BF Investment Analysis

BF Investment  is an investment holding company for the Kalyani Group ( flagship Bharat Forge Ltd.) with investments in related promoter companies.BF Investment was formed as a de-merged entity that took over the investment management business of BF Utilities, and was listed on the exchange starting 14th January 2011. 

Most of the investment value for BF Investment is hidden in its carried at cost investments portfolio in promotor companies. While it has significant direct investments in sister companies, its insignificant investment as shown on balance sheet in its unquoted investment( KSL Holdings Pvt Ltd 49.99%) is significantly higher. (documents provided for at the end of analysis, for some documents you might have to send in a request at pratik.thakkar@valueeinvestor.com)

Objective & Methodology: 

To Find per share Intrinsic Value of BF Investments Ltd.

BF Investment is a core investment company, which shall be viewed and analyzed as a closed ended Mutual fund, with passive management.For the purpose of Analysis, most of the assumptions have been made on a conservative basis. 

Operating and many other unquoted investments have not been considered in the analysis, which even though lend a significant value per share, some uncertainty and lack of data on them restrict their inclusion in the following analysis. 

Even though some investments are not included in the analysis, if their carrying value were to be reduced down to zero (operating assets have a net operating asset position, significantly over current operating liabilities) the investment value of BF Investment wouldn't change , and even if it does it would on the upside.

Following is a table looking at the Quoted and one Unquoted Investment (KSL Holdings Portfolio) for BF Investments Ltd.

BF Investment Update

* Date of Shares at which price was taken was the closing price on Tuesday December 20th 2011.


Insiders Buying:


In the recent few months insiders have been buying a substantial portion of the company's shares in the open markets.On aggregate basis, they have bought 4.79 % .

Following the table there is a graph representing, at what levels insiders have been buying indicated by the green pop ups in the whole.

Insider Buying_ValueeInvestor Sheet3

* Data obtained through NSE

Adjusted Balance Sheet:

Adjusted Balance sheet can be found by clicking on the link. There were 37.7 million shares outstanding as of 31st March-2011. Giving a per share net operating value( without considering Investment Portfolio) of around 22.25 Rs/Share.Which for the purpose of calculation, and in the matter of conservative approach have not been included in the analysis.

Documents: 

Following are the documents that could and would be made available on further request:

1) KSL Holdings Pvt Ltd. (Annual Report Filed with Registrar of Companies)

                                                           Disclaimer

Funds managed by ValueeInvestor and its affiliates own investments that are bullish on BF Investment’s prospects. ValueeInvestor generally invests in long positions and did so based upon our analysis of publicly available documents, general market data and other information.

This report is based uponValueeInvestor’s own reading of BF Investments BSE filings from 2010 to the present as well as other public documents. ValueeInvestor’s views are also informed by its knowledge of, experience in, and opinions about Investment related companies generally.

This report is not intended as investment advice to anyone. Others may disagree with some or all of the opinions expressed here.ValueeInvestor urges anyone interested in the company to read BF Investments public disclosures available on its website or on BSE,and to consult whatever other source they deem appropriate in order to form their own opinions on the topics covered in this report.

We welcome any reponse from anyone willing to get more information or clarification on the claims made inthe report. We are willing to make ourselves available 

This is in no way an advice to buy or sell the shares of the company, and ValueeInvestor takes no responsibility for the same.

Crude Oil Analysis

The objective in this post is to analyze crude oil prices with respect to two parameters initially and propose to look at further parameters to fully understand the things that do affect the pricing or crude oil on a general basis in the markets. 

What we can see in the table below is Price of Crude oil with regards to Inflation adjusted prices, and compare that against Nominal Prices as well as Inflation in the corresponding Periods.Moreover, we look at Production & Consumption on a daily basis, as well as the change in the Consumption and Production Variable over the years. 

One thing that strikes out from the table is the fact that much of the Crude oil Price on an Inflation adjusted basis is 

1) Nowhere close to the Top,but is significantly above the all time lows. Suggesting more of an all time downside to the upside rewards for taking the risk of investing into Crude. 

2) Inflation on the other hand is close to the lows seen during the 1960s right before the double digit inflation witnessed in the US for the next decade.

3) Differential between Nominal and Inflation adjusted Crude Price was higher during 1970s as compared to todays differential.

4) Consumption has outstripped demand in the last two decades, and has infact grown up 200 percent from 2000-2010 ( a big factor in the rise of crude oil prices)

The data above shows a  positive bias for crude oil prices on a demand driven basis, but not as much of a solid footing based purely on inflation and its threats (which even though obvious, is hard to determine with regards to timing and becomes more of a speculative game, rather than one based on pure fundamental basis)

Now the question here is what could bring down the supply demand gap, and if there is something that can what happens to the price of crude oil. 

While it is hard to predict what happens to the price of crude oil, it is much easier to say how and what can decrease the Consumption/Production Differential. 

