Suzlon Energy and RePower - Best Wind Energy Stock - detailed Analysis

Wind Energy

I am bullish on Wind Energy - and other green energies like those from Biofuels. There are several reasons for this and some of them are discussed in my earlier post on Investing in Wind Energy Stocks. No doubt, other forms of energies like Nuclear energy will also play an increasing role. However, there are strong reasons why I think that we will soon see a period where there will be a 'boom' in wind energy, with several companies trying to set up their own wind farms and wind turbines to satisfy their energy requirements. In this post I am going to analyze a Wind Turbine manufacturing company 'Suzlon Wind Power' (together with Repower, its subsidiary) and explain why at current valuations, this company offers the best investment opportunity, with a time frame of 3 to 5 years. Even if you are not located in India, you can buy stocks of Indian companies, for e.g. by registering with Interactive Brokers.

Suzlon Wind Energy and Repower- best Wind Energy Stock

Suzlon owns 90% of the Repower, and Suzlon Repower combine are the third largest wind turbine manufacturers by market share. Suzlon acquired Repower in 2009, by aggressively outbidding Areva. Read more about Suzlon acquires Repower. Here is the general business overview of Suzlon and Repower.

1. Suzlon manufactures wind turbines in the range of upto 2.1 MW capacity and targets developing and emerging economies like India, China, Latin America, etc. In 2009, Suzlon held a market share of 53% in India. See Suzlon Products Portfolio on Suzlon's homepage.
   
2. Repower manufactures turbines in from 2.5 MW to 6.15 MW capacity and mainly targets developed nations like Europe, UK, US, etc. Repower 6.15 MW turbines are highly suitable for offshore wind farms, something we will see more in the coming years - as building large wind farms in the sea becomes more economically viable option than using up the expensive land area. See Repower products Portfolio on Repower's homepage.
   

Although the above is only a rough guideline, note that Suzlon also has sold several wind turbines in developed world e.g. U.S., Australia, etc. To dig deeper into Suzlon's business model, i recommend reading Suzlon's Investor Presentation.

Note on REPOWER wind energy stock : Note that REPOWER stock can be bought separately (but not in India, in German stock exchanges). Since the offshore wind farms are expected to see a 'boom', Repower alone also in my opinion is one of the best wind energy stocks available at the moment. This is given the fact that Repower margins are expected to improve because of the advantage of Suzlon's marketing network.

Suzlon Wind Energy stock - financials

1. Suzlon's current Debt equity ratio is about 1.5.
   
2. ROE for the years 2005 to 2008 has been 38%, 29%, 28%, 20%. From 2008 to 2010 Suzlon has not had a profitable year.
3. Exepected topline growth is about 20% in Wind industry, once the global economy recovers.
4. EBITDA margins during 2005-2008 were about 8% to 10%. In 2008, and 2009, margins have dropped to less than 4% due to various reasons like lower volumes, recall of some of its problematic blades, etc.
   

EBITDA margins are expected to grow as volumes increase (at least this is what Suzlon Wind Energy claims in one of its presentation). Suzlon is doing a lot for managing its debt, it has achieved a 24% reduction in debt in the previous financial year by sale of 35% stake in Hannsen Gearbox. In the financial year 2010-2011, it has launched a 2:15 rights issue, which again it plans to use to reduce its debt.

Suzlon Wind Energy stock - Positives

1. Suzulon's products are nearly 20%-25% cheaper than other leading wind turbine manufacturers. Since initial cost for setting up wind farms is quite significant, this is a great advantage.
2. Suzlon is a vertically integrated company, and can leverage its network to increase sales of Repower products too.
3. Suzlon held a 53% market share in India, a fast growing market for Wind turbines.
4. Management of Suzlon has been very aggressive in expansion of the company. The company started with merely 3 employees in 1995 and went on to become the third largest in the industry by 2009.
5. Several governments have and are likely to provide tax incentives to encourage clean energy options like Wind Energy.

Suzlon Wind Energy stock - Risks, Negatives.

1. There is extremely high competition in the industry with several different players.
2. Suzlons blades have been a major problem in the past with almost all blades supplied to the US developing cracks. These had to be replaced costing Suzlon over Rs. 2000 crore.
3. Suzlon has serious debt problems. It has $500 million in zero coupon FCCB (foreign currency convertible bonds) due on June 2012 and Oct 2012. Suzlon has managed to bring down the floor price of this bond. However, if the company does not do well by June 2012, and these bonds do not get converted, then the company is in deep trouble in paying back the money. Moreover, even if all the FCCB get converted, there will be about 20% equity dilution.
   
4. Any slowdown in China, US and Europe will impact sales.

In all, it is worth investing in Suzlon only if you understand these risks.

Suzlon Wind Energy stock- summary

Concerns about the quality of its blades and high debt remain the main risk factors in investing Suzlon Wind Energy stock. However one should note that recalls and problems with products is something which has been experienced by other large companies, - remember the largest car company Toyota recalled more than 8 million vehicles worldwide?. That does not necessarily mean the company cannot overcome the problem. Moreover, at current valuations (1.6 times Book Value), Suzlon Wind energy stock is attractively priced and I think of this as the Best Stock available and makes a great investment opportunity.

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HR 5623 - Home buyer tax credit extension till Oct. 2010 likely !

H.R. 5623 and tax credit extension

H.R. 5623 is a bill which the Congress has come up with extend the Home buyer tax credit by further 90 days (till 01 October 2010) and consequently stop the further deterioration of the housing market in United States. For details of the bill visit Tax credit extension - October 2010. This bill has indeed been passed by the house - read US House backs 2010 tax credit extension. It has to be still passed by the senate. However, it is expected to be passed by the Senate today.

