87,000 (as compared with $40,000). Analysts expect this kind of supply tightness to continue till CY10.

The company’s acquisition of Sinvest, gave it access to premium jack-up rigs and quicker supply of rigs, which otherwise would have taken about three years.

Thus, the expected strong operational cash-flows will help Aban bring down the huge debt on its books (high debt to equity ratio of 1.7 in FY07) and boost earnings.

Lastly, while the growth in earnings in FY09 is steep as compared with the EPS of Rs 40 for trailing 12 months, it comes on the back of a loss in FY07 (due to five-fold rise in interest costs).

Nonetheless, after adjusting for the low base effect, Aban’s expected growth in earnings is more than healthy and its future prospects continue to be good, all of which make it a good bet.

ABB
ABB, a leading player in the power equipment (transmission and distribution) and industrial automation technology businesses, reported strong growth for the year ended December 2007, wherein revenues shot up by 39 per cent to Rs 5,930 crore and order backlog was up 49 per cent at Rs 5,020 crore followed by a 100 basis points improvement in operating margins to 12.2 per cent.

Such robust growth is expected to continue and orders are expected to flow in for the next few years, given growth in the power sector (in India as well as globally) and investments in sectors such as minerals, energy, oil and gas in emerging markets, driving demand for its automation division.

The Indian power sector is expected to witness investments of Rs 6,16,300 crore during the Eleventh Plan period (ending 2012), out of which the transmission and distribution sector – the target market for ABB – is allotted Rs 1,74,300 crore.

After completing its $100 million capex and augmenting its manufacturing facilities, ABB has announced yet another investment of a similar amount, spread over the next 18 months. ABB’s parent expects the business from its Indian operations to double by 2010, which is an indication of robust growth for ABB going forward.

HDFC Bank
HDFC Bank, the second largest private bank in India, trades at a premium to other larger private and public sector banks due to its ability to sustain its superior financial track record, especially in areas such as net interest margins, return ratios, profit growth and asset quality, irrespective of the interest rate scenario.

Going forward, the bank is expected to continue its robust organic growth – 42 per cent, 40.5 per cent and 31 per cent in advances, net interest income and net profit respectively, reported in the past four years.

Its recent acquisition of the relatively smaller private bank, Centurion Bank of Punjab (CBoP), should help expand its geographical reach. Its branch network would jump by 52 per cent to 1,148 branches, ahead of its larger peer ICICI Bank, with greater concentration in northern and southern states.

HDFC Bank’s balance sheet size, total advances and total deposits will shoot up as well, by 37 per cent, 43 per cent and 43 per cent, respectively.

However, its CASA (current and savings bank account) ratio will decline from 58 per cent to 50 per cent, which will impact margins, while its overall asset quality is also expected to be impacted slightly.

However, these concerns are only short-term in nature and should be offset on account of the long-term benefits from better synergies, rationalisation of employee and branches as well lower expenditure on technology.

Also, CBoP’s dominant position in the retail (two-wheelers and cars) and SME (small and medium enterprise) segments, distribution of third-party products and substantial non-resident client base will strongly complement to that of HDFC Bank.

IDFC
Infrastructure Development Finance Company (IDFC) has been a preferred lender to infrastructure projects due to its long track record and age old association with the government in policy formulation.

However, due to pressure on margins in this wholesale financing business, IDFC has formed its strategy of stepping up its fee-based income by acquiring stakes in various businesses including brokerage firm SSKI, buyout of Standard Chartered Mutual Fund, and private equity along with debt finance and syndication opportunities.

Nevertheless, infrastructure financing would remain a key revenue stream for the next few years due to the astounding (around $500 billion) opportunity in infrastructure spending.

Moreover, with India’s economic growth still one of the highest in the world, even after the expectations of a mild slowdown, and favourable demographics (leaving more disposable income in the hands of people), the financial services industry is expected to experience buoyant times.

For example, the Indian asset management industry has grown over 40 per cent in the last four years and is expected to grow at a rapid clip in the future as well. All this suggests that IDFC is not only set to grow at more than healthy rates, but should also emerge as a formidable financial institution.