1) Increase in Exploration and Resulting Production from new reservoirs

       A lot of efforts have been concentrated by many companies in their search for and production from new reservoirs of Oil, while the problem is usually the lead time from Exploration , Discovery & Production an increase in the crude oil supply from these new discoveries could negatively affect the Consumption/Production differential. 

Henceforth, we suggest to look at the number of such production process underway , and the potential increase in crude oil supply estimated over the future years. 

2) Change to Renewable Energy : If crude oil prices are to remain stubbornly as high as they are, renewable sources of energy could fill in the gap at some places decreasing the marginal demand at some places and substantial demand at others ( while it is hard to predict where, Utilities and Transportation is seeing a huge shift from Crude Oil Usage to CNG and Electric Cars) 

Again while the process is slow, it is still underway and the ground no doubt is dynamic and shifting. Last but not the least Department of Energy publishes data on Crude Oil Reserves for United States, a really helpful determinant in the short term. 

All said we at ValueeInvestor believe Crude oil might go high, or might go low in the coming years. We do not have any idea as to the course of actions , but what we definitely know is that we would want to stay away from the asset class, and have none of it in our portfolio. 

Crude Oil Data

DISCLAIMER :To be sure we are in no way predicting or advising anybody to take action, the research is based purely for and on an educational basis.Any actions taken based on the research is purely ones own decision, and we do not take any responsibility for the same.

Nifty Quarterly Earnings and Subsequent Changes in Price the following Quarter

The following graph shows the change in Earnings for nifty in any given quarter, and the price changes in the subsequent quarter.

Seven most important things about Investments

Investments and investing is an intellectual game, with rewards which are financial in nature( makes the process all the more exciting). While easier said than done,picking the right investment is a skill and requires some work(discipline,curiosity and basic math skills) on behalf of the investigator (stock selector).

Moreover, while it is preferred to have  as much information available about the company  a few of the things becomes really important while looking at a business, and deciding if it has the characteristics of forming part of a long term investment. 

In this article we touch at the things we consider to be really important while selecting a stock/business and talk about why these things are important and how can they make a big difference. 

Investing is like working as a detective collecting and analyzing information and processing it intelligently to arrive at a decision, which in our case is valuation.

Listed below are the seven most important things to look at while selecting a long term business, we shall look at each one of them separately and in brief with as many examples to make the point clear for our readers.

So without wasting much of your time here are the 6 most important things to look in a business.

1) Product
2) Scalability
3) Return on Equity
4) Free Cash Flow
5) Cost Structure
6) Corporate Governance
7) Price

1) Product : The obvious question in everyone mind is why is product the first thing here ? If it is here why is it here ? Before we talk about product, we would like to touch upon what Mr.Buffett had to say about business in one of his famous quotes " If business does well, the stock would follow". Sounds like an amazing thing to say, and makes sense logically as well if we assume that there is a direct relationship with Business and Stock in the long term, which as a matter of fact do believe here at ValueeInvestor.

Now the question is so what forms a business ? Obviously it is nothing else, but the products a business has to offer. What forms Titan in India ? or Coca Cola business worldwide ? It is the products that these businesses have to offer.

However one may ask well all the businesses do offer products, how does one decide if the product is a good one, or something that can be relied to outperform or in demand for the long term. So to start with lets narrow our focus to things that are simple and easy to understand, products that either have a brand name and/or a monopolistic influence, or a lower cost structure in a competitive commodity like market which cannot be replicated by any other competitor.Things that make the product special, as well as give it a competitive edge over competitors is the product we want to look at.

Examples of which are : Coca Cola ( biggest in its industry with a dominant brand name) Posco ( steelmaker with a patented cost structure which makes the products cheaper by 15-20 percent in a commodity like business), Lovable Lingerie in India ( biggest market share , and dominant brands)

While it was a brief introduction to the product segment readers got an idea about, why and what products are important to look at during the preliminary search phase for strong products as well as products for which there is a recurring demand.

2) Scalability : Once we have recognized a product, the question that strikes first is how big is the market for this product? How many people can I sell this product to? The bigger the market the better the scope, and more the growth in earnings over the future years as well as increasing dividends.

For e.g How big is the market for underwear's ? Now sounds like a silly question but everybody world over needs it, and branded products do and have made a substantial foot print world over - Fruit of the Loom is a perfect example in the medium range branded product. Coca Cola is another.

While the market need not to on a world basis, if a company is just starting out and is domestic with a huge domestic need that is also a big market to look at, and plays a significant role during appraisal of the business.

3) Return on Equity(ROE): Why is return on equity of any consideration while buying a business/investment ? The same way why is interest important when you put your money in a savings account ? If money was free, we wouldn't have included this concept in here. But while that is not the case, and after selecting an outstanding product, with a big market the other most important check is to see if it is profitable or not as well. The best way to see if the product the way it proclaims about its outstanding stature in the industry is right, and you haven't made any errors yourself while looking at the company, and selecting a good product.

