Top 10 dividend yield stocks

Recent stock market correction has left many stocks with attractive dividend yields which indicated a huge value (assuming of course that their earnings do not go down even if growth is slower). A list of the top 10 dividend yield companies is as follows. Remember that dividends are tax free in the hands of the investor and to compare yields to bank interest rates you need to remove a third from the bank rates.

Company Dividend Yield -%
ARI Consolidated 16.37
Hind.Housing Co. 15.95
Swastik Safe Dep 15.87
Ashirwad Capital 15.35
Disa India 14.80
Kanchan Intl. 14.79
Schrader Duncan 14.19
Hinduja Ventures 14.04
Assam Petrochem. 14.01
Allsec Tech 13.33

Of Bottled Water

Read Vir Sanghvi's column on bottled water scam in the mint today. I see that happening all the time. Restaurants in India supply over priced bottled water. What he forgot to mention was that this happens in cinemas too. In PVR, for example, you need to pay a bomb for every thing from pop corn to water. Since they cannot sell bottled above MRP, they have come up with a novel scheme. Water bottles supplied to these halls are different from the usual ones available else where. Mind you, just the bottles and not the water are different. MRP printed on them is way higher that usual for similar quantities of even same brand available outside (and people pay for this despite water coolers that are installed in the premises that are filled with filtered water. They could do atleast this much)

I do not know if they pay a higher tax to the govt (vat etc on this ) but it sure makes them a huge margin. I guess every one has to just put his/her foot down and stop buying items that are priced nonsensically.

NIFTY Options Strategy

NIFTY bounced back today. The volatility is likely to continue.

Anyways, for those expecting the market to increase , recommend buying a strap (ie go long in two calls and one put options with same maturity and strike price) or a strip (long in two puts and one call options as before)

Google Ads Slider - Giving in to customers desire to view ads

Only Google can get away with it. Notice the slider (circled here)

Phew !!!!

Technical Analysis

Was reading Graham's "The Intellingent Investor". According to him, its is difficult to benefit from trend following. A number of people I know, deride technical analysis. However, I believe that patterns should be looked at in a way you would look at statistical models.

And therefore like these models, technical pattens represent statistical realities and like all statistical models, would give you predict correctly only a certain percentage of times. As long as this is above 50 percent it has some value. Need is to be persistent with your apporach and to select patterns where predictive success percentage is substantially greater than 50 percent.

Anyways, market held above the 4015 support today. Fundamentally the markets look prime for entry. However, the momentum may take the market down further in the near term.

Technical Support NIFTY

The next support for NIFTY is at 4015 levels. If that does not hold then the market can go down a further 5-6%. However, clearly these are attreactive levels to initiate long term long positions.

June 28, 2008

Financial Analysts and Consultants

Can never forget the following comments by a consultant:

Q. What does he tell a client who desperately wants to buy into the market?
A. "Buy half of your desired position now"

Q. What does he tell a client who is losing money in his position and wants to sell?
A. "Sell half your position now"

Now just imagine what would he tell his clients if the market moved up and what would he tell them if the market moved down.

Making sense of the Oil bubble

Prices of oil cannot continue to rise and sky is not the limit as most speculators would have you believe right now. Yes fossil fuels reserves are limited but human ingenuity would find a way to use alternative energy sources. Already a lot of ways which were not economically viable earlier are now profitable because the price of crude is way above the breakeven mark for them. As for limited refining capacities there is always a cycle of over capacity and shortage similar to all commodities.

Guess it is easier to return to these reasons when the price trend reverses than now. Till then keep looking at the following reasons for price rise and take your pick:

• Limited fossil fuel reserves
• Rising crude demand due to rapid demand increase from emerging economies
• Limited crude refining capacity leading to short to medium term fixed supply
• Cartelization from OPEC/ hoarding
• Speculation / Traders playing on uncertainty due to all of the above / Psychology

On Reverse Outsourcing

Salaries of software professionals rose 18.7% in 2007 while the rupee has gained almost 10% this year to near 10-year highs

Read the rest here

In defence of Blogging

Every reader may find a blog that caters to him/her, while journalism caters to the lowest common denominator

"...All who attack blogs are right, but they nevertheless miss the point, as Theodore Sturgeon could have told them. When Sturgeon, a writer of science fiction, was attacked for the rubbish that came out of that genre, he famously came up with what is known today as Sturgeon’s Revelation: “90% of everything is crud.

Sturgeon’s point was that most attacks against science fiction used “the worst examples of the field for ammunition”. And while he accepted that 90% of science fiction was rubbish, so was 90% of everything else. If one just looked at the crud component of any field, it would be easy to dismiss anything...."