Reliance Petroleum
Apart from the promoter company, Reliance Industries (RIL), Reliance Petroleum (RPL) also offers a good investment opportunity as its 29 million metric tonne per annum (580,000 barrels per day) refinery, the world’s sixth-largest is likely to come on stream before the scheduled December 2008.

The commissioning of capacity is well timed, given that the outlook for gross refining margins (GRMs) is bullish till FY12.

Globally, refining margins are likely to remain buoyant between $5-$10 per barrel from 2008 to 2012, thanks to the huge demand-supply mismatch and the time lag of three to four years for new capacities to come on-stream.

Also, increasingly stringent environmental standards leading to demand for light and cleaner products, and thus, high prices are further strengthening the case for higher GRMs.

The company’s promoter, Reliance Industries’ gross refining margins improved by 380 basis points in nine months ended December 2007 to $14.9 a barrel, almost double of the benchmark Singapore complex margins of $7.7 a barrel. Since RPL will be able to process even complex crudes it will earn relatively high refining margins.

The key thing to look in this case is the movement of the rupee against the dollar, which is bullish, though it would be partly offset by low cost incurred by the company due to its plant location in a special economic zone, benefiting from incentives like zero duty on imports of plant and machinery and fiscal benefits like a tax holiday (no minimum alternative tax; 100 per cent for first five year followed by half that for another five years).

Titan Industries
Titan’s focus on branded products, and its strategy of capturing less penetrated market segments and catering to every income group will help it reap rich fruits.

The company is a market leader in the organised watch segment with a 40 per cent share with brands like Titan, Sonata and Fast Track. It braced up its branded jewellery business and today, its Tanishq brand enjoys a strong recall in the organised market.

Organised jewellery retailing business has a meagre share of 3-4 per cent, but with a growth of 25-30 per cent, it is expected to gain higher share, thus benefiting Titan. Further, it has rightly identified new markets with strong growth potential.

It has also entered the $450 million Indian eyewear market with its Fast Track brand and precision engineering equipment business catering to automobile, medical and aerospace industry (global size of $35 billion). It has also ventured into the Rs 2,500-3,000 crore Indian prescription eyewear business under the brand Titan Eye+.

All these indicate that Titan is set to report high revenue growth driven by its branded jewellery business and supported by new segments.

Although profitability will trail sales growth due to lower margins in the jewellery business, it is still expected to be substantial. Moreover, periodic introduction of brands and ability to identify new segments boosts confidence about the company’s prospects.

Voltas
Voltas, the engineering and air-conditioning major, is expected to gain immensely from the rising capital expenditure across sectors like retail, IT and entertainment, and higher infrastructure spending in India and other emerging markets such as West Asia.

Being the second largest player in the Indian organised heating, ventilation, and air conditioning (HVAC) market after Blue Star, the company is expected to reap benefits of immense opportunities in the air conditioning market, especially the non-residential segment, which is expected to almost triple to Rs 37,600 crore in the next five years.

Apart from HVAC, Voltas will also gain from the growth in the construction activities, which in turn throw up opportunities in the fledgling MEP (mechanical, electrical and plumbing) industry.

The company has established itself in its MEP business, which is growing at 40 per cent year-on-year, which had an order book of Rs 3,500 crore (international orders worth Rs 2,700 crore and Rs 800 crore worth of domestic orders) as on December 2007.

To its credit, the company has executed orders at nine out of the ten domestic airports, and is currently working on the upcoming international airport at Hyderabad.

The total investment of Rs 40,800 crore planned towards airports over the next five years reflects a huge market and hence, growth potential for players including Voltas and Blue Star.

Also, Voltas, which commands a 17 per cent share in the air-conditioner market, should benefit from increased consumer spending. All this put together indicate strong growth prospects for Voltas.