While Return on Equity is a matter of subjective choice , we prefer to look at Return on Equity in the 15-20 percent rage over a period of 5-10 years ( higher the better , but the higher ROE should be again to see if there hasn't been tempered with through financial engineering)

4) Free Cash Flow : What are the Free Cashflows from the business? Cash left after accounting for Capex, for the entire firm.( i.e debt holders as well as equity holders of the business) This is the cashflow that can be technically taken out of the business every year, and the one to use for valuation using the Discounted Cash Flow Analysis. It will be lower than Net Income for a growing company.

5) Cost Structure : The world if investment could be a scary place, if you don't know what affects your business, and its financial results.Keeping a tab and know how about costs affecting a business are ultimately really important.While one time change in cost structures ( e.g COGS , and SG&A) are less of a problem a certain addition or reduction in certain costs for the long run could change the valuation substantially.This is the part which can and will have maximum risk on the valuation if it is not fully accounted for, and understood during the stock selection process.

6) Corporate Governance: Most importantly who do you want as the stewards to your financial success ? People to look at the fact that things are running the way they are supposed to be running, and no nature of illegal activity is at play. If there is one it is detected at the first sight , taken care of and the system is cleared not to even think of that thing happening again. So every-time you look at a business make sure you know the history of the Management Committee , as well as the Board of Directors. While it might not be of a big difference in a short term , in the long term proven and successful management will stand miles apart from their weaker competitors financially, and in praise from their shareholders.

7) Price : Very last, but the most important of all is the price. You can end up being right on all the six factors mentioned above, but if you missed the last one you would still end up having a mediocre result. Price is ultimately what you pay , and value as Mr.Buffett would say is what you get. Value in our case is the valuation derived by us using the free cash flows that we can get out of the business for lets say 10 years and discounting it all back to todays time.

If that is higher than the current price the market puts on the business , you my friend have made yourself a fortune if not then even though you might be right on all counts a wrong price could certainly harm your results substantially.

As somebody once said , you make a fortune when you buy not when you sell. So if the price is right the sky is yours. Every asset has a value the only difference is the price paid to acquire that value. Lower the price relative to value paid higher the re


We hope our readers enjoyed , and learned from the 7 most crucial points about an investment , and would be able to look at investments in a better way now moving ahead.

If you have any questions feel free to write to us at info@valueeinvestor.com

ValueeInvestor Team®

FII and its Effects on the Indian Markets

Foreign Institutional Investors play a big role in the Indian Securities markets , with the sheer volume of money at play their arrival or departure can make the markets either move or crumble onto their own. While we haven't done any co-relation analysis, we might put up that data pretty soon. We do not believe any mathematical analysis of such sort plays any significant role, and can be relied upon while trading , we so believe a rough estimate about the flow of money especially FII and DII ( Domestic Institutional Investors) do impact the markets from a price view as well as a know how of and about the same gives an extra sense about the pulse of the market. While it is hard to say what is happening or what could happen in the market by just looking at one parameter, mixed all together they give a clear view about the market and expectations.

Attached together is the data set for FII obtained from RBI , and a graph showing the Y-O-Y change as well as total change in terms of money invested by the FII in the Indian Equity Markets. By the end of June '11 FII had a net investment of 3.62 lac crores or $67.33 billion assuming an exchange rate of  $1= 50 INR. FII has increased approximately at an annual compounded rate of 28 % since 93/94 till April 2010 last year. A substantial increase over a 17 year time span.

April-05

Trading and Technicals ( India Specific )

As we have indicated earlier in our posts, our emphasis shall be on emerging markets and on ways by which investor/traders can learn improve their returns in the market. 

Now while we do know, and wish our readers to know as well that making money in the market is not an easy task a scientific approach towards securities  followed with utmost discipline over a period of time promises decent return as compared to the markets. 

In this blog we take a different path as compared to our usual posts, and as a disclaimer want readers to know that while all can invest intelligently trading is not everybody's cup of tea.

Before we delve ourselves into the world of trading, we need to understand what trading is, and how is it different from our usual approach.( i.e investing)

Trading: Trading is noting else but buying (selling) a stock, bond, derivative with the hope of selling(buying) it back later at a higher(lower) price.Whereas in investment the underlying play a significant role as to the decisions leading upto investment, trading is solely based on factors including the psychology and emotions of markets as well as people in the market.

While many may believe the process akin to gambling , some scientific approach to it can improve speculation and speculators profit.Trading in a simpler language is nothing less than intelligent speculating. Which requires one to do his/her work and make decisions accordingly. 

Deciding onto peoples emotions is a hard guess, but interpretation of their actions when and as seen in the markets is a trading advantage.What are these trading advantages or emotional tests a trader shall or does use to get himself ahead of the market ? 

While there are many tools out there in the technical space we deal with a few that we think are highly important and affect the Indian Markets. We might and do reserve the right to add/change/delete or modify these variables depending on how they span out in the markets , and or if they still remain valid from a traders perspective.

