Thursday, November 30, 2006

Optimism and Billionaires: Any equation

Billionaire Richard Branson hosts a technology conference - Nov. 30, 2006

At one point I mentioned my impressions of our host to News Corp.'s Philips, who works closely with Rupert Murdoch. "That's something I've noticed about these moguls," he replied. "They're almost always the most optimistic person in the room."

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Wednesday, November 29, 2006

Whos runs the web 2.0 bubble

Interesting article. Web 2.0 is centered around Google. I thought about it but not as intensive. Let the IT Gods bless every one and every one profits. I don't want to see that.

 No matter I am bullish on the stock and respect the people working over there. I have little concern over the stock prizes of tech firm.

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googleGThomas Hawk submits: Dave Winer has an interesting observation out today about the Web 2.0 bubble. Since most of the Web 2.0 companies are not going public, the question Dave raises is how will we know when the bubble bursts. Dave suggests that we'll know when Google's (GOOG) stock crashes.

Since most Web 2.0 companies are not selling stock to the public, and are mostly funded by VC money, the argument would be that we would not likely see a dramatic fallout like we did with the tech stock market in 2000-2002.

But Dave thinks that Google has a big impact on the health of the Web 2.0 playground and that as go Google's prospects, so goes Web 2.0.

And this might be true to the extent that so many Web 2.0 companies business plans are built on eyeballs and advertising. But there are some that are generating real revenue and real profits and these might be the ones that survive even if we do see a Google induced Web 2.0 crash.

With Google's current P/E ratio sitting at about 60 times earnings it does make you wonder: Is Google's stock price already set for perfection? What if advertising revenues don't come in in line? What if there are cracks beneath the surface of Google that we don't know about?

Earlier today, on his Real Money Radio Show, Jim Cramer was lathering Google up good, like only he knows how. He was praising the pathetic Verizon deal (there is no way people are going to pay $15 per month for YouTube on their phone) and telling viewers that they need to buy Google now. This kind of stuff worries me. Cramer is pure hype. And hype builds speculation which builds panic which builds crashes.

Of all of the stocks in the Standard & Poor's 500, Google has the 11th highest overall analyst rating out there. Wall Street could not be more bullish on the stock. Buy, buy, buy, buy. But there is very little room for more enthusiasm left on the stock. A single solitary analyst, Philip J. Remek over at Guzman & Co. (an investment company that no one has heard of of course), is the only analyst on Wall Street saying sell. And even there Guzman's target price for the stock is $460 a share, a mild drop from where it sits today. Contrast that with Safa Rashtchy over at Piper Jaffray who says that Google is going to go to $600 a share or with Mark Rowen over at Prudential who says that Google is going to go to $575 a share and you really do have a stock priced for perfection.

Personally, I'm scared of Google's stock price. I don't own the stock myself and worry that it could be set for a fall. And if it falls, I worry that Dave might be right and that the collateral damage that impacts the entire Web 2.0 could hurt a lot of great companies and businesses.

GOOG 2-yr chart:

goog two year

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Bid for gambling company, Is it a gamble?

Second Group May Make Bid for Biggest Casino Company [New York Times]

Summary: harrah\'sComing on the heels of last month's $15.5 billion offer by Apollo Management Group and Texas Pacific Group to buy Harrah's Entertainment, the largest casino operator in the world, a second buyout group is now considering an offer for the company. The new offer, led by Penn National Gaming, which owns casinos and racetracks, and D. E. Shaw, the hedge fund, sent shares up 2.5% yesterday after it was announced on CNBC. Any buyout would require the new owners to obtain a license to operate gambling businesses in the state of Nevada, a requirement that has stymied deals for casino operators in the past.
Related links: Media coverage: Las Vegas Business Press. Commentary: Who Will Acquire Harrah's? * Valuing the Casino Industry: Are There More Harrah's Out There? * Harrah's Seems Underwhelmed by Buyout Offer * Harrah's Gamble Not Without Risk * Bidding Up Harrah's.
Potentially impacted stocks and ETFs: Harrah's Entertainment (HET), Penn National Gaming (PENN) * Competitors: Wynn (WYNN), Las Vegas Sands (LVS), Trump Entertainment Resorts (TRMP), Monarch Casino & Resort (MCRI), Pinnacle Entertainment (PNK).

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Monday, November 27, 2006

Docor in wall street

Its of utmost important what I am saying here, People always want to be successfull, unfortunately or fortunately for many financial independence is the definition of success.

I understood it takes great effort to make money but at the same time it doesn't guarantee any thing more. I found these lines very very interesting read more

Lure of Great Wealth Affects Career Choices - New York Times

“lifestyle security comes from financial independence. I’m doing what I want to do and it just so happens that is where the money is.”

How to avoid the classic entrepreneurial mistakes

Grahams value investing principles in a nutshell

Benjamin Grahams Value investing

The analytical criteria of the Graham-Rao method contain quality criteria and valuation criteria. The quality criteria are:

# The company must have an adequate size (Sales of Rs 100 crore may be taken as adequate size for Indian companies)

# Current assets should be at least twice that of current liabilities and the total debt-equity ratio should not be greater than 1:1

# The company should have paid dividends and earned profits for the last 10 years

# There should be a growth in earnings per share (EPS) of 10 per cent per annum over the last seven years The two valuation criteria are:

1.The current share price should not exceed 20 times the average EPS in the last seven years for companies with a seven-year growth (GAGR) higher than 20 per cent. For companies with past growth rate between 10 and 20 per cent per annum, the multiplier has to be the growth rate itself. In other words fair value is the average EPS of the last seven years multiplied by the P/E ratio specified as above

2.The current price should also not be more than 1.5 times the latest book value.

Wednesday, November 22, 2006

Survivor characteristics by Fred Wilson with updates

Update from Fred
If you take money at a valuation that is not sustainable and the market corrects and you need more, you will often be facing a cramdown/restructuring where everyone gets wiped out and the new money owns the company

I've lived through that too many times and I don't want to see it again

The problem with lofty exit expectations is that once they are dashed by new market realities, you will often lose your investors and employees who were sold on an outcome that is no longer possible

Hope this helps

He mentioned that New Money owns the company. From an entrepreneur point of view does it really matter as long as he holds a considerable equity. I cant comment on this. Of course market will always correct the valuation when its on the either side.

Yes the second one makes more sense. Exit expectations should be a a decision of all the major stake holders. No one can belittle sweat equity.

A VC: Building A Bust Proof Portfolio

So here are the things that those "survivor" companies had in common:

Lower burn rates

Business models, revenues, and customers

Good venture syndicates with real VC firms (as opposed to strategic investors, amateurs, new funds, etc)

* Realistic valuations (as opposed to valuations that could not be sustained when the market broke)

* Committed entrepreneurs who were in it for more than just money

* Long time horizons for everyone involved (entrepreneurs, investors, employees)

* Reasonable exit expectations

* Less capital raised and less preferences on top of the founders

Isnt it some thing which he says indirectly that dont have high ambitions.

Reasonable exit strategies,If the market is offering you one is there anything wrongs in taking it.?

Realistic valuations? Wht not ahigh valuation

Less capital raised, is it you are telling in terms of part with less equity

Saturday, November 18, 2006

Indian entrepreneurship saga

Indians are the start-up kings of US- The Economic Times
Indians are the start-up kings of US. Indian immigrants to the US account for 28% of all foreign-founded private start-up companies in a climate dominated by immigrant entrepreneurs, according to a new study on the hot-button issue. The study found that over the last 15 years, immigrants have started one in four (25%) US public companies that were venture-backed, representing a market capitalisation of more than $500 billion

The study also found that immigrant founders are responsible for building a high percentage of the most innovative American companies, with 87% operating in sectors such as high-tech manufacturing, infotech and life sciences.
article is throws a light about Indian entrepreneur and the important part played in startups.
The surely could have mentioned some names like Ram Shriram, Vindh Khosla etc

Tuesday, November 07, 2006

Real Estate Sector review

I'm glad to have readers like Deepa who has some interesting insights and would like to know more about real estate sector. Here I make an attempt to understand the goings on
in the Real Estate sector and how and why it is a good investment option.