Guess why you did not get THAT shortlist ??

LUCK...............

With a pile of 300 résumés on his desk and a need to pick someone quickly, my boss told me to make calls on the bottom 50 and toss the rest.

"Throw away 250 résumés?" I asked, shocked.
"What if the best candidates are in there?"


"You have a point," he said. "But then again, I don't need people with bad luck here."

- Becky Horowitz (Reader's digest)

Tata-Corus - Analysis

Here's my analysis

Winners
UBS + Goldman Sachs: Had bought 11 percent of Corus before they pushed CSN into the bidding game.(think 0.11*11 billion *(609-455)/455 dollars ) **

CSN: had 36 million of Corus Shares. Put in a bid of 475 pence per share (and did due diligence later, can you belive it, did it get ponied by the bankers or it believed Tata would outbid it anyway)

Corus and its other shareholders: Obvious Reasons

Indian Politicians: Blowing their own trumpet

What does India (or Indian industry) gain through this publicity? Would investors be more willing to invest in India after this?

Potential Dark Horse

Tata Steel:

Got screwed ??

Yes, but it had already decided to build up capacity. Think industry dynamics (consolidation, pricing power) Paid $700 per tonne of production capacity. Would have needed double that amount to build (unless what I read was wrong, some say PV of expanding to that capacity to be $2000)

Verdict

There can be only one loser . (unless the industry consolidation wipes out smaller players) But fingers crossed?

** 400+ million dollars

Tata Corus CSN - Three way Deal?

Instead of fighting over Corus if CSN and Tata Steel combine to form a three way alliance, it may be the best for the shareholders for all three companies (at least for CSN's and Tata's). The ongoing bidding war would only mean that either of the two companies would end up overpaying for the deal and the other would miss out on the synergies.

It may be best to try a new form that companies Corus's access to markets, CSN's access to raw materials and Tata's managerial capability. But would all the managers be ready to give up personal gains for this option? This remains to be seen as the story onfolds.

This week at ISB...

The week has been interesting to say the least. Not only did we get to interact with to top honchos of the corporate world but also had a chance to be in close quarters with our very own 'MAN'. I mean our very own PM Manmohan Singh.

It started with the Capital Markets Conference on the 29th followed by the ISB Leadership Summit on the 2nd of Dec and then the two day GLS. Each of these events were special in their own rights and have been clubbed with the five year celebrations of the ISB.

We are not sure where we may be another 10 years from now but know where we want to be and the promise is worth the wait. But hope is to be a part of that promise than just a spectator.

It is very easy to get disillusioned by what happens at ISB. So you need to keep you feet firmly planted in the reality and work towards what you want the most. The idea is to prioritize they say.

P.C. on microfinance

Chidambaram states yesterday what he should have a long time ago. Recognising that 22-25% percent interest charged by MFIs could reflect actual costs of transactions and put to rest attempt of some states to cap interest rates. What must be kept in mind that even at these rates MFIs cannot reach the poorest of poor. One of the most efficent (SKS) MFIs charges 26% and it may not be possible for others to reduce their costs to this extent.

The need of the hour is innovation in the business of micro credit. But there is hope, only recently has micro-fin become a hot debate topic around the world and attracting talent in some of the top B Schools. ISB has a full time elective on microfinace.

Problems of micro-fin are many fold in India (as in any other state). Lack of information leads to adverse selection and difficulty in monitoring leads to moral hazard. Both of these added to the problem of limited liability of borrowers and high transaction costs. The need of the hour is to create innovative products that make the process efficient reducing the risks ie costs associated with the small loans

Placements Ahoy!

This is that time of the year. It has come in earlier than was expected as some of the companies have been accommodated to coincide with their international recruiting schedules. However to keep the process fair to the later recruiters, while interviews would be conducted now, the offers would be announced only at the end of Day 1 of the placement week in February. For some, their focus companies are coming now and this is the chance for them to grab early positions. For the rest it is at least good early preparation for the placement week.

I plan to apply to a few as I find the roles interesting although that has nothing to do with my prior experience. The challenge would be to display skills that I can transfer to the open positions.

CAS has promised a lot of fireworks in the coming few months and indicated that this year's the recruitments are going to be our best yet

Me!! I am keeping my fingers crossed.

The topology of apology

Some say that one of the most difficult task for a person is to issue an apology. Ideally it should be one of the easiest things to do if one realizes one's mistakes and has a clear conscience.

However in corporate settings, it has other complexities. Some of the complexities arise bacause managers sometimes have to apologise for sins committed by their predecessors or by oversight of others. Other complications exist because doing so may not be in the best interests of the company, at least in the short run and since most managers' incentives are tied to short run performance it becomes an even ardous task.