Now without much of a wait let us just get to a few important trading parameters : 

1) Margin Trading 

2) FII/DII Trading within the markets

3) NSE Open interest

4) Advances Declines

5) Volumes / Market Capitalization 

6) PE Ratios ( Change in Earnings , Prices and overall Change ) 

7) Insiders buying/selling

8) Pledged and Un-pledged Shares
9) Cash levels at Mutual Funds , and Mutual Fund Activity

We shall look at each one of them individually and learn what they are and how they can aid a trader in his or her trading on a day to day basis. 

For the convenience of our readers , we shall do our best to keep the data updated on a daily basis as well as go back to the maximum date we can so that it helps in the analysis of individual securities at hand.

Valuation Concern : On Going & Liquidation

Valuation has been a really important parameter to arrive at the conclusion if any security/company is selling for cheap in the open market or not. But the decision about how to arrive at valuation is a pretty important matter as well.

There are two ways of Valuing a Company , i.e is the company to be valued as a Going Concern or Liquidation Basis ? 

The reason why we mention Going Concern and Liquidation decides how does one value a business. One may ask what difference is there , and why such a difference in terms of valuation for business.The answer lies in the fact about capitalism, and the constant and dynamic change in business environment where either new industries are introduced from nowhere ( e.g -technology), or the destruction of other industries ( due to many reasons , outsourcing, technological change has made the industry obsolete,smaller commodity companies cannot keep up with changing business environment). 

While many industries do not face the problem of obsolesce due to the products they offer (e.g chewing gum industry, food industry (taste might change),shaving industry,soft drink), certainly a few do.For the former class measuring the companies by their earnings or as a going concern is a much better yardstick for valuation , and for the latter a liquidation valuation does make a lot more sense. 

That said, there are times when one can find companies valued fairly on an earnings or a going concern, but substantially cheap on a liquidation basis. While one might guess that the best way to make money would be to just liquidate the business , the other reason for such undervaluation is that assets operating or non operating are carried on the Balance Sheet at Historical Cost which happens to be really low, and now predictive of what it would be in today's market. 

If the asset is non-operating we have two businesses combined in one entity, one is an ongoing business while the other a non-operating business which can be sold and a one time substantial gain can be realized by the shareholders.

If the asset is operating, and sells for relatively cheap much more care and attention should be put on the earnings and the Return on Assets (ROA) and Return on Equity (ROE) should be considered accordingly as this might result into higher ROA & ROE with comparable business, and a false undervaluation for the same.

So it is really necessary and important to know what the business is and what part of the growth cycle( either be mature or declining as well) it operates into to decide what valuation methodology to be used.

Commercial Banking , Credit Rating & Emerging Countries

With the problems in the Euro Crisis , and the spread of the contagion to other AAA rates countries in the Euro region, one thing comes to mind. Who gets really affected by the change in a country's credit rating ? Well you guessed it right BANKS. 

With the recent downgrades in the credit ratings of countries , the biggest impact that has been observed is a subsequent downgrade in the credit ratings of the banks in the same country. Which explains a really important fact. A Banks credit rating is highly dependant on its home country's ratings. 

Why would credit ratings be important to a bank ? Obvious reason is a better credit ratings, leads to lesser interest cost and higher earnings. But it is not as simple as it seems in the world of Banking. Lending money is a commodity business, the only way a competitor can get advantage over the other is by producing (i.e getting money) at a cheaper rates, given Net Interest Margin ( Net Interest Earned- Net Interest Expense) remains the same for each bank.

Now to compete at a Global Scale the only banks that can be really competitive are the banks with a AAA credit rating , which has a lot to do with the credit rating of the Country. Recent Financial and Euro region crisis, has had an impact on many of these things and made developed banks if not now in the longer term less competitive at the global scale if not fully dysfunctional in some extreme cases ( Banks in Greece, Portugal , Spain and Italy)

How does credit ratings relate to Emerging Markets ? Much of the last decade has seen an improvement in any of the emerging markets, especially in growth , their debt servicing capacity, Debt to GDP ratio, exports etc. 

In light of all these positive factors , and a simultaneous deterioration in the developed worlds credit rating opens up a significant opportunity for the developing markets and countries around the world that has a high possibility of leading to improvements in credit ratings. 

What impact can this have for the Banks in Developing Markets one may ask ? For one it makes them competitive at a Global Scale , Increase in business and increase in Balance sheets as well as increase in earnings. 

In this dynamic world, many opportunities do exist for the emerging markets. It is upto them to prove and grab their opportunity in this changed world.But, if things work right, many countries , and banks would and can benefit from a better credit ratings on a global level.

Treasury Borrowing Advisory Committee : Amazing Presentation, and what to expect ?

TBAC Discussion Charts Merged 



Disclaimer : All the data provided is for educational purposes, and Valuee Investors takes no responsibility for any financial loss.

Jim Rogers : Reuters

Japan Crisis, and a Follow Up on our recommendations Update 1

Since our last post on 16th March 2011, many things as the world & news might make you feel has changed. At the heart of it all, we think the fundamental reasoning for many things that that lead us interested in precious metal. 