H.R. 5623: Homebuyer Assistance and Improvement Act - Legislative Digest - GOP.gov

H.R. 5623 would extend the home-buyer tax credit of up to $8,000 for the purchase of a principal residence before October 1, 2010. The current benefits apply to cover buyers who enter into contracts before April 30 and close by June 30. This bill would extend the closing date to September 30, 2010.

The bill would provide any home-buyer who entered into a contract on a home by April 30, 2010, but have been unable to go to closing within the required 60 days; the provision would extend the closing date for an additional 90 days. This provision is estimated to cost $140 million.
....

For knowing more about the Home buyer tax credit, read my detailed post on Tax credit and its extension.

Federal Tax Breaks, IRS Tax Credits, Tax Rebates in 2009 Economic Stimulus Package that maybe of interest to you H.R. 5623 - Extension of Housing Tax credit to October 2010. Cash for Clunkers - Is it Useful? Will there be a Second Stimulus Plan in 2009 or 2010? 2009 Obama Stimulus Package details explained. New Car Purchase Auto Stimulus details explained- Excise and Sales Tax deduction for new purchase of new vehicles. Cars- Cash for Clunkers - Car tax credit when you trade your old fuel inefficient car for a new one and get a rebate of $3500 or $4500. $8000 First Time Home Buyer Tax Credit details- 2009 Housing Stimulus Bill in Economic Plan proposed by Obama. $800 Making work pay tax credit stimulus- details explained ($400 working tax credit for individuals and $800 tax credit for married taxpayers). $250 Social Security Stimulus Check in 2009 Economic Stimulus Package. 2009 Cobra Stimulus Package 65% Reduction in Cobra Health Insurance Premium for qualifying individuals. 2009 Stimulus Checks? Economic Stimulus Payment $1000 Child Tax Credit, Dependent Tax Credit 2009 extension. FAQ: Can you claim your $8000 first time home buyer tax credit in 2008 tax return itself or do you have to wait till you file 2009 tax return? The law allows any qualified purchases made in 2009 to be treated as if the purchase was made on December 31 2008. You can claim the $8000 first time home buyer tax credit in 2008 tax return itself by filing form 5405 according to the latest IRS ruling. Thus you can get the benefit of $8000 in 2008 tax return itself. Income Tax tip for first time home-buyers: If you know you qualify for the $8000 home buyer credit there is no need to wait to file your 2009 tax return in order to get benefit of this housing stimulus. First time home buyers are actually permitted to reduce their income tax withholding by the amount equal to housing credit, i.e. $8000. You can then use this 'extra cash' got by increase in your take home pay for down-payment. Quick Answers to common queries: Question: When will the $8000 home buyer tax credit end? Answer: April 30, 2010 for general public and April 30 2011 for Government employees in Military, Foreign Service and Intelligence Community. Question: Can I purchase a house from my parents or relative and still qualify for the tax credit? Answer: No. please read the 7 important points in detail. Question: I am married and filing separately and I have not owned a principal residence in last three years. Do I qualify? Answer: For married people, whether filing jointly or separately, both the partners have to be 'first time home buyers' according to the definition mentioned in 7 important points.

TxtStopper: Probably Illegal

I saw a press release about a device called the TxtStopper, which is a cell phone jammer you wire into your car's 12v power line to jam cell phones when your engine is running.  The idea is to keep your teenager from texting while driving.

This device is probably not legal in the U.S., since it interferes with legal and regulated cell phone signals.

Also, I don't see how they keep it just to your vehicle.  If it is so low powered that it doesn't extend much beyond about a 5 foot radius, it may not be powerful enough to reliably jam your phone.

Also, cell phones in vehicles have legitimate safety uses, such as 911. 

Bad idea.

Boycott BP?

Should you boycott BP?

Yes, maybe, no.

Yes because reduced wholesales of their products will hurt them in their pocket books and teach them a harsh lesson.

Maybe not, because chances are if you have a 401(k) or pension plan, you are infact a shareholder of BP, one of the largest (by capitalization) companies in the world.  You will help to damage your own retirement funds.

No, because you will hurt your local small-business owners who own BP stations, which are almost all franchises.  And BP is one of the largest employers in oil producing regions.  Many more people will lose jobs, than already are.

Myself, I am ambivalent.  I don't actively avoid BP stations these days, but I don't really seek them out either.  Besides, near me, Speedway and Valero brands are usually cheaper!

Want Less Oil Use? Raise Gas Taxes!

The laws of economics are nearly as immutable as the laws of physics.

If you want to reduce consumption of an item, increase its price, or reduce its supply (same effect, different mechanism).

David Frum points this out in a very lucid piece on CNN.com, here.

We want to get the country off oil? Tax it. (Politicians may not wish to say it, but their advisers can at least think it.) Then liberate people to find their own best alternative -- and incentivize industry to develop alternatives that make sense at the new higher price. And be prepared to argue candidly and straightforwardly in the marketplace of ideas why this new tax is right and justified.

If not, then kindly please spare us the grand speeches about how the status quo is the thing you will not accept. It is precisely the thing you are accepting.

However, as Frum correctly points out, a politician who raises gas taxes by $1+ per gallon will soon be an ex-politician.  That's because there is not really a strong consensus on reducing our use of fossil fuels in this country.  As I write here so often, people want cheap gas and high fuel efficiency, but they aren't willing to pay much for it.

One sensible solution to the sting of higher taxes is to do a "feebate" scheme, where the taxes which are collected are distributed back to the taxpayers as tax rebates.  This way, you would nudge the consumer to consume less fuel, but on average wouldn't hurt the economy much.  Congress can even play with the rebate rules, to penalize higher income consumers less than low income consumers, exclude business and agriculture uses, etc.

Instead, we have the perverse system of CAFE, which tells automakers what cars to build and in what mix they can sell them, but is largely invisible to the consumer except on the window stickers at the dealership.  