Then again, there is a problem of how your apology is perceived. It is equally important that the company is perceived correclty and the wording and timing of the apology are appropriate. Lastly, the companies also must match the words they say through their actions.

Reference: Economist.com

V

Well the title is not 'V'ictory. It stands for term fi'V'e during this one year long journey called ISB. Added to that, it also stands for the number of courses I am taking this term different from term IV ( We had IV each in first IV core terms).

However, if I add the PaEV course, technically it should count for VI. I might end up applying to V or at the most V+I companies in the first round between Terms V and VI. Would be glad to make it in I of them. I mean I would be glad to make it in at least one.

Having slept at VI in the morning, am not sure if I am making any sense. But thought it was kind of interesting.

Terrorism and Index of Political Freedom

Globally, people tend to view poverty and deprivation as a cause of terrorism. However, in a research, conducted by Alberto Abadie at the John F Kennedy School of Government (Harvard University), factors such as GDP per capita, Human Development Index (HDI) and the Gini Index were found to be non-significant predictors of level of terrorism in countries around the globe.

In the study, Abadie used regression for measuring terrorism as measured by World Market Research Center's Global Terrorism Index (WMRC-GTI) upon various indicators of poverty including GDP per capita, HDI (measure of development in terms of health, education and income) , the Gini Index (measure of income or consumption inequality), Freedom House's Political Rights Index (Freedom House, 2004) , certain geopolitical features including include measures of country land area, average elevation, fraction of the country area in tropical climate and landlock and Indices for linguistic, ethnic, and religious fractionalization which measures the probability that two individuals chosen at random from the same country belong to different linguistic, ethnic, or religious groups.

The data suggests that the dependence on GDP per capita, HDI or the Gini index is not statistically significant and fails to explain terrorism differences. However the other variables including differences in linguistics, geography and climate and lack of political rights are significantly related to the incidence of terrorism.

The study, however, suggests that political freedom has a non-monotonic effect on terrorism i.e. terrorism does not rise with more oppression of freedom but is maximum in the intermediate range (E.g., Iraq, which is making a transition from an authoritarian regime to one with more political freedom is witnessing increased amounts of terrorism and North Korea, which has one of the most oppressive regimes in the world, has the lowest levels of terrorism as indicated by the WMRC Global Terrorism Index (2003-2004)

Also, certain geographical areas have been attributed to cause failure to eliminate terrorism such as mountain terrains (Afghanistan) or tropical jungles (Columbia).

Figure 1 Terrorism and Political Freedom (1- Politically Free to 7 - Authoritarian)

Reference:
Poverty, Political Freedom, and the Roots of Terrorism, Alberto Abadie, October 2004

Hierarchical Human Development Index (HHDI): Search for a better index

There is a multitude of indicators that quantify human progress on economic and social development. But what makes a person developed? Yes for the vast majority of people, getting the basic necessities of life, food, shelter and clothing is an everyday struggle. Once a persons basic needs are taken care of, is he content in mere sustenance. Can we call him developed?

If we say that a true measure of development is happiness, what is the index that measures true development of people? Until we develop happiness meters to measure happiness, we have to keep looking for better indicators that measure development.

One way of thinking about and happiness and development is in terms of evolution of needs. As a person evolves, his focus shifts to a new level of needs. If we consider Maslow’s hierarchy of needs to be absolute (although there is no proof of that) how would we want to measure our progress? For some one in search of Actualization, how good is to force him or her to think about basic material needs. Every excess is limited by the law of diminishing returns. Having one common measure of development index is like forcing everyone to keep thinking about needs that he or she derives only a marginal benefit from.

Maslow's hierarchy of needs.

5. Actualization

4. Status (esteem)

3. Love/belonging

2. Safety

1. Physiological (biological needs)

Countries, just like individuals, differ in their focus based on the level of collective development. After having achieved a level, they may want to focus on another set of needs to satisfy. Although, HDI indicator in its present from is a powerful tool for countries to measure their development on the bottom level and there is no doubt that there is a pressing need for them to do so, it has limited significance to top one third of the countries. Why not have different levels of HDI for countries on different levels. This index, called HDDI, would retain the advantages of the current HDI, and would give the relatively advanced societies a handle on their development based on their current level. Countries would be rated on the level they are and compared to countries at the same level. Measures such as environmental protection, political freedom, and gender and secularity issues can be built into appropriate levels. Also, the level of a country can be used to decide upon its responsibilities on each of these levels and those below it. The goal of the nations would be to move up in the hierarchy and then move forward in its level until they reach a new level.

Such an index should take care of the concerns of most nations and possibly give them relevant measures to focus on.