NOTICE OF CAUTION : We agree with George Soros, when he says that Precious Metal (Gold) is the ultimate bubble.While we might be wrong, and take responsibility ( not from an investment perspective, but analytical perspective) and take it a step further that the bubble is not about to burst.( Again in the light of further information we do reserve the right to change our opinion, and does not bear responsibility of posting the same information onto the blog, but shall try too on a timely and a regular basis as best as we can)

In our last update about,  Japan crisis we said that the markets did over react too much, and there was no need to be worried about Precious metals as such. Before we move ahead and make any analysis, and recommendations  (purely for academic basis), it makes all the sense to look at how Precious Metals have performed, because if they haven't performed well and our analysis wasn't right there is no point for you to waste your time reading. 

SILVER : Since we came out with our article, silver has risen approx. 22% in prices. Even though we think silver to benefit the most with inflation fears, we have reason to be cautioned about its sudden increase. While the long term story does remain intact with industrial growth, lower inventory levels, and increased inflation fear.In the short term Silver is notoriously known for its wild swings, which is hard for many people to take care off.In the short term we are a bit cautious, while the Mid and Long term prospects remain positive with inflation fear rising. 

Next up , GOLD

GOLD : Gold since the last article has been up by around 5.5 %. While many believe GOLD to be the best hedge against inflation we differ on our perspective. While it might go up higher and further in the future, we are not as confident about GOLD as we are about SILVER. ( which we in the short term are still concerned about). The reason for our displeasure with GOLD involves two factors , limited industrial usage , and decreasing inventory.

Since the start of the year, the Gold Inventory levels have been dropping consistently and infact are down approx 5-6 percent as of the date of the article.Whereas Silver does have a lot of industrial usage, and its price is inversely proportional to Inventory levels Gold has a direct relationship ( again on an observed basis) to Inventory Levels. Increasing prices , with decreasing Inventory levels are a cause of concern to us, and because it lies outside our circle of competence beyond the Japan crisis trade, we shall stay away from the same.

Gold Inventory Data.

contd....

Irish Bow to Trichet on Bondholders as Rescue Hits $142 Billion

Ireland yielded to the European Central Bank to protect bondholders even as its bailout bill for the region’s worst banking crisis moved to as much as 100 billion euros ($142 billion) after stress tests.

The ECB in Frankfurt was “solidly opposed” to imposing losses on investors in senior bank debt, Finance Minister Michael Noonan told broadcaster RTE today. The ECB agreed to provide “ongoing” funding for the banks, he said.

Ireland agreed yesterday to inject as much as 24 billion euros into four banks, while leaving bondholders untouched. The government already funneled 46.3 billion euros into the financial system and set up an agency that paid more than 30 billion euros to assume risky property loans. The total equates to about two-thirds the size of the Irish economy.

“The government’s position is very clear: It doesn’t want to take action on senior bondholders for the four banks that are going forward,” said Matthew Elderfield, head of regulation at the central bank, said in an interview with Bloomberg Television. “It recognizes that, on balance, that if you want to have these viable banks able to return to the market that would hurt their capacity to do that.”

Standard & Poor’s Ratings Services today cut Ireland one notch to BBB+ from A-, though revised its outlook to stable.

The better forecast reflects “our opinion of the credibility of the stress tests conducted by the Central Bank of Ireland to determine additional capital needs for the Irish banking system,” S&P said in a statement.

‘Civil Servant’

The issue of who should share the burden of bailing out the banks has dominated Ireland, whose six government-guaranteed lenders have 63.3 billion euros in outstanding bonds, according to figures from the central bank.

During an election campaign last month, Eamon Gilmore, now deputy prime minister, dismissed ECB President Jean-Claude Trichet as a “civil servant” who would answer to politicians. As recently as March 28, Agriculture Minister Simon Coveney said the government planned to impose losses on senior bondholders in the banks to cut the costs of its bailout.

“Taking all of the losses of the banking system and putting them on the balance sheet of the government doesn’t make sense,” Nouriel Roubini, co-founder of Roubini Global Economics LLC, said today in an interview from Cernobbio, Italy, with Maryam Nemazee on Bloomberg Television’s “The Pulse.” “Eventually, the back of the government will be broken.”

Default Swaps

The cost of insuring against losses on the senior debt of European banks fell to the lowest in more than five months today. The Markit iTraxx Financial Index, linked to the senior debt of 25 banks and insurers, dropped as much as 6 basis points to 137, the lowest since November 19, before paring the decline, according to JPMorgan Chase & Co. Credit-default swaps on Portugal, Ireland, Greece and Spain also declined.

Allied Irish Banks Plc (ALBK), the largest lender during the decade-long economic boom, requires 13.3 billion euros of additional capital after its stress test, the central bank said yesterday. Bank of Ireland Plc needs 5.2 billion euros, while Irish Life & Permanent Plc must raise 4 billion euros and EBS Building Society has to find 1.5 billion euros.

Irish Life’s stock plunged 51 percent as the bank prepared to spin off its life assurance and asset management unit through a share sale. Both the government and central bank also said they expect the company to end up in state control.