(Please note this is a report appeared in The Business Standard newspaper. You are at your own risk to invest in these shares. In no way, I am responsible for your decisions)

Double Your Income Doing What You Love: Raymond Aaron's Guide to Power Mentoring

Everyone wants to make more money. But many feel that to do so, they must sacrifice their lifestyle and work at a job they don't particularly like. In fact, if you're like most people, your life is likely filled with activities, obligations, and commitments that have nothing to do with your goals or your dreams, your life's mission, or the things that you love. But it doesn't have to be that way—and in this book, renowned success and investment coach Raymond Aaron explains why. Over the last twenty-four years, he has developed, tested, and refined the amazing goal-setting and goal-attaining system outlined in Double Your Income Doing What You Love.

Aaron breaks life down into six pathways, and then sets out a simple but highly effective system for you to set goals in all six categories every month. Using his MTO system, he teaches you how to set each goal at three levels—Minimum, Target, and Outrageous—so that you can always have some level of success (and often it is the Outrageous success of your dreams). As you follow his powerful system, you will find yourself beginning to achieve measurable successes, month by month. When you track your successes, you will see yourself begin to move ever closer to fully creating, and then living, the life you want—the life of your dreams.

Even if you have no idea what your life mission is, one of Aaron's processes will help you to actually identify it. You can then begin to make good decisions about who and what you want in your life, based on how they support or don't support your life's mission. You will see your life inexorably moving forward in the exact direction of your choice.

Unfortunately, most people hope for more but settle for less. Raymond Aaron offers the tools to create a designed life, a strategically organized life, and a life that delivers to you what you want. It takes courage, but it is your right if you want it. This book will help you begin your new life and achieve the success you desire.

Download this valuable brand new book for free:

http://rapidshare.com/files/99344972/Double_Your_Income.rar
(Please copy paste the above link in your browser if you are unable to click on the link).

What is Your Money Personality? Take the Test!

Like almost everything else in life, your response to money is largely dictated by your personality. But have you given much thought to how you behave in regard to your finances and how that behavior affects your bottom line? Understanding your money personality is the first step and will help you shape your approach to spending, saving and investing. So what's your money personality? Read on to find out.

What's your type?
Money personalities have been analyzed in a variety of ways and many people can identify with aspects of several profiles. They key is to find the profile that most closely matches your behavior. The major profiles are: big spenders, savers, shoppers, debtors and investors.

Big Spenders
Big spenders love nice cars, new gadgets and brand-name clothing. Big spenders aren't bargain shoppers; they are fashionable and they are looking to make a statement. This often means a desire to have the smallest cell phone, the biggest plasma TV and a beautiful home. When it comes to keeping up the Joneses, big spenders are the Joneses. They are comfortable spending money, don't fear debt and often take big risks when investing.

Savers
Savers are the exact opposite of big spenders. They turn off the lights when leaving the room, close the refrigerator door quickly to keep in the cold, shop only when necessary, and rarely make purchases with credit cards. They generally have no debts and are often viewed as cheapskates. Savers are not concerned about following the latest trends, and they derive more satisfaction from reading the interest on a bank statement than from acquiring something new. Savers are conservative by nature and don't take big risks with their investments.

Shoppers
Shoppers derive great emotional satisfaction from spending money. They often can't resist spending money, even if it's to purchase items they don't need. Shoppers are usually aware of their addiction to spending and are even concerned about the debt that it creates. They look for bargains and are pleased when they get a good deal. Shoppers will often shop to entertain themselves, even if the items they buy go unused.

Shoppers are an eclectic bunch when it comes to investing. Some invest on a regular basis through tax-saving plans and other automatic investments and may even invest a portion of any sudden windfalls such as bonuses or inheritance money, while others view investing as something they will get to later on.

Debtors
Debtors aren't trying to make a statement with their expenditures, and they don't shop to entertain or cheer themselves up. They simply don't spend much time thinking about their money and therefore don't keep tabs on what they spend and where they spend it. Debtors generally spend more than they earn and are deeply in debt and they don't put much thought into investing. Similarly, they often fail to even take advantage of the company match in their tax-saving plans.

Investors
Investors are consciously aware of money. They understand their financial situations and try to put their money to work. Regardless of their current financial standing, investors tend to seek a day when passive investments will provide sufficient income to cover all of their bills. Their actions are driven by careful decision making, and their investments reflect the need to take a certain amount of risk in pursuit of their goals.