Well, CAFE isn't free either.  Getting to 36mpg is going to have some nasty side effects on the vehicles available on the marketplace, foremost of which is that cars are going to get more expensive.   So instead of slightly less expensive cars and pricier gas, we are going to have cheaper gas and more expensive cars.  You still pay in the end, though--efficiency costs money.  The advantage of the market approach is that the consumer has choice--if someone wants to drive a thirsty vehicle, and they can afford the gas tax,they can choose to pay.  With CAFE, the very choice of the thirsty vehicle may be taken away, depending on how the fleet average works out.

Gordon Murray's (Controversial) T.25

There are new photos out of designer Gordon Murray's proposed T.25 city car (see photos here).

It looks like a very tidy design, with a 1+2 seating arrangement where the passengers sit behind the driver, who is front and center.  But the ergonomics look very tricky--to get those 2nd row passengers in their seats, they have to climb over (I assume) a folded forward drivers seat, after negotiation the forward tilting cab.  

Unless the rear of the cab opens as well?  It is hard to tell from the press photos.

Even if the rear cabin opens, I don't think a forward opening door will be well received.  If it is raining, you (and our seat) are getting wet while you work on getting in or out.  If you are in a front end accident, it seems like it would be harder to open the door, if the hinge was crushed.  

The half-windows are also not going to go over well, although perhaps in the U.K fast food drive-through is not as common as in the U.S.  

Mandatory Breathalyzer Interlock?

Did you know that the NHTSA, together with 13 automakers, is working on a device which will test your breath alcohol concentration, to be installed (they hope) in all vehicles?  Did you know that they are spending $2,000,000 per year (some of which is taxpayer money) on this project?  Now Senator Udall from New Mexico is proposing to increase funding to $12,000,000/year.   

To its credit, the DADSS project acknowledges that in order to be accepted by the public, the system they come up with must be practical and non-intrusive.  They are pursuing several methods of doing a passive test, to avoid having to have the driver blow into a tube and wait several minutes before allowing the car to start.

They are looking at both contacting and non-contacting methods.  One method is to have an IR spectrograph system which reads the blood alcohol level by analyzing the reflected light from a persons skin, which would have to be touching a sensor hidden somewhere such as the steering wheel or shift knob.  Another method would be to analyze the vapor in the cabin using several "sniffers".

However, even a passive system has some significant issues that will need to be overcome before the average person will agree to have one in their vehicle.  The chance of a false positive must be vanishingly small.  But at the same time, the system must be difficult to defeat, or it loses its protective effect.

And any system that degrades over time, to the point where it starts calling false positives, would not be acceptable.   

Consider a contacting spectrograph sensor.  What if it is winter, and our driver wants to wear gloves?  Do you make him remove his gloves to start the car?  Would people submit to that? (No).   

Can the system tell the difference between a bag of saline solution and a persons finger?  Could it be fooled with a hot dog? 

Or what if you are using cabin air sensors, and you are sober but your friend in the passenger seat is drunk?  The system must be able to tell the difference reliably to be acceptable.

Would an air analyzer system work with the windows down, or with the ventilation fans blowing?  Any solution which requires people to start with closed windows or without ventilation won't be accepted.

Could a cabin air analyzer be fooled by taping over the sensor inlet ports?

To be effective and safe, the system would have to make an up or down call quickly while the car is parked.  Which means it will almost certainly have to be a default-to-guilty (restrictive) system as opposed to a non-restrictive  default-to-innocent system.   If the system allows you to drive away, but then makes a "intoxicated" call later, and stops your car, it may leave you in an unsafe situation.  

I am skeptical about the idea that every car should have an alcohol detector on board.  I think many lives could be saved if, instead, the system were required as an after-market installation for anyone who is caught DUI.  I am not ready to accept, and I don't think most people would accept a system which presumes that you are drunk unless you can prove otherwise.  

You can read more about the DADSS project at http://www.dadss.org/.

An interesting source of counter-advocacy is here: http://interlockfacts.com/, which is run by the American Beverage Institute.

The Future of Wind Power - invest in Wind Energy stocks

Wind energy - The best green, renewable energy of the future

The Wind Industry has been growing at the rate of about 20% annually in the past few years (at least if you exclude the years of global recession). One can try to expect similar growth figures in the future. But what this article does is to present (with rigorous support of facts) that there will much greater growth in wind industry by 2015-2020. In other words, the coming decade will witness a BOOM in wind energy. Is Wind power 'the next Big thing?'. Continue reading the post and if you have any more insight to offer, please share it in a comment with the readers.

Fossil Fuels - A predictable end

The addiction of Human kind to Fossil Fuels is very disturbing. There are two problems with Fossil Fuels. First, it is highly polluting, environmentally damaging - and as oil companies dig deeper and deeper for more oil reserves, the chances of devastating oil spills like the one caused by BP in the Gulf of Mexico will increase. However there is also another big problem with Fossil Fuels and Oil - they are simply not going to last !. If you look at current oil reserves , you will notice how most oil reserves will last only for the next 50-100 years. Of course, new reserves are being found and there are also some even more environmentally damaging alternatives like heavy crude oil. But clearly, all these are not enough to meet the growing requirements of the world economy. Currently more than 50% of the worlds power is generated by Fossil Fuels (including coal). These non-renewable energy sources, although may not get 'finished' very soon, will become more and more expensive. A glimpse of this was seen at the end of 2007, when oil prices reached $140 per barrel. Thus Fossil Fuels are heading towards a very predictable end - slowly they will get more and more expensive and there will be a 'tipping point' when investments in alternative energy sources like wind energy, solar energy, bio fuels will attract a lot of attention. Fossil Fuels are supposed to remain dominant until 2030, but slowly their importance will be reduced.

Wind Energy Facts

Wind energy is one of the best, abundantly available renewable energy source on this planet. Here is a list of Wind Energy Facts which will convince you why this is the best green energy that human kind should start investing in.