EBS, the fifth-largest bank, will be merged into Allied Irish, while Bank of Ireland will focus on being a stronger domestic bank, Noonan told parliament yesterday. The total bailout cost for Allied Irish almost equals its peak stock market value of 21 billion euros in 2007.

Taxpayer Burden

“Rather than go after over 20 billion euros in unguaranteed bonds, the government is making ordinary citizens bear the burden of this debt,” Gerry Adams, leader of nationalist party Sinn Fein, said in statement today. “Rather than act in the interests of the Irish people they are acting in the interest of the banks.”

Ireland set aside 35 billion euros of funds for its banks last year as part of the country’s rescue package by the European Union and International Monetary Fund. The money includes 17.5 billion euros from Ireland’s own resources.

The banks were reliant on the ECB for 88.7 billion euros of funding at the end of last month, the Irish central bank said. They may have borrowed another 70.1 billion euros in exceptional liquidity from the Irish central bank, according to figures released on March 11.

The decision not to seek burden-sharing with senior bondholders “is a recognition of reality that Ireland is depending on continued funding for its banks from the ECB, which is setting the rules,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers.

Ireland will now seek to reopen terms of the country’s 85 billion-euro EU and IMF bailout. Noonan will bring the results to a meeting of European finance ministers in Budapest starting on April 8 as he pushes for a reduction in the 5.8 percent interest rate on the loans.

To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net

Warren Buffett India Part 6

Warren Buffett India Part 5

Warren Buffett India Part 4

Warren Buffett India Part 3

Warren Buffett India Part 2

Warren Buffett India Part 1

Chipotle Lures Investors to U.S. Spinoffs: Chart of the Day

The success of Chipotle Mexican Grill Inc. (CMG), whose shares have surged 12-fold since it separated from parent McDonald’s Corp. in 2006, has investors chasing after U.S. spinoffs in search for the next hidden gem.

The CHART OF THE DAY shows the newly developed Bloomberg U.S. Spin-Off Index, which includes companies like Time Warner Cable Inc. and cigarette maker Lorillard Inc., has jumped 163 percent from Dec. 31, 2002, through yesterday. The Standard & Poor’s 500 Index has increased 45 percent over the same time.

Northrop Grumman Corp. (NOC), the third-largest U.S. defense contractor, tomorrow will spin off its shipbuilding unit into a separate company to be called Huntington Ingalls Industries Inc. The unit makes nuclear-powered aircraft carriers, submarines and destroyers at yards in Louisiana, Mississippi and Virginia.

Other companies that have announced spinoffs since the start of the year include Liberty Media Corp., Marathon Oil Corp., Cablevision Systems Corp., Fortune Brands Inc., Motorola Corp. and ITT Corp. Pfizer Inc.’s shareholders are pushing the company to divest its nutrition business.

“That’s a brisk start for the year,” said Rob Gutman, an equity research analyst at New York-based Robotti & Co LLC., who focuses on spun-off businesses. “The unwinding of a conglomerate can unlock” the discount that investors typically apply to such companies, he said in a phone interview.

“Pure plays may get a premium because they could become takeover targets.”

Denver-based Chipotle was spun off from Oakbrook, Illinois- based McDonald’s in January 2006, and its market capitalization tripled to $8 billion after the separation, William Mitchell, author of Spinoff & Reorg Profiles, a monthly newsletter published from Costa Mesa, California, said in an interview. Its value may not have been revealed “if it was still buried inside McDonald’s,” he said.

To contact the reporter on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at Msilva34@bloomberg.net

Copper and Returns -- Is the party coming to an end ?

Lately Copper has been one of the commodity on everybodys mind, may it be Wallstreet Journal or the Main Street Daily.Every time we hear a commodity breaking a new high, China gets away with all the credit and applause, and sooner than later just an adjustment to the real supply and and demand turns into a full blown momentum taking the price to levels never seen before. 

Before we get any deeper, one needs to understand the fact that Commodities are fundamentally driven by supply & demand, and inventory levels.IF demand is high, but there is an inventory build up the first question is Why is there too much inventory with supply being so high, and prices rising ? 

Well answer might either be supply is already higher, higher the prices get it dries up the demand , or the higher prices are solely a function of money supply ( which is merely inflation, more good chasing the same quantity of products) 

To prove our point we go more into detail and look at a Graph Comparing the Price of Copper against its inventory levels . It helps us understand the change in the price of late, but raises an eyebrow when inventory seems to be rising off late. 

The White Line Represents the Inventory levels , where as the orange one represent prices.

Disclaimer : We would like to request the readers not to use the data for any commercial use, it is solely intended for educational purposes, and we do not take any liability for any of the investment losses. Do consult your financial advisor before making any investment decisions.

David Tepper CNBC : Part 4

David Tepper CNBC : Part 3

David Tepper CNBC : Part 2

David Tepper CNBC : Part 1

Walter Schloss : Part 5

Walter Schloss : Part 4

Walter Schloss : Part 3

Walter Schloss : Part 2

Walter Schloss : Part 1

Seth Klarman : Part 6

Seth Klarman : Part 5

Seth Klarman : Part 4

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Seth Klarman : Part 2

Seth Klarman : Part 1

Anti-Nuclear Sentiment in Europe

Warren Buffett, Ajit Jain answer students - India

Coca Cola & its Wonderful World.

