November 28, 2006
How to save your wife, kids from creditors
found this enlightening article at rediff
Considering that in India people get married at a early age and your creditors really extract a pound of flesh for every Paisa you owe them. Married Women’s Property Act (MWP), 1874 is like the best Chapter 11 Bankruptcy law ever designed for Indians.
What amazes is that this Act was created in 1874 when females rarely owned any property and was at the mercy of the male members of the joint family for all her financial needs.
It takes only a couple of minutes to create a trust. I suggest you buy a term insurance scheme scheme and make its beneficiary this trust. Hence in case you die, family gets all the benefit (and no liabilities) else… you lose nothing.
November 27, 2006
Stock Advice
Recently some of my advice on IPO saw huge activities Tech Mahindra got over 500 hits and the on going Shobha Developers got over a 1000. Hence I thought it would be wise if I published who I am before a thousand souls spend their life fortune on my words.
1) I am a small time investor in the stock market who never allows his Stock Market Portfolio to exceed 50% of my current Assets. ( I will drop it to 33% when I get married and to 25% when I will have a kid)
2) I hate people who believe in hot-tips and day trading. It is too risky and you are more likely to lose than the gain anything.
3) To me stock market is a very calculated risk in which you research and find the undervalued gold-mines and wait patiently till everybody realizes its potential. I hold no more than 4 scrips at one given time and trade less and once every 1-2 months.
4) However even a gold mine will never yield diamonds…. If a stock is trading above what I think it is worth, then quickly exit… maybe later on you can re-enter.
5) I never invest in companies whom I will never consider doing business with. (So no penny stocks. They might not be worth the paper it was printed on)
6) Make a target and buy a scrip in 2-3 phases and sell it off in 2-3 lots. You can never hope to buy at the lowest and sell at the highest price. So buying in lots is the best strategy as it keeps your investment low and allows you to encash on a bubble.
7) Stock market has a history of 1 nano second. It never cares what the stock was worth once. And for all practical purposes (except the Tax calculation) it does not give a damm of what price you paid for the stock. So why do you give a damm…. whenever you think the price is right sell of the scrip and limit your losses.
8. Be extra careful when you invest in IPO.
1.Most IPO are Overpriced/ aggressively priced. So you might make a small listing loss.
2.Under priced IPOs are too oversubscribed that the small allotment you get will not be worth your investment.
9) Be ruthless: If you feel the promoter has cheated you or is telling you fairy tales. QUIT and if possible Short Sell his shares. Stock market is not a Diwali gambling session but it is a serious place where you invest your hard earned sweat and blood.
10) For Mutual Funds/ ULIP check the amount of Asset Management Fees they are charging and see if it is worth the benefits you get.
Stock Market is all about buying a Dollar Bill at 60 cents.
Disclaimer: The opinions expressed here are personal views of a private citizen who has no formal training in Finance or Management. I hold positions in all the shares discussed in the stock.
motivational pictures
You can only be young once. But you can always be immature.
– Dave Barry
Capital punishment is as fundamentally wrong as a cure for crime as charity is wrong as a cure for poverty.
– Henry Ford
November 24, 2006
Mom, where did I come from?
Little Rita asked her mother, “Mom, where did I come from?”
Mom stammered, but got her composure and decided it was time her daughter knew the facts of life. She told Little Rita how the expression of love resulted in the beginning of life, how life developed in the womb, and how a child was born. As she spoke, Little Rita’s eyes grew wider and wider.
When Mom was finally done, Little Rita said, “Wow. Neat. At school, Jimmy said he came from Pennsylvania!”
Cairn India IPO
Cairn India, a subsidiary of the Edinburgh-based Cairn Energy, has raised USD 822.5 million through pre-IPO placement. The company has placed 20.97 crore shares at Rs 176.48 per share and 11.88% equity shares via pre-IPO placement. Most of the proceeds came from Petronas (A Malaysia based oil Giant) who evaluated the company to be around 311.54 Billion INR and took 10% of the stake. The other big names who invested during this fund-rasing are Videocon, Black Rock, Petro Drill and Citibank
Cairn IPO shall be open between 11-Dec to 15-Dec. The IPO size of 32.88 crore shares at a price band of 160-190 to translate into 5800 crore INR. Cairn India is to retain USD 600 million of IPO proceeds and rest will be used to Payoff the current promoters. This is the part of the $2 Billion USD the company is planning to raise.
Cairn is into oil exploration which is usually termed risky but I like the promoter and the fundamentals of the company. By 2010, the company’s Rajasthan oil-fields will be operational and Cairn is expected to be producing 20% of India’s crude oil. So if you want oil in your portfolio do invest in this IPO for the long term.
I love companies which try to raise money before going to IPO
1) Petronas/VC would have done a through evaluation of the business prospects. So the books will be in order and not many skeletons are expected out of the closet.
2) The pricing is more realistic. It will not be like the Air Deccan whose prices dipped by 50% immediately after listing.
3) The company most likely needs money for the genuine business needs rather than the promoter simply cash on the boom phase and exiting his business.
190/- might be a bit high but the share is definitely a good but at 160-180 price band.
My strategy:
1) Invest at an upper cut off of 180/-
2) The listing should happen somewhere in March at around 200/- Sell off half your holding at that price which will lower your acquisition cost.
3) Sell of the rest of the holding at 225+.
UPDATE: 7th December ONGC raised an objection to the red hearing prospectus Cairn filed for the IPO. Although serious, It does not effect the long term prospectus a lot. However if SEBI imposes a fine (or does anything more serious than redrafting the letter) it might scare a lot of institutional investors away. (and hence reduce the listing gains)
UPDATE2:15th December: Cairn was oversubscribed only 1.11 times and 0.9 times in retail. So retail investors can expect full allotment at 160/- (lower price band) and the listing is on 9th of Jan.
Ankur Aggarwal
sree
Sandip Chaudhuri
vbr
Skabeesh
shobhendrasrivastava