1. According to a wind study done in 2005, the total quantity of wind energy on earth is roughly five times our total energy requirement ! Wind energy is abundant, convinced?
   
2. Energy required to construct and install wind energy equipments (like turbines, towers etc.) is paid off back in less than 9 months of time. Thus this is truly a green energy.
   
3. The current wind power usage (as of 2009) shows that the wind energy accounts for only 2% of the total power generated in this world. Thus plenty of room for a 'big boom' in wind energy.
   

Before explaining how to financially benefit from this possible future boom of wind energy, let me first list some of the advantages and disadvantages of wind energy.

Wind Energy - Pros and Cons

Wind energy advantages -

1. Renewable, plentiful available energy source.
2. Wind turbines operate 24/7, unlike solar energy which can only produce power during the day.
   
3. Zero pollution - completely environmentally friendly, green energy.
4. Wind farms can also be built in the sea (offshore wind farms).
   

Wind energy disadvantages -

1. Building large on shore wind farms may require a lot of land, thus it is usually not economically viable to build wind farms near big cities.
   
2. Visibility- some people complain that wind farms do not look very pleasant (minor disadvantage - from my viewpoint).
3. Wind farms, wind turbines, occasionally kill birds when they pass through the blades. (but the number of birds killed by fossil fuel pollution is much greater than this)
   

In the next post, I will list some of the best wind energy stocks, along with their analysis.

Camry Most "American" Car?

According to the Detroit News (here), Cars.com finds that the Camry is the "most American car", based on domestic parts content and popularity.

I suppose it is fair, and congratulations to Toyota for supporting the U.S. economy as much as the Camry does.

But...

If you follow the flow of engineering and the flow of money, the picture is a little different.  The Camry has quite a bit of its engineering done in Japan, which means that Japanese engineers are doing the work, not U.S. engineers.  Also, the profits from the sale of the Camry flow back through Japan, though the shareholders of Toyota are global.

Consider instead a car designed in the U.S. and built over the border, such as the Ford Fusion, or the Chrysler 300.  Yes, it is being bolted together by Mexicans (or Canadians, or even Mexican-Canadians), from parts that flow from all over.  However, U.S. engineers and technicians worked on the product, and and the profits flow mostly to U.S. shareholders (and the .gov in the case of Chrysler and GM).

It isn't black and white, and if you buy a Camry, to my thinking it is much better than buying a car designed and built overseas.  But if you want to support American engineering and American shareholders, you can do better than Camry.

The Truth About The Vuvuzela

The vuvuzela was originally invented by the Jews! Made of a rams horn, the shofar was blown during battle, and I am sure during ancient soccer games. Today, it is blown during the high holidays.

Why Not Small Cars?

Mark Tapscott at the Examiner (link) does a good job discussing why it is that small and fuel efficient cars are not taking off in the marketplace yet. He mentions several major reasons, such as safety issues (perceived and real), and cargo capacity.

I can add a few more.

Perceived Value: Americans still associate size/mass with value. Many of them are not yet ready to agree to pay mid-sized car prices for a small car.

Ride and Handling: Americans seem to be divided on how they want their cars to handle. Some of the best selling cars (Toyota Camry, Corolla) are comparatively squishy, while others (Honda Accord, Civic) have sharper handling and firmer rides. While it is not impossible to produce a small car with a softer ride, light weight and short suspension travel limits do make it more difficult. Also, when efficiency is the overriding design factor, one of the easiest places to lose weight is in sound isolation materials. Do the "silent majority" want little cars with go-kart manners (Mini, Smart) or do they want scaled down couches? Currently, most small cars are tuned more towards go-kart.

Styling: Looks still matter. Americans want a sharp looking car, although what "sharp looking" is is not always consistent. Designers have to work hard to avoid designing short little jelly beans with high roofs, which is really the most space efficient design with some aerodynamic efficiency. On a larger car, there is more surface to play with, and more ways to draw the eye. Americans don't really want something that looks like a rollerskate, with a tall roof and little wheels pushed out to the corners.

Comfort: Americans are not getting thinner. I recently witnessed about 500lbs of female Target shopper (a mother and daughter?) flow out of both sides of an old Dodge minivan, you could almost hear the springs sigh in relief as the ride height jumped by 2" in front. Show those women a Fiesta and they will probably laugh at you. They might then go ahead and eat it.

Toy Story 3

I went to see Toy Story 3 today, it is a real work of art, absolutely wonderful. The opening scene features a wild get-away by train robbing Potato Heads in a purple Barbie corvette driven by Martians.

Even if you have not seen the earlier installments, go see this one.

Cheap Gas, Low Demand For Hybrids, B-Cars

According to Ward's Auto, sales of fuel efficient vehicles (cars with 30mpg+) are falling, as customers move back to their mid-size cars and crossovers.  Toyota's Prius is selling well, but the hybrid Camry and Honda Civic Hybrid are declining.  Small gasoline cars such as the Yaris (down 38%), Honda Fit (down 20%), and Smart ForTwo (down 63%) are not doing well.

Unless Obama can find a way to ramp up the price of gasoline soon, the near term sales of the many new B-cars are not going to be pretty, and fleet fuel economy improvements are going to be small.

Let's face it, Americans don't want little cars.  They want cheap gas and large cars.  I can't wait for the public reaction when the 36mpg CAFE regulations force people to look at B-cars, or pay a premium for larger vehicles.  

 

HP2G Vaporware?