We have heard it from Warren Buffett time and again how important is the product, even more important that the price at which you buy a company.Now, I am sure with the numbers at hand we can look at what he meant when he was talking about. It is fascinating to see what $40 invested in one share of Coca Cola in 1919, with all subsequent dividends reinvested (assuming no taxes & no commission), would be close to around $ 8.5 Million, and yes that is M at year end 2010.

We shall soon be out with the Coca Analysis, and a fair look at the assumptions Mr.Buffett made during his investment in the company, and an actual Excel File looking at the same.Till then enjoy the PDF. 

Coca Cola Must See

Junk bond yields fall to all-time lows

JUNK bond yields are at an all-time low, according to a widely watched Merrill Lynch index, as investors disappointed by the returns on higher-rated bonds pour billions of dollars into the market for speculative-grade debt. 


The average yield of bonds included in the Merrill Lynch High Yield Master II index dropped to 6.837 per cent, slipping under the previous low of 6.863 per cent in December 2004.

Through the first six weeks of 2011, as the Federal Reserve has held short-term interest rates near zero, investors have increased their stakes in mutual funds focused on junk bonds by a net $US4.6 billion ($4.5bn), and by $US5.4bn for funds focused on leveraged loans, a related risky asset class, according to Lipper FMI, a unit of Thomson Reuters.

The average junk bond now trades at US103.89 cents for every US dollar of face value, according to the Merrill index. The average risk premium -- the additional return investors get to buy these bonds rather than Treasuries -- is now 4.54 percentage points over comparable Treasury bonds, down from 6.22 in early December, according to the Merrill index.

"You've got to understand: what's your alternative?" said Carl Kaufman, high-yield portfolio manager at Osterweis Capital Management in San Francisco.

"Rates are starting to creep up, and you're starting to see increased risk in Treasuries and investment-grade corporates. The only counter-argument is that based on past performance, when (junk bonds) get to this level they should be sold."

This has translated into markedly lower borrowing costs for companies.

Ford Motor's Ford Motor Credit, for example, sold $US1.25bn of 10-year notes earlier this month to yield 5.75 per cent; last April, it sold $US1.75bn of notes with a shorter maturity, five years, at a significantly higher yield of 7.125 per cent.

Similarly, Chesapeake Energy sold $US1bn of 10-year notes last week to yield 6.125 per cent; in February 2009, the company sold $US425 million of six-year notes to yield 10 per cent.
The high-yield rally has also benefited buy-and-hold investors.

Junk bonds have enjoyed a remarkable two-year bull run, returning 15.2 per cent in 2010 and 57.5 per cent in 2009, according to the Merrill index.They have already gained 3.1 per cent so far this year.
As recently as December 2008, the average junk bond traded for 55.4 cents per dollar of face value and yielded 22.1 per cent.

Investors buying into the market at current levels, however, are getting paid less than ever before.
Market participants are divided over whether the market is poised for a fall.

Many note that risk premiums are near their historic average of roughly 5 percentage points above Treasuries and far from their low of 2.41 percentage points reached in May 2007. When yields hit their low point in 2004, risk premiums measured 3.1 percentage points.

Similarly, risk premium, also known as spread over Treasuries, now accounts for roughly two-thirds of total junk-bond yield, but could fall further before reaching its long-term median ratio of 57 per cent, said Adrian Miller, strategist at Miller Tabak Roberts Securities.

"While the decline in the ratio from its peak (in 2008) has been significant, down 32 per cent, this measure of relative value has room to go," Mr Miller wrote in a note this week.Martin Fridson, global credit strategist at BNP Paribas Investment Partners, said the current average risk premium is only slightly tighter than would be expected given the current low default rate, ample credit availability and the level of economic output.

"In valuing corporate bonds, it does not really matter how spreads have changed over the past month or quarter, or how they compare with some historical average," Mr Fridson wrote this week.

"Spreads are risk premiums, so if risk is below average, a comparably below-average spread does not indicate that the bonds are rich."

Investors see continued downward pressure on yields as long as the Federal Reserve continues to suppress short-term interest rates, particularly through its current, second round of quantitative easing, known as QE2.

"There has to be a natural end obviously, I just don't know when," Mr Kaufman of Osterweis said. "It's probably going to coincide with the end of QE2."
 

Japan May Face ‘Irreversible’ Blow to Power Capacity

Japan may face “irreversible” damage to power-supply capacity from the March 11 earthquake, limiting business activity, Citigroup Inc. said.

“Particularly worrying is the serious blow to the power supply in eastern Japan,” Kiichi Murashima, chief economist at Citigroup Global Markets Japan in Tokyo, said in an e-mailed note dated yesterday. “It is difficult to tell how long this will remain a drag on corporate activity.”


