I intentionally waited a few days to post a video of my latest appearance on CNBC's worldwide exchange. For once i wanted to say if I was once again right: it seems to be the case.
Much of my previous picks like Pepsi, Wall Mart and Swiss Re are up: Swiss Re it is now at 91.25 up over 5% today only. I recommended it on the low 80's and is now well above that.
Wall Mart and Pepsi (as huge companies as they are) are still up over 2% in a little bit more than one week.
Even last month picks like VP Bank are up now over 8%.
Fear not: this is not a narcissistic about how good are my picks. Markets are by definition unpredictable but valuable companies will always remain such. You might wonder what happened to Bear Sterns and that perhaps would have not fitted the definition of a valuable company for the long term. On the other side some important brands like Pepsi and Wall Mart have a much lower volatility and are not likely to disappear overnight.
I am mentioning the hypothetical returns to support the view I expressed on the show: It is certainly too naive to say "let's stay away of equities, especially U.S. equities" . In this case there is no discussion and no debate. The good pickers or good fund managers (and I am certainly neither) should be able to pick good stocks in a storm like this. If they are not, they are not worth their money (and often it seems to be the case: you would be amazed to know how many fund managers under perform vs. their reference index).
Last but not least about US: the Dow Jones Industrial Index is down "only" 6.42%. If you compare this to the [European and global indexes 1 you will see that U.S. equities did pretty well: The German index lost almost 20% and both China and India over 20%. Japan 18% isn't reassuring either.
True it is much harder to find value in the current market conditions. But is it so hard as to give up investing all together? hardly.
Reader commentary
Dr Suhas Mhatre
April 6th, 2008 at 09:19am
I agree with Dean Costa's observations. There is no difference of opinion that major companies with âgoodâ strategies will always find a way to survive even in the difficult situations because they base their business on strong fundamentals and work hard to keep it so.
Fundamental factors that will help companies survive in the current economic climate are their levels of diversities with respect to (a) products and/or services and (b) geographies that they operate in. They will follow the Markowitzâs Nobel winning theoryâ setback in a particular product/service area will be compensated by a diverse area that is âcomparativelyâ un-affected by the current crisis; the same principle applies to the geographic spread as wellâ upset in one geography may be compensated by income from a âcomparativelyâ unaffected one. I used the word âcomparativeâ, because given the expanse of the US economy and the depth of its problems, there is hardly any business area or geography that will remain totally unaffected.
However, the percentages of upward / downward movements of the various indices need to be seen in a different perspective. As investor, the realizable absolute net gain / loss over a period is more important to me. Because, markets will always go up and down but what it makes to my net worth is what matters most !
DJ has fallen the 6.42% over last three months compared to German, Indian, Japanese or Chinese indices that fell over 20%. In fact, to quote a specific case, Indian indices fell over 37% at the last count (end March 2008) over last 3 months. But, S&P NIFTY (one of the major Indian Stock Indices) has grown about 500% over last 5 years and more than 100% over last one year (52 weeks). So, even discounting for the loss of 40% in the last three months, investors still achieved a net yield of over 60% in the last year, alone. Shares of many individual companies with strong fundamentals and with weak/no links to US economy are still having a net yield of over 100% over last one year. So, for good Indian companies, it has been a story of "some loss in the gain" and not of "the loss in the net yield". As a happy surprise, share prices of the major Indian IT (Infosys, Wipro, TCS, etc.) companies that are heavily dependent on the US business (even up to 98% in some cases); are still 5 - 20% above their lowest levels during the last 52 weeks.
Some experts believe that US economic woes will bring down the "orders" to their foreign suppliers due to lowered consumption levels but this may get compensated eventually by increased off-shoring (BPO and such) activity by US businesses as they start cutting costs to remain in business / remain competitive.
It will be quite interesting to see how the whole global economic scenario unfurls. US Treasury Secretary Paulson has already accepted in public that US economy needs a âTotal Regulatory Revampâ. Many experts are not happy with the depth of the primary framework suggested for discussion. It remains to be seen how much of this hard talk sees the day of light on the background of the US presidential elections that will go on till late this year.
Dr Suhas Mhatre
Dr Suhas Mhatre
April 6th, 2008 at 09:18am
I agree with Dean Costa's observations. There is no difference of opinion that major companies with âgoodâ strategies will always find a way to survive even in the difficult situations because they base their business on strong fundamentals and work hard to keep it so.
Fundamental factors that will help companies survive in the current economic climate are their levels of diversities with respect to (a) products and/or services and (b) geographies that they operate in. They will follow the Markowitzâs Nobel winning theoryâ setback in a particular product/service area will be compensated by a diverse area that is âcomparativelyâ un-affected by the current crisis; the same principle applies to the geographic spread as wellâ upset in one geography may be compensated by income from a âcomparativelyâ unaffected one. I used the word âcomparativeâ, because given the expanse of the US economy and the depth of its problems, there is hardly any business area or geography that will remain totally unaffected.
However, the percentages of upward / downward movements of the various indices need to be seen in a different perspective. As investor, the realizable absolute net gain / loss over a period is more important to me. Because, markets will always go up and down but what it makes to my net worth is what matters most !
DJ has fallen the 6.42% over last three months compared to German, Indian, Japanese or Chinese indices that fell over 20%. In fact, to quote a specific case, Indian indices fell over 37% at the last count (end March 2008) over last 3 months. But, S&P NIFTY (one of the major Indian Stock Indices) has grown about 500% over last 5 years and more than 100% over last one year (52 weeks). So, even discounting for the loss of 40% in the last three months, investors still achieved a net yield of over 60% in the last year, alone. Shares of many individual companies with strong fundamentals and with weak/no links to US economy are still having a net yield of over 100% over last one year. So, for good Indian companies, it has been a story of "some loss in the gain" and not of "the loss in the net yield". As a happy surprise, share prices of the major Indian IT (Infosys, Wipro, TCS, etc.) companies that are heavily dependent on the US business (even up to 98% in some cases); are still 5 - 20% above their lowest levels during the last 52 weeks.
Some experts believe that US economic woes will bring down the "orders" to their foreign suppliers due to lowered consumption levels but this may get compensated eventually by increased off-shoring (BPO and such) activity by US businesses as they start cutting costs to remain in business / remain competitive.
It will be quite interesting to see how the whole global economic scenario unfurls. US Treasury Secretary Paulson has already accepted in public that US economy needs a âTotal Regulatory Revampâ. Many experts are not happy with the depth of the primary framework suggested for discussion. It remains to be seen how much of this hard talk sees the day of light on the background of the US presidential elections that will go on till late this year.
Dr Suhas Mhatre