I keep tabs on HP2G, Doug Pelmear's startup which is working on a hybrid electric V8 engine design, because he is somewhat local (Toledo OH) and makes some astonishing claims (110 MPGe and 400HP).  As you may have heard already, HP2G was a Progressive Automotive X-prize contender but dropped out in the early stages of the competition.  HP2G also had a deal with Revenge Design to supply the HP2G engine for a hybrid supercar, the Revenge Blade.  Revenge has broken off its relationship with HP2G, and posted this nasty item on its web site:

Revenge Designs Inc is announcing the withdrawal of all support and funding to Hp2g llc, due to numerous requests for third party validations to the claims of their 110mpge Hp2g engine. Revenge Designs was informed the patents were in place late 2009, since then Revenge Designs has requested documentation for the third party testing to no avail. Revenge Designs finds this to be unacceptable. 

A quick search of the U.S. patent database shows that the only patent that Doug Pelmear has to his name at this time is one for an engine block brace--nothing about his magnetic cylinder assist system.  There are no applications by Pelmear in the U.S. patent application database.  A quick search of the EU patent database also shows only the engine block brace patent.  So it appears that HP2G has failed to apply for a patent for its magnetic hybrid engine technology until very recently.  And it is odd that HP2G refuses to allow 3rd party testing of its prototype, an old Mustang.

Does Pelmear have a 110MPGe V8 engine that also makes 400HP, or is he selling snake oil?  I wonder if we will ever be able to find out.

New J.D. Power Initial Quality Rankings

Some interesting results in the new J.D. Power IQS. (Full press release here)

For 2010, "domestic" brands are beating "import brands" as a group, 108 PP100 vs 109 (Problems Per 100).

Toyota has fallen to significantly below average, at 117 PP100. That crashing sound you hear is the sound of Toyota execs jumping out of high-rise windows.

All GM brands are below average, though all but GMC are better than Toyota.

Ford has charged up to just above Honda, well above average, and Lincoln is better than industry average, but oddly Mercury is below average.

Land Rover continues its dominance as the worst in the industry.

Audi (VW) has improved dramatically over the last few years, from 136 PP100 in 2007 to 111 in 2010. VW has also improved, 135 PP100 in 2010 vs 160 in 2007, but relative to average, is still near the bottom.

Volvo improved from below average to above average since 2007.

TTitan Industries - best stock in Consumer Durables for long term

Titan Industries - best stock to buy now

This article plans to convince the reader with facts that Titan industries is one of the best stock available in Consumer durables, (or even when compared to stocks in other sectors). This stock was listed as the Best stock to buy in 2009, and since Jan 2009 (when that post was written) the stock has gained over 150% (as compared to 80% returns given by the index over the same period). The core business of Titan Industries is manufacturing and retailing of wrist watches and Gold jewelry (Tanishq). Titan is also emerging as an important player in Eye-wear retailing (Titan Eye Plus). Below is a review of Titan Industries (including comments about its subsidiaries Tanishq and Titan Eye +), its financials, risk and business outlook.

Titan World - Wrist Watches

The current core business of Titan Industries, Titan Watches is expected to grow at the rate of 20%-25% in the coming few years. One biggest plus point of Titan, is that being a market leader, it enjoys a competitive advantage. Moreover, the management takes continuous efforts to maintain/increase market share, for example:

1. Titan Releases one stylish watch design every month.
   
2. Titan, with the recent launch of Titan Zoop has aggressive plans in place to capture the currently untapped market for kids watches.

Tanishq - Gold and other Jewelery

Tanishq is a fully owned subsidiary of Titan Industries. Tanishq expects its topline to grow by 30% to 40% in the coming few years, faster than the watch segment. The market for Jewelery in India is evergreen and growing and although there is high competition in this segment, Tanishq is the only player selling branded products.

Titan Eye +

Titan was again quick to realize that the market for Eye-wear - frames, glasses and lenses, also lacks branded items. Titan Eye + or Titan Eye plus is a fully owned subsidiary of Titan Industries and being an extremely new player has more scope for growth. Titan Eye plus currently has 85 stores across 42 cities. It plans to expand this to 300 stores in the next 3-4 years. I expect margins to significantly improve in the coming 3 for years, so the bottomline will grow faster than the topline.

Titan Industries - Financial ratios, Risks and drawbacks

Here are the key financial ratios of Titan industries.

1. ROE of about 30%, consistently in the past 5 years.
   
2. Long term debt equity ratio of 0.2.
3. Operating Profit Margins have been slightly above 8% which is not bad as compared to other retail industries.
   
4. P/E ratio of about 39 (At the current Market price of 2200). This is a bit high and thus the stock may not be an excellent buy from short term or medium term perspective.
   

Thus the meaning of "BEST Stock" in the title should be understood as Best stock for Long term investment (3 to 5 years or more). It is best to 'accumulate' this stock, i.e. buy on every dips in small portions, rather than buy lump-some.

Titan Industries - overseas expansion plans

Titan watches have a strong market presence in South East Asia and Middle East and some African countries like Kenya. About 10% of its revenues from watch segment come from outside. However recently Titan has clarified that it has put its plans to expand overseas on hold (read Titan news ). Its attempt to launch brand Tanishq in United States has failed to obtain the desired response and hence the stores have been closed. Although currently Titan is focused on the Indian Market, since it is constantly looking for growth opportunities, may think of overseas acquisition or expansion plans especially in China and Russia. In any case, this is the kind of stock that I like to buy and hold, without worrying too much about market movements (after I have bought the stock). Disclosure- I have started buying this stock in small portions. I plan to buy a big chunk if the price falls below Rs. 2000.

Recent Posts related to the theme "Best Stocks to Buy Now" (2010) Suzlon Energy - Best Wind Energy Stock for 3-5 yr investment. Crisil - Best Stock for Long term Investment Titan Industries - Best Consumer Durables Stock for long term Investment Apollo Hospitals - Good Stock to buy for Long term investment. Godrej Consumer Products - Best FMCG stock to Invest Now Stocks which were "Best Stocks to Invest" for year 2009, but now, the analysis may or may not apply, as prospects for the current year have changed. Best Stocks to buy in 2009. Glaxo - Best Pharma Stock Cipla - Good Pharma Stock Tata Tea- Best FMCG Stock Hero Honda - Best Auto Stock for 2009. Hindustan Unilever - Safe FMCG stock Posts on Investment Basics Understanding the P/E Ratio Return on Equity (ROE), ROCE and Shareholder's Equity Consolidated results vs. Standalone Results. Topline Growth vs Bottomline Growth

Mahindra Trucks, In Trouble?

This may be a sign that Mahindra's attempt to import diesel pickup trucks into the U.S. is in big trouble.

According to Global Atlanta (here), Mahindra's U.S. distributor Global Vehicles has filed a federal lawsuit against the company.  Mahindra, despite rumors to the contrary, has not yet filed for EPA certification of its pickup trucks.  Which likely means, they aren't making emissions.

Meanwhile, the many U.S. dealers (some of them closed Chrysler or GM dealers) who put down money on a franchise to sell Mahindra trucks have nothing to show for their investments.

How much money should I invest in Mutual Funds?

Every person should invest in Mutual Funds, except..

Mutual Fund investments are one of the best options for a beginner or even most advanced investors for investing in stock market. Although I pick and buy stocks of good companies myself, I also invest a portion of my money in Mutual Funds, and overall in my past years experience there is nothing I have found to regret about my investment strategy. In spite of all the talk on global recession, subprime etc. my investments made before the recession have earned good positive returns. If you are a beginning investor, I recommend reading the article Riding the Equity Wave for you. Having said this, the first step in investing is to decide how much to invest in mutual funds or stock markets. In my opinion every person should invest in Mutual Funds or stock markets except those who do not have any risk appetite. And here's a simple recipe to find your 'monthly risk appetite'.

Determining your monthly risk appetite

No matter, how many success stories you hear, mutual fund or stock market investments are always risky, especially in the short term. In other words, the principal you invest is at a 'risk'. For e.g. Rs. 1Lac invested on Dec 2007 in most Mutual funds was less than Rs. 50K a year after that (but now it is more than Rs. 1Lac again). Thus you simply cannot invest money from your salary that you need in the near future (say 5 years). Use the following simple formula.

Monthly Risk appetite = portion of your monthly income you can you set aside for the next 5 years

Let me give you my example. My current monthly salary is Rs. 45K. Including expenses for me and my wife, plus a monthly support i give to my parents, my expenses are around 15-20K. Apart from this my wife and I are expecting a baby in the coming year and we also plan to buy a car. For this, in addition to the savings I already have, I am saving at the rate of 5K per month. This takes out about 25K from my salary. For emergencies, add an additional 5K-10K per month. So I am left with around 10K from my monthly salary which I will not need in the coming 3 to 5 years. So my monthly risk appetite is around 10K. Note that I already have enough savings to support me and my family for 2 years,

In similar manner above, you should first determine a monthly amount you can set aside for the next 5 years. Remember to take into account all possible emergencies and also save at least 10-20% of your salary in safe investing options like fixed deposits or bonds. So after reading this paragraph, we assume you can now calculate your monthly risk appetite. lets move on to the next step.

Keeping a margin for stock market collapse

An obvious choice would be to invest all the money you have set aside in the above step in mutual funds or stock markets. I however recommend that you keep aside some portion of it (say 10% - 25%) further for investing when the stock market crashes. Remember that money invested in stock market crash gives much more returns than investments made when the stock market is at its peak (obviously). I follow the simple rule that whenever the stock market falls below 15% from its peak value, I invest about 20-25% of the money I have set aside for stock market crash.

Start an SIP - Systematic Investment Plan

It is best (risk-minimizing) to make small investments every month rather than large lump-some investments in Mutual Funds. Lump-some investments are also great if they are made when the stock markets crash. Thus from the above two step you now know how much to invest in Mutual Funds every month - simply

Monthly Mutual Fund investments = You 'monthly risk appetite' x 0.8

Start an SIP once you determine your risk appetite. The 20% of the cash you set aside from your monthly risk appetite can be set aside and kept in a bank and invested only if the stock market crashes. This simple strategy can work wonders if followed for a stretch of 5 to 10 years.

The Card Car aka JoeCar From New Zealand

TheCardCar nicknamed JoeCar or JOKERis 1983 TOYOTA STARLET, created by Ted Charlton for art and fun and I believe the first art car submitted from New Zealand. The car has a dozen jumbo decks, four 500 decks and approx. four standard decks, then coated with two coats of polyurethane resin. The character cards from two German decks are also placed behind the rear doors and inside on the front dash, due to their wonderful artistic quality.

Ted is looking for like minded art cars covered in cards so he can compare notes on technique, so be sure to let him know if you come across another one. I know of a few cars covered in paper products such as the Pokemon Art Car and the Stamp Art Car, so their might be some connection there. Good luck Ted and thanks for your submission.

Crisil Mutual Funds CPR Ratings - what they tell us

Crisil - Credit ratings agency

Crisil is a credit rating agency which rates various companies for their ability to repay back debt. You can read about more about Credit rating agencies here. In addition to this, Crisil also rates mutual funds. Crisil is a well known and reputed company and is a market leader in India (followed by ICRA). Thus the ratings assigned by CRISIL can be taken seriously.

CRISIL CPR ratings

The ratings assigned to Mutual Funds by Crisil are CPR1, CPR2, ... with CPR1 being the topmost rating - for the Best Mutual Fund, according to predetermined criterion used by Crisil. Crisil uses the following criterion to rate a mutual fund.