Advice for Your Personality
Once you recognize yourself in one of these profiles and have put some thought into how you approach money, it's time to see what you can do to make the most of what you have. Sometimes making just small changes can yield big results.

Spenders: Shop a Little Less, Save a Little More
If you love to spend, you are going to keep doing it, but you should seek long-term value, not just short-term satisfaction. Before you splurge on something expensive or trendy, ask yourself how much that purchase is going to mean to you in a year. If the answer is "not much", skip the purchase. In this way, you can try to limit your spending to things you'll actually use.

When you channel your energy into saving, you have another opportunity to think long term. Look for slow and steady gains as opposed to high-risk, quick-win scenarios. If you really want to challenge yourself, consider the merits of scaling back.

Savers: Use Moderation
Ben Franklin once recommended "moderation in all things". For a saver, this is particularly good advice. Don't let all of the fun parts of life pass you by just to save a few pennies.

Tune up your savings efforts too. Pinching pennies is not enough. While minimizing risk is any investor's prime goal, minimizing risk while maximizing return is the key to investing success.

Shoppers: Don't Spend Money You Don't Have
A critical step for shoppers is to take control of their credit cards. Unchecked credit card interest can wreak havoc on your finances, so think before you spend - particularly if you need a credit card to make the purchase.

Try to focus your efforts on saving your money. Learn the philosophy behind successful savings plans and try to incorporate some of those philosophies into your own. If spending is something you use to compensate for other areas of your life that you feel are lacking, think about what these might be and work on changing them.

Debtors: Start Investing
If you are a debtor, you need to get your finances in order and set up a plan to start investing. You may not be able to do it alone, so getting some help is probably a good idea. Deciding on who will guide your investments is an important choice, so choose any investment professional carefully.

Investors: Keep Up the Good Work
Congratulations! Financially speaking, you are doing great! Keep doing what you are doing, and continue to educate yourself.

Knowledge Is Power
While you may not be able to change your personality, you can acknowledge it and address the challenges that it presents. Managing your money involves self awareness; knowing where you stand will allow you to modify your behavior to achieve your desired outcome.

Courtesy: www.forbes.com

Pour Your Heart Into It!

In 1982, Howard Schultz, the current chairman and chief global strategist of Starbucks,left his prestigious job as national sales manager for a European housewares company to join a small, Seattle-based coffee roaster and retailer. Starbucks had come to Schultz’s attention when he noticed this small business was purchasing a disproportionately large number of coffee makers from his company. When Schultz visited Seattle, he stopped to check out Starbucks and became intrigued with the possibilities. “I saw Starbucks, not for what it was but for what it could be,” he has said.

The key to Schultz’s vision was simple: create community. The idea came to him while
visiting Milan, Italy, where he observed how people gathered at their neighbourhood
espresso bars “like an extension of the front porch, an extension of the home,” he liked to say.

At Starbucks, Schultz saw a means to bring people together in America, just as espresso bars bring them together in Italy.

Unfortunately, the founders of Starbucks didn’t share Schultz’s vision and preferred to remain a coffee roaster with a small retail presence. Schultz’s belief in the idea, however, was so certain that he eventually left Starbucks in 1985 to start an espresso bar retailer.Two years later, he bought Starbucks from its owners and merged it into his small company.

Schultz, a passionate, visionary leader, went on to revolutionise coffee retailing in the US and is rapidly taking Starbucks worldwide. Howard Schultz carefully nurtured an inspiring identity for the company in the hearts and minds of employees. At first he told his story and explained in detail how Starbucks would become an oasis for people as they took time out of their increasingly busy days to stop by for a brief period to relax.

As the company grew by 1997 to more than 1,300 stores and 25,000 partners, it became impossible for Schultz to reach everyone in person. So he did the next best thing. He compiled his stories into an inspiring book entitled Pour Your Heart into It.

Pour Your Heart into It is a compelling account of the Starbucks story. Every Starbucks partner who reads it will understand Starbucks’s history and where it’s headed. The book is filled with vividly told stories,including Schultz’s vision for creating a community. By articulating his vision, he helped to transform
their work experience from one of selling coffee to a higher calling of creating communities among people.

Howard Schultz also brought human value to the Starbucks culture by paying employees well relative to other retailers, and also providing generous benefits such as health-care insurance and participation in the Starbucks stock option plan.

Schultz increased knowledge flow in the Starbucks culture by making it everyone’s responsibility to share their ideas about how to continuously improve the business. Schultz also presented a very approachable persona that made people comfortable that it was safe to be honest with him.

Fostering a connection between employees (or ‘partners,’ as they are known at Starbucks) and customers is an integral part of the Starbucks experience. Partners are trained to understand how to make a customer’s visit true to Starbucks’s mission (i.e. frontline employees’ behaviour is aligned with its mission to create a community). Habits such as making eye contact with customers,
remembering regular customers’ drink orders, and anticipating customer needs are developed through orientation and ongoing training programmes.

The results speak for themselves. By 2005, Starbucks had more than 100,000 partners, 10,801 retail locations,35 million customers walking through its doors, and a record $6.4 billion dollars in revenue during its fiscal year. Its success should come as no surprise, given that Starbucks says that “The human connection . . . is the foundation of everything we do.”

Howard Schultz increased inspiring identity by telling the Starbucks story in writing so that anyone could read it and understand how Starbucks developed its values. He increased human value by calling everyone a ‘partner’ and compensating partners above industry norms. Howard Shultz’s approachable persona increased knowledge flow because he made it safe for people to be honest with him.

Do you know the inspiring identity of your organization? Could you articulate it for yourself and others? Do you feel that everyone is on the same page?

Let us start with "Hedge Fund"

"Hedge fund" is a general, non-legal term that was originally used to describe a type of private and unregistered investment pool that employed sophisticated hedging and arbitrage techniques to trade in the corporate equity markets. Hedge funds have traditionally been limited to sophisticated, wealthy investors. Over time, the activities of hedge funds broadened into other financial instruments and activities. Today, the term "hedge fund" refers not so much to hedging techniques, which hedge funds may or may not employ, as it does to their status as private and unregistered investment pools.

A Short History and the Definition of a Hedge Fund

The first hedge fund was set up by Alfred W. Jones in 1949. Jones was the first to use short sales and leverage techniques in combination. In 1952, he converted his general partnership fund into a limited partnership investing with several independent portfolio managers and created the first multi-manager hedge fund. In the mid 1950's other funds started using the short-selling of shares, although for the majority of these funds the hedging of market risk was not central to their investment strategy.

In 1966, an article in Fortune magazine about a "hedge fund" run by a certain A. W. Jones shocked the investment community. Apparently, the fund had outperformed all the mutual funds of its time, even after accounting for a hefty 20% incentive fee. This is because the rate of return was higher on the hedge fund versus all other mutual funds.

Facts about Hedge Funds
-Estimated to be a $1 trillion worldwide industry and growing at about 20% per year, with approximately 8350 active hedge funds in the world.
-Includes a variety of investment strategies, some of which use leverage while others are more conservative and employ little or no leverage. Many hedge fund strategies seek to reduce market risk specifically by shorting equities or derivatives.
-Their returns over a sustained period of time have outperformed standard equity and bond indexes with less volatility and less risk of loss than equities.
-The popular misconception is that all hedge funds are volatile -- that they all use risky techniques and strategies and place large bets on stocks, currencies, bonds, commodities, and gold, while using lots of leverage. In reality, less than 5% of hedge funds are of this sort.

Useful Terms

Arbitrage: the simultaneous buying and selling of securities in different markets with the purpose of profiting from the price difference in the markets.

Derivative: a volatile financial instrument whose value depends on or is derived from the performance of a secondary source such as an underlying bond or currency.

Hedge: making arrangements to safeguard against loss on an investment (can involve various techniques)

Leverage: the use of credit (such as margin) to improve one's speculative ability and to increase the rate of return on an investment

Short Sale: a sale of a security that the seller doesn't own (if the seller does own the security she is said to be in a long position), and that the seller must borrow. Usually, the technique is employed when prices drop. If the price of the security does drop, the seller can make a profit on the price of the shares sold versus the price of the shares bought to pay back the borrowed shares.