Power supply may be reduced by 54 percent under a worst- case scenario to companies reliant on Tokyo Electric Power Co., Murashima said. That calculation is based on the company suspending operations at all nuclear plants and thermal power plants being unable to resume operating, the note said.

The Nikkei 225 (NKY) Stock Average resumed its slide today as helicopters dumped water on uranium and plutonium fuel rods at a reactor at Tepco’s Fukushima Dai-Ichi power station and after a U.S. official warned of radiation dangers. The benchmark was down 2 percent as of 10:57 a.m. local time after earlier falling as much as 5 percent.

Tepco supplies 32 percent of Japan’s electricity, according to Murashima.

Citigroup’s ``base case'' is that the partially operating Kashiwazaki-Kariwa plant keeps going, other nuclear power stations do not, and operations at thermal stations return to normal “quickly.” Here, the calculation is for a 20 percent reduction in supply to companies reliant on Tepco.

“Reconsidering the economic impact of the earthquake, we cannot help but feel that Japan’s supply capacity may have been irreversibly damaged,” Murashima said.

To contact the reporter on this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

Price of Silver with relation to Inventory

The recent Japan crisis, has caused disruptions around many markets & sectors. Some for valid reasons, while many of it was over exaggerated. It is important to understand the fundamentals, look at the facts and rather make objective rational decisions . Below we look at an amazing graph, which does show many interesting things about silver pricing  & its relation to the inventory levels . Even though classified as a precious metal, majority of the silver demand comes from its utility in the industrial sector. Henceforth whereas Gold is directional proportional to inventory levels , silver is inversely proportional.

The graph proves what we are trying to explain.Even though silver after the crash has come down from the historic high's that it was touching each day before the crisis, the inventory levels keep dropping increased with the risk of Government having to print more money ( Japan in this case , while others where obvious , and Euro Crisis), we do not see any reason for Silver to go down or stay there in the medium or long term basis. 

Disclaimer:The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Japan Crisis and Updates on it

Japanese earthquake caught many by shock , and with the sheer magnitude as well as destruction the government which already is struggling with the highest debt load which much more problems to tackle off. 

In the first two days of the week, we saw a huge sell off across all the major markets , and the commodities markets alike. While the sell off on the equities market was taken too far not only in Japan, but many countries around the world, the sell off in the precious metal market came as a shock. 

The obvious reason for the precious metals market in the last couple of years, as the fear that governments around the world would , and have to print more money to fill the huge budget gap they all face.While the obvious reasons do & did come to light people ran for safety ( which in a scary market like this was no where to be found)

Its times like these ( Unfortunately in some cases) when the markets do react irrationally as compared to the magnitude of the problem, that many good companies can either be found at bargain prices , or few decent companies can work as amazing trading positions ( given you are in the market already, and know their intrinsic values to begin with) .

All, I would like to say is stop listening to the crowd and the noise and follow the facts and look for investments/trading positions . There are many out there in the market already. As the saying goes on Wallstreet , "Bears make money , bulls make money , its pigs who get slaughtered"

Unfortunately for those who where expecting any investment advice , we do not provide it at the moment ( There is no free lunch in this world) . Anyways , keep updated for the research reports coming out by the end of the week.

-Valuee Investor Team

Table 14 : Employment in Public and Organised Private Sectors

Table 14 : Employment in Public and Organised Private Sectors | (Excel File)

Table 13 : Sector-Wise Gross Capital Formation

Table 13 : Sector-Wise Gross Capital Formation | (Excel File)

Table 12 : Gross/ Net Domestic Capital Formation (At Current Prices)

Table 12 : Gross/ Net Domestic Capital Formation (At Current Prices) | (Excel File)

Table 11 : Changes in Financial Assets/ Liabilities of the Household Sector (At Current Prices)

Table 11 : Changes in Financial Assets/ Liabilities of the Household Sector (At Current Prices) | (Excel File)

Table 10 : Sector-Wise Domestic Savings (At Current Prices)

Table 10 : Sector-Wise Domestic Savings (At Current Prices) | (Excel File) 

Table 9 : Per Capita Net State Domestic Product at Factor Cost - State-Wise (At Constant Prices)

Table 9 : Per Capita Net State Domestic Product at Factor Cost - State-Wise (At Constant Prices) | (Excel File)

Table 8 : Per Capita Net State Domestic Product at Factor Cost - State-Wise (At Current Prices)

Table 8 : Per Capita Net State Domestic Product at Factor Cost - State-Wise (At Current Prices) | (Excel File)

Table 7 : Components of Net State Domestic Product at Factor Cost by Industry of Origin (At Constant Prices) (Base : 1999-2000)

Table 7 : Components of Net State Domestic Product at Factor Cost by Industry of Origin (At Constant Prices | (Excel File)

Table 6:Components of Net State Domestic Product at Factor Cost by Industry of Origin(At Current Prices)

Table 6:Components of Net State Domestic Product at Factor Cost by Industry of Origin(At Current Prices) | (Excel File)