1. Past Performance of the Mutual Fund as compared to its peers in the past 2 years - (75% weightage)
2. Sector concentration of the portfolio of that Mutual Fund
   
3. Industry concentration
   
4. Liquidity

Note that the rating is not merely on the basis of past performance. Thus a BEST Mutual Fund according to CRISIL CPR ratings may not be the best performing mutual fund. However the other factors considered in the rating are criterion are also important as they are 'risk-minimizing factors'. It is best to split your investments in 2 to 5 mutual funds to further minimize risk (all having CPR 1 ratings). I highly recommend investing in Mutual Funds with CPR 1 ratings, unless you know what you are doing.

To find out the best rated Mutual Funds by CRISIL, click on CRISIL CPR ratings.

Choosing the best from different Fund Families

Crisil groups mutual funds into different categories, Large Cap, Equity Diversified, Small and Midcap, and assigns ratings within each category. if you do not know what category to choose, it is always best to choose "Equity Diversified" (unless you are doing it for a tax saving purpose, in which case you should go for Tax Saving ELSS funds). If you have a larger investment appetite, then I recommend investing in 2 to 3 Equity Diversified Mutual Funds and one Midcap/Small cap Fund.

DSP BLackRock Micro Cap Fund Review and latest news

DSP BlackRock Micro Cap - Introduction

DSP BlackRock Micro Cap Fund is the best mutual fund in 'equities diversified' category (best as per according to NSE MF Tracker. Note that this rating 'best' is only based on the past performance of the mutual fund, unlike CRISIL CPR ratings which not only take into account not just performance but also other risk minimizing factors like sector concentration, industry concentration and liquidity. However, DSP BlackRock Micro Cap Fund is not rated by Crisil yet. In any case, I personally think that this is the one of the best mutual funds to invest in (especially SIP - Systematic Investment Plan) in the coming years. Moreover, this mutual fund makes an even more attractive investment options in view of the latest news (see below) which says that DSP Blackrock Micro Cap Fund will now be converted into an open ended scheme. Earlier SIP in this scheme was not possible. Below are some of the highlights of this micro cap mutual fund scheme.

Highlights and key points of DSP BlackRock Micro Cap Fund

1. Open Ended scheme - with no entry and exit load. An exit load of 0.25% will be charged if units are redeemed before 7 days.
   
2. Investment idea - Micro Cap Stocks - DSP Blackrock Micro Cap Fund invests company's which are 'small' in the sense that these companies do not belong to the top 300 companies by market capitalization. Let us call these stocks as micro cap stocks. According to information on Blackrock page, 65%-100% of the portfolio will consist of micro cap stocks while 0-35% of the portfolio may consists of other equities. Click on DSP BLackrock micro cap portfolio to check out its portfolio at various available dates in the past.
3. Fund Recurring expenses - The fund recurring expenses are about 2.5% (annual).
4. Mutual fund Past performance - Click on DSP BlackRock Micro Cap NAV and past performance to find out more.
   

DSP Blackrock Micro Cap Fund now an open ended scheme from June 15 2010 - latest news

The following is an announcement directly on DSP blackrock funds page.

DSP Merrill Lynch Mutual Fund News

DSP BlackRock Mutual Fund has announced that DSP BlackRock Fund, which is currently a close ended scheme, will be converted into an open ended scheme. The change will be effective from 15th June, 2010. The scheme will offer regular and institutional plan with growth option. The minimum application amount under regular plan is Rs. 1000 and for institutional Rs.5 crore. The scheme will be managed by Mr. Apoorva Shah and Mr. Vinit Sambre. The scheme will charge 0.25 per cent exit load, if units are redeemed within 7 days from the date of allotment. Investors, who do not agree to the revision, have an option to redeem or switch their units on or before 14th June, 2010 without paying any exit load.

Understanding ROE, ROCE and Shareholder's Equity

Return on Equity (Return on Net worth)

Return on Equity (ROE), also called as Return on Net Worth, is one of the key financial ratios which indicates how well the management has been efficient in managing the company's assets. In my early days in the investing world, this is the ratio which confused me the most. Return on Equity is defined by the following formula


What is confusing in the above formula for beginners is the meaning of 'Shareholder's equity'. Shareholder's equity should not be confused with 'total value of all the equities, i.e. shares'. The later is called market capitalization of the company. Shareholder's equity is defined by

Shareholder's equity = Total Assets - Total Liability

In other words, Shareholder's equity is nothing but the amount of money that the company would be worth if it were to go bankrupt at this very moment. This is also called as book value.

How to calculate ROE?

In order to calculate ROE, Return on Equity, lookup any financial portal or the company's annual report for the following

1. EPS - the earning per share of the company.
2. Book Value - The book value of the company per share (i.e. shareholder's equity divided by the number of shares).

Then to calculate ROE you simply divide EPS by Book Value. ROE is typically expressed as a percentage (i.e. multiply by 100 and put a "%" sign).

Example of Return on Equity : Let us say a company earns Rs. 100 per share and the book value of the company is Rs. 300. Then the Return on equity is 33.3%.

Typical values of Return on Equity and what it means

As a general rule of thumb, you should be careful while investing in any company whose ROE is less than 10%. I personally prefer stocks which give a return on equity of at least 20% or more. Obviously return on equity is a direct measure of how well the company is generating cash with the amount of 'shareholder's money' it has. There is one more thing which ROE tells you and which most financial websites don't mention. ROE also tells you how easy it is for the company to profitably expand its business. For example, let us take a situation where the company does not have any debt. Then an ROE of 25% means that the company is producing Rs. 25 for every Rs. 100 of assets it has. Thus if the company were to expand its business, then for every Rs. 100 spent on expansion, it would earn Rs. 25, which is greater than the usual interest rates. If ROE is roughly the same as the bank interest rates, then it means that even if the company expands, it will take a long time for it to make its investments in expansion profitable.

Variations: Return on Average Equity

The Book Value of a company can significantly change during a given year. In these circumstances, one can calculate the average book value (average of the book value in the beginning of the year and at the end of the year) and use it to calculate ROE.

What ROE does not tell you

ROE, like any other financial ratio is very far from being perfect. For example, ROE does not tell you anything about the debt of the company. As explained before it does say something about the potential of the company to expand its business, but does not actually tell you anything about the possible or expected growth of the company. Nevertheless, ROE is a very basic ratio, and used in addition with few other indicators like topline growth and financial ratios like P/E, Debt/Equity and profit margins can give a reasonable good and quick overview of the company.

ROE versus ROCE

A related ratio to Return on Equity is Return on Capital Employed (ROCE) or also called by the name of Return on Capital Invested (ROCI). ROCE is defined to be

ROCE = Operating Profit / Capital Employed.

Operating Profit means profit before tax, depreciation, interest and exceptional items. While Capital Employed is the cash (& assets) that was actually used to do the business in that year. The formula for calculating Capital Employed is

Capital Employed = Total Assets - Current Liabilities

Note that Current Liabilities are those liabilities which the company has to meet immediately (in the coming year). ROCE can sometimes give a slightly accurate picture than ROE, but I have found that overall if you look at the values of ROE for the past 5 years, you get roughly the same picture of the company as you would get by looking at values of ROCE. Moreover, ROE is easier to calculate.

Related Posts on Financial concepts and Investment Basics Understanding the P/E Ratio Return on Equity (ROE), ROCE and Shareholder's Equity Consolidated results vs. Standalone Results. Topline Growth vs Bottomline Growth

Topline vs BottomLine Growth - what is a better indicator? Investment Basics)

Topline vs Bottom Line Growth

(Anticipated) Growth of a company is an extremely important parameter in deciding the valuation of the company's stock. When a company grows, there are however various parameters which 'grow' when a company 'grows'. Among the most important of these are

1. Growth of a company's sales - This is called as Topline Growth for the simple reason that in accounting the sales of a company are written on the first line 'top line'.
   
2. Growth of company's net profit - This is called as Bottomline Growth, for the simple reason that Net profit of a company is written at the bottom, after writing figures of sales, expenditures, revenues, interest, depreciation, tax, etc.
   

Topline vs bottomline - simple example

Topline growth, or growth in sales represents the potential for the business to grow. Bottomline growth or growth in net profit, however can be caused either by increase in sales, or decrease in expenditure/raw material or various combinations including exceptional items (i.e. items which are one-time expenditures/income). Let us take the example of a steel company. If its sales grow by 25%, then topline growth is 25%. It show that the demand for steel, the basic output of that company is growing by 25%. However, it could happen that at the same time, prices for raw material, in this case coal or iron ore also go up by 15%. Other factors remaining same, the increase in net profit will be much less than 25%.

What number to look at while analyzing a stock - topline or bototmline ?

As far as getting an idea of how the company is growing, i think it is a good idea to look at topline growth. Various factors which come into play while calculating bottomline growth (e.g. raw material costs, etc.) are also important, but in my experience i have found it very convenient to analyze them by looking at financial ratios like operating profit margins (or ebitda margins) or net profit margins.

Related Posts on Financial concepts and Investment Basics Understanding the P/E Ratio Return on Equity (ROE), ROCE and Shareholder's Equity Consolidated results vs. Standalone Results. Topline Growth vs Bottomline Growth

"Chevy"

I heard on the morning news that GM is instructing its employees to always refer to Chevrolet as Chevrolet, not as Chevy.  They apparently want to portray a grown-up, mature brand.

Good luck with that.

Chevy is ingrained in the culture.  They'll have to retrain thousands of NASCAR fans.  

They'll have to get songs re-written: "Drove my Chevrolet to the levr-o-let but the levr-o-let was dry"

It's good for Dodge (Ram) and Ford, through--they only have one syllable.  Easier to say.

Monster Big Bike Could Crush Hot Weels

Here is the ultimate in Monster pennyfarthing bicycle riding madness. Its not the easiest bicycle ride to handle to come out of the Netherlands, but its slow and steady. The only thing it will crush is hot wheels cars lined up on the side walk. The video is a must see.

How to buy stocks in USA, China or overseas from India?

Indian Investors looking to invest in stock markets abroad

Have you been looking for investing opportunities beyond the Indian Stock markets (NSE, BSE)? For e.g. investing in Oil ETFs, or other mutual funds exclusively available in select developed countries like United States or Europe, UK, etc? Or thinking of buying stocks in China? Read on.. the answer to these questions is much simpler than what one would have imagined.

RBI allows $25000 foreign investment per annum

RBI has several restrictions on buying and selling rupee. For example, you are still not allowed to trade forex in india, unless it is for hedging purpose. However, fortunately, RBI has allowed every indian to invest up to $25000 overseas. This means you can use this much money to either buy real estate, stocks, mutual funds, or simply put that money in a savings account in USA, China or any other country (this last option does not make economical sense, because interest rates in India are higher). Thus trading in stocks in world markets either in USA, Japan, China, Europe, or any other country is now extremely Easy. All you do is start by registering with an online broker who allows you to trade in world markets of your choice.

Registering with an Online broker

An example of such an online broker is Interactive Brokers. This is just one example. There are several other online brokers which allow you to trade in world wide markets from India. Even ICICI Direct allows you to invest in stocks in USA or other countries. Google a little or keep your eye on advertisements. Good brokers usually advertise aggressively highlighting their plus points. The following things need to be kept in mind.

1. Trading in world markets may require a larger appetite. For example when you open an account with Interactive brokers, you have to start with $5000 for investing in world markets like NYSE.
2. There is a verification procedure when you open your account where you may have to submit/post some documents. The overall approval procedure may take a couple of days or more.
3. The money you invest in foreign stocks is kept in dollars (or other currency). Thus apart from stock market fluctuations you are also exposed to the risk of currency fluctuations.