  • The Tenth Five Year Plan has estimated a
    shortfall of 22.4 million dwelling units in the country. According to
    one estimate, over the next 10 to 15 years 80 to 90 million housing
    units will have to be constructed.
  • The investment required for
    constructing these dwelling units and for providing related
    infrastructure during this period will be of the order of $666 billion
    to $ 888 billion at roughly $33 billion to $44 billion per year ($ 1
    billion = Rs 4,400 crore).
  • The real estate prices have stabilised and showing a steady growth after the boom and crash in the mid 1990s.
  • There is a steady growth in Housing Finance sector of approx.30 % over last four years.
  • The
    rate of interest for housing finance has become reasonable and
    affordable which has resulted into more credit offtake and subsequent
    maturing of the housing industry. Even though there is an increase, the
    rates are still reasonable to my mind after factoring in the tax
  • Fiscal benefits provided by the Government of India have encouraged the end users and investors alike.
  • Income of the urban buyer has grown substantially.
  • There is tremendous scope and growth in the Infrastructure Development.
  • Foreign investment by way of FDI has been approved.
  • Emergence of professional builders in the market with proper accounting standards.
    Emergence of rating systems for building projects.
  • The
    high growth of the real estate sector has led a lager financial
    institution to launch a dedicated real estate fund. These funds are
    simultaneously enticing large institutional investors as well as High
    Net worth Individual (HNIs) to expand their portfolio.
  • Last
    year in July, 2005 SEBI approved the country’s first venture capital
    fund, HDFC Property Fund, in real estate. Thus SEBI has not allowed to
    a property fund to come up as a mutual fund but as a venture capital
    fund. This will allow only the high net worth individuals and
    corporates to subscribe for this fund. HDFC board had approved the
    corporation’s entry into business of real estate venture fund after
    SEBI amended, the venture fund act.
    With the real estate prices of
    both residential and industrial properties in major cities
    sky-rocketing in the last two years and with housing still remaining a
    major bottleneck for urban planners and developers, the bullish outlook
    on the real estate market is justified. And many are projecting a 15-25% growth for the sector in the next 5 years.
  • A
    report by the CII has pointed out that globally the real estate is and
    should always be considered as an attractive investment option.
  • The
    scrips in the construction sector are doing very well. The Mutual Funds
    who have invested in Infrastructure stocks are doing well too.
  • Key Construction stocks to my mind are Gammon, GMR, Mahindra Gesco, Hind, Patel Engg., Era Constructions.

thinks the real estate sector is a bit heated up or prone to be over
heated. So there might be some go slow on Real Estate Mutual Funds and
Real Estate Investment Trusts (REIT) but they are bound to come, sooner
or later.

Monday, November 06, 2006

Warren Buffets Philosophy of investing

Warren Buffett  - the greatest investor of this generation. What makes him click

from his famous speech in 1984 Columbia Business School

1)) Value investing

 2) Look for the value of the company as a whole.

Buffett gave the example of the Washington Post Company, which, in 1973, was selling for $80 million in the stock market. At the same point of time, the assets of the company were worth not less than $400 million. So the price of the business was much less than its value. And that made it a good buy.

  3) Look for the total worth of business

  4) Psychology of investors.
           The higher stock prices go, the more they appeal to investors, a psychology that often proves detrimental to the interests of both investors as well as the market.

As Buffett pointed out in the speech, "He's not looking at quarterly earnings projections, he's not looking at next year's earnings, he's not thinking about what day of the week it is, he doesn't care what investment research from any place says, he's not interested in price momentum, volume or anything… He's simply asking: What is the business worth?"

Thanks DNAIndia for amazing article.

Rakesh Junjunwalas Portfolio

The above portfolio of RJ is as declared to stock exchanges as on Oct 31, 2006. I shall update the same as and when more information is filed with the exchanges.

Note: Panama Petrochem Ltd is the new stock addition to the master investor's portfolio in September 2006 quarter. I shall shortly post more research on Panama Petrochem on this blog.
Disclaimer: Please dont invest just because he invested in it. The message got to me from an elite group which has key peoples working in indian stock exchange.