Wk 29

Potential winners AND the buy pt:

1. Pride international (PDE) [ 37.21]
2. CNH global (CNH) [ 58.49]
3. CF inds hldgs (CF) [already exended 10% beyond buy pt: 66.6]
4. Riverbed (RVBD) [ 46.76]
5. Oriental education (EDU) [already extended 3.2% beyond buy pt:56.41]

shares based on IBD list

I shall be regularly (as much time I can make free) trying to give a few tips on the
shares which might be breaking out of bases and are potential winners. I shall keep
it short and not give any reasons ...

Uranium investment opportunities

In this article I shall be updating you with the recent development in the uranium market which is set up for a big boom in the coming year after a healthy correction recently.





Spot prices of uranium:
Look at the chart above((Picture courtesy : http://www.uxc.com/review/uxc_Prices.aspx).
It is expected that after a correction of almost 20% and an impending stock market recovery soon we might be in a time to invest in uranium. The spot prices are expected to hit $140 next year and this would be fuelled by the rising demand in autumn(power requirement peaks in winter). So that would give a return within next six months of 30% or more.

For unexperienced investors one might one to own Pinetree capital(TSE:PNP) which has had a severe correction recently and is nicely poised for sustained upturn(provided the market forces do not turn bearish).

Other possibilities are TSE:SXR(Uranium One) and Cameco corp.

All the best and happy returns.

Some article about bear market (impending ?)

There are some rumours about the beginning of a bear market soon.
Here are some articles about earlier bear market.
(Courtesy:this website)
The stock market crash of 1987 was the largest one day stock market crash in history. The Dow lost 22.6% of its value or $500 billion dollars on October 19 th 1987! In order to understand the crash, we must first study the cause.
1986 and 1987 were banner years for the stock market. These years were an extension of an extremely powerful bull market that started in the summer of 1982. This bull market had been fueled by hostile takeovers, leveraged buyouts and merger mania. Companies were scrambling to raise capital to buy each other out, in essence. The philosophy of the time was that companies would grow exponentially simply by constantly purchasing other companies. In leveraged buyouts, a company would raise massive amounts of capital by selling junk bonds to the public. Junk bonds are simply bonds that have a high risk of loss, so they pay a high interest rate. The money raised by selling junk bonds, would go towards the purchase of the desired company. IPOs were also becoming a commonplace driver of the markets. An IPO is when a company issues stock for the first time. “Microcomputers” were also a top growth industry. People started to view the personal computer as a revolutionary tool that will change our way of life, and create wonderful profit opportunities. The investing public was caught up in a contagious euphoria, similar to that of any other bubble and market crash in history. This euphoria made people, once again, believe that the market would always go up.
Despite the strong economic growth, SEC was unable to prevent shady IPOs and conglomerates from proliferating. In early 1987, the SEC conducted numerous investigations of illegal insider trading. This created a wary stance from many investors at this point. Also, due to the extremely strong economic growth, inflation was now becoming a concern. The Fed rapidly raised short term interest rates to temper inflation. This, unfortunately, had an effect of hurting stocks as well. Many institutional trading firms started utilizing portfolio insurance to protect against further stock dips. Portfolio insurance is a practice that uses futures contracts as an insurance policy. People that hold the futures contracts can make money as the market crashes, offsetting the losses in the stock holdings. After interest rates had risen, many of the large institutional firms started using portfolio insurance all at the same time. The futures market was taking in billions of dollars within minutes, causing the futures market and the stock market to crash from instability. Additionally, common stock holders all wanted to sell simultaneously. The market couldn’t handle so many orders at once and most people couldn’t sell because there weren’t ANY buyers left!
Within one day, 500 billion dollars was evaporated from the Dow Jones index. Markets in every country around the world collapsed in the same fashion. When individual investors heard that a massive stock market crash was in effect, they scrambled to call their brokers. This was unsuccessful because each broker had many clients. Many people lost millions instantly. Some unstable individuals, who had lost fortunes, went to their broker’s office and started shooting. Several brokers were killed, despite the fact that they had no control over the market action. The majority of investors who were selling, didn’t even know why they were selling, except that they “saw everyone else selling”. This irrational mentality caused the extreme market crash. Most futures and stock exchanges were shut down for the day.
Around this time, the Fed started to intervene. Short term interest rates were instantly lowered to prevent a depression and a banking crisis. Remarkably, the markets recovered quickly from the worst one day stock market crash. Unlike the stock market crash of 1929, the market quickly started on a bull run, once again. This was powered by companies buying back their stocks that were undervalued after the severe crash. Additionally, the Japanese Nikkei index was embarking on its own massive bull market. This tremendous momentum helped pull the US stock markets to new heights never seen before. Some benefits came as a result of the 1987 stock market crash. For example, the circuit breakers system was implemented, which electronically stops stocks from trading if they plummet too quickly. This will prevent any future one day vertical drops, like 1987.
Once again, the remarkable similarity between all of the market crashes is striking. It seems that after all of the historical market crashes, people would learn to foresee a coming financial disaster. This rarely happens, of course, which is why there is constant opportunity for the smart money to prosper from the irrationality of other people.

Article on technical chart analysis

This blog is being created while reading books and good websites on chart analysis. This is also very important for small investors as timing a buying of a share is very important for getting good returns on a time span of 1-2 years. Sometimes bad timings can lead to a waiting time of 1 year or more before one can break even.

(Taken from the book by william j'o neil:)

stocks with big future prospects

All these stocks have made it to IBD top 100. But due to ongoing subprime lending crisis some of them are having corrections and thus provides new consolidated values. Here are some of them.

1. Green mountain coffee roaster(GMCR): The stock is getting a correction of around 6-7% and if this proceeds to another 10% to value of around 34USD then this is an extremely good value to buy. Since this stock had a base price of around 30USD this would be within a deviation of 15% from the base.
2. Amazon(AMZN) : Inspite of the subprime crisis this stock is one of the growth stocks of IBD 100. And more importantly it is within 10% of the base of 70 USD. This will prosper in the near future. More importantly in midst of the difficult market amazon has hit a new high. All the right parameter and ready to grow once this crisis stops.

Fundamental versus techincal investment.

During the recent rout in the stock market I am starting to question the pure buffet style of investment for small investors like me. Does it really pay to see all your gains washed away simply because the company fundamentals are strong and there will be an eventual recovery ?

I do not think so. For small investors I would surelly suggest reading the book "How to make money in stocks" by "william j. o'neil". This book emphasises on ways to preserve the gains in the bull market and several other useful hints. Mainly it introduces CAN SLIM strategy.

C Current quaterly earnings per share: Higher, the better.
A Annual earnings increase: Look for significant growth.
N New products , New management, New Highs : Buying at the right time

S Supply and demand: Shares outstanding plus big volume demand
L Leader or Laggard: Which is your stock ?
I Institutional Sponsorship: Follow the leaders
M Market direction: How to determine it ?

During this correction the stocks where I lost money were precisely the ones where the sector was beaten down due to huge gains in the earlier bull run. Most of the stocks still have good fundamentals but cannot be called good growth stocks. This is where the CAN SLIM strategy will help investors. Hopefully we can find a nice balance of both worlds.

Example :

Philips : Though it is undergoing drastic reorganization, streamlining and focussed acquisitions does not have the required growth momentum. No new products etc. So although the company is sitting on huge cash reserves (close to 20 bn) it is in a beaten sector.

Arcelor mittal: This is a very nice selection but still is suffering in the short term due to overall steel sector getting the beating. In fact it is a very investor freindly management and looks agressively for growth. Recently they have penetrated the chinese steel market(joinlty with bao steel and nippon steel. 15% stake). This stock also lists in the IBD top 100. Look for buying opportunity in a week or two.

Salzgitter: This is also a good company with sound policy and with exteremely low debt/equity: 0.04. But still I lost some cash due to wrong timing of buying this stock. It is also a nice fundamental stock and they are also tying up with Korean POSCO in search of growth.
So overall it is a nice long term investment, given the growth of the german economy in the offing.


Overall there advices are very useful (atleast to me):
(Courtesy: www.investors.com)

1. Consider buying stocks with each of the last three years' earnings up 25%+, return on equity of 17%+ and recent earnings and sales accelerating.

2. Recent quarterly earnings and sales should be up 25% or more.

3. Avoid cheap stocks. Buy higher quality stocks selling $15 a share and higher.

4. Learn how to use charts to see sound bases and exact buy points.

5. Cut every loss when it’s 8% below your cost. Make no exceptions so you can always avoid huge, damaging losses. Never average down in price.

6. Follow selling rules on when to sell and take profit on the way up.

7. Buy when market indexes are in an uptrend. Reduce investments and raise cash when general market indexes show five or more days of volume distribution.

8. Read IBD's Investor's Corner and Big Picture columns to learn how to recognize important tops and bottoms in market indexes.

9. Buy stocks with a Composite Rating of 90 or more and a Relative Price Strength Rating of 85 or higher in the IBD SmartSelect® Corporate Ratings.

10. Pick companies with management ownership of stock.

11. Buy mostly in the top six broad industry sectors in IBD’s New High List.

12. Select stocks with increasing institutional sponsorship in recent quarters.

13. Current quarterly after-tax profit margins should be improving, near their peak and among the best in the stock's industry

14. Don’t buy because of dividends or P-E ratios.

15. Pick companies with a superior new product or service.

16. Invest mainly in entrepreneurial New America companies. Pay close attention to those with an IPO in the past 8 years.

17. Check into companies buying back 5% to 10% of their stock and those with new management.

18. Don’t try to bottom guess or buy on the way down. Never argue with the market. Forget your pride and ego.

19. Find out if the market currently favors big-cap or small-cap stocks.

20. Do a post-analysis of all your buys and sells. Post on charts where you bought and sold each stock. Evaluate and develop rules to correct your major past mistakes.

Potential good stocks( A company by company analysis)

I shall be analyzing few stocks which I think are potential buy for long term.
The companies will not be initially sorted out sector wise but maybe as it evolves
that can be done.

KWS Saat:
What does it do ?
KWS Saat AG operates as a plant breeding company worldwide.It primarily engages in the sugar beet, corn, and cereals businesses. The company involves in the multiplication, processing, and distribution of sugar beet seeds. It also produces and distributes corn for grain and silage corn, as well as oil and field seed. In addition, the company produces hybrid rye, wheat, and barley. Further, it offers research and breeding services; services for sugar beets, corn, and cereals; and consulting services. KWS Saat is based in Einbeck, Germany.

P/E: 15.3
Industry P/E : 31.6
S&P 500: 22.4



Market Cap: 775.43 Mil

Cash position:

Current ratio: 2,57
Quick ratio: 1,66

Price/Book Value : 1.97

Debt/Equity Ratio :0.07

Number of employees: 2,550 people in 68 countries

Market Cap:


News (courtesy Business week):

KWS Saat AG reported earnings results for the nine months ended March 31, 2007. For the period, the company reported increase in its net sales by 6.5% to €428.3 against €402.2 million in the year ago period. This positive trend is attributable to good sugarbeet seed business and increased use of agricultural crops as a source of energy. Net income after minority interests was €62.2 million against €41.9 million reported in the year ago period. For the full year ending June 30, 2007, the company anticipates sales of just over €520 against €505 million reported in the year ago period, and an increase in operating profit of about 20% over the previous year of €46.7 million. Net income will be positively impacted by credit balances in corporate income tax in Germany.

Major competitors:
Syngenta (with its Hilleshög brand) and Advanta.

Business sectors:

1. Sugarbeet : In Germany, the single largest producer of sugar beet in the European Union (EU), KWS is the market leader. The market for sugar beet seed in the European Union is gradually decreasing due to increasing productivity of new varieties and to decreasing acreage (together with a production quota system). Therefore, KWS is seeking expansion in Central and Eastern Europe and in North America. In the United States (US), KWS' subsidiary, Betaseed, has formed an alliance with the American Crystal Sugar Company.
2. Corn
3. Cereals
4. Oil and fodder crops

Outlook for 2006/2007:(taken from the annual report )

• CULTIVATION OF PLANTS FOR ENERGY WILL HAVE A POSITIVE IMPACT ON THE DEVELOPMENT OF ALL SEGMENTS AT THE KWS GROUP THIS FISCAL YEAR.
• While biofuels now account for 1.4% vehicle fuel usage in Europe, this proportion is to be increased to 5.75 % by 2010. The German government is currently planning a mandated-admixture of 3% of ethanol in gasoline and 5% of biodiesel in diesel as of 2007. The use of
  biofuels is now mandatory in the U.S., resulting in growing global demand.
• In the wake of this fundamental policy decision, the European sugar industry has decided to expand bioethanol production based on sugar beet.
• However, one concrete risk is the reform of the European Sugar Market Regime, which was finalized by the EU on November 24, 2005. The reformed version, which is to be
  valid until September 30, 2015, resulted in a 20 % reduction in sugar beet cultivation area in the EU in the very first vegetation period (2006). A further decline in area can be
  expected for the 2007 sowing season.
• Two of the above points taken together it has been predicted there will be
  10 % decline in net sales in the sugar beet segment
• The recently completed rapeseed sowing season clearly shows the growing demand for biodiesel. We posted an increase of around 40 % in sales of KWS rapeseed hybrids.
  Moreover, the energy corn variety ATLETICO will stimulate business in the corn segment.
• Overall, we will probably be able to achieve double-digit growth in net sales again
  at the corn segment. At the same time, we expect clear growth in the operating result, especially given the fact that our burdens in Southern Europe will be lower. We also
  assume that our business in Argentina will expand in the medium term. KWS has had a presence and continually grown there for many years. This fiscal year we have
  launched corn breeding activities at our own breeding station in Argentina – a further regional focus alongside Europe and North America

A nice quote from their report:

Every person is different, every person is special. In interaction with our ideas and skills, our intellect and creativity can achieve great things – in order to treat life on earth with respect.

Distribution of manpower in various sectors:

Research and Development :35 %, Production: 21%, Sales :28 %, Administration: 16%

New opportunities after the recent correction

Just tracking shares picked from Mauritrader and see how vulnerable it is to correction:

http://spreadsheets.google.com/pub?key=pmwQQGCv8U57tJSF0BcMfZA

Name Correction(%)
AFSI 30
APLX 23
VSR 26
IGLD 26
CPA 25
TTEC 21.5
HRZ 20.53
INNO 17
FTEK 17
TASR 17
ULTR 12.9
SNDA 16.2
HURC 15
XRA: 12.5
HURN 11
NAVI 10.6
KHD 10.81
CKSW 8.01
MA 9.2
IMA 9.1
NTLS 7.2
FSLR 7.3
OMTR 7
LFL 6.3
CNH 6.1
PRGX 6.7
TESO 4.4
IHS 2.58
CRNT 1.7
DECK 1.3
VDSI None
EVEP None

stockbee: Opportunity Buffet Part 2

stockbee: Opportunity Buffet Part 2

Articles on Warren Buffet(Part 1)

Taken from Intelligent Investor:

Taking an interest in the doings of Warren Buffett is one of those things that tends to start out as an act of intellectual curiosity and ends up dragging you deeper and deeper into the thought processes of this most remarkable of individuals. Over the years, many professional investors have made the journey, as I have done, from initial scepticism ("can this guy really be that good?") into outright awe and fascination at what this great investor and businessman has achieved.
This is not so much because of the track record that Buffett has put together as an investor over a period of more than 40 years, formidable though that is - a compound annual return of more than 20% per annum since the late 1950s. It is more, I think, because of his unrivalled ability to talk the most profound (and entertaining) common sense about the way that the business and financial world operates.
Professional investors are by and large a competitive and sceptical bunch, whose daily task is to filter hope (of which there is an unending supply in all financial markets) from reality, a somewhat rarer commodity. I have never found one who disputes that Buffett has an extraordinary capacity for telling things the way that they really are, and doing so in a way that is wonderfully succinct and to the point.
There are plenty of examples, many familiar, some less so, in a new book on Buffett that has just appeared. The author is a British fund manager James O'Loughlin, who is head of global equity strategy at the Co-Operative Insurance Society. He quotes extensively from the vast archive of Buffett quotes and folklore, but also adds some interesting new details on aspects of Buffett's career that have not been often aired elsewhere.
The sheer scale and scope of the business Buffett controls now does is frequently misunderstood. While he spent the first twenty years of his working life as a stock market investor, buying and trading shares for a group of wealthy clients in his home state of Nebraska , for the last thirty years he has been running something much more ambitious. His holding company Berkshire Hathaway is built around a core of cash-generative insurance companies; the cash they generate provides the capital that Buffett and his partner Charlie Munger then invest on their shareholders' behalf. Capital allocation is what Buffett and Munger see as being their "core competence".
Buffett is well-known for his large "semi-permanent" minority holdings in a handful of America 's largest companies, the likes of American Express, Coca-Cola and Gillette. Yet these represent only one part (and a declining one) of the company's overall investment activities. In addition to his insurance operations, Berkshire Hathaway now owns outright a string of industrial and retail companies, many in deeply boring but lucrative fields of business. While many of these were originally family-owned companies, an increasing number are now former quoted companies that Buffett has acquired outright on the stock market.
In fact, he has been stepping up the pace and range of his acquisitions over the last two years, taking advantage of the attractive valuations that the bear market has thrown up in some (though not all) sectors. Yet four years ago, as Mr O'Loughlin correctly points out, Buffett made what for him was a huge switch in his overall asset allocation in the opposite direction. This he did by buying General Re, one of the largest quoted reinsurance companies in the States.
Viewed in isolation, and from a strictly insurance business perspective, it is clear that Buffett made one of his rare mistakes in paying so much for General Re. The business turned out to have had laxer underwriting disciplines than Buffett expects or tolerates in his own insurance operations. This, combined with a string of high profile insurance disasters (including September 11), has produced some very large losses at the company.
But the much bigger purpose behind the merger, which was missed by many observeers at the time, was to reduce substantially Buffett's exposure to the overvalued stock market, and increase commensurately his holdings of bonds and fixed interest securities. Insurance companies generally hold a much greater proportion of their assets in fixed interest than other types of institutional investor.
By doing what he rarely does, and paying for the merger in Berkshire Hathaway's own shares, Buffett in effect bought himself a vast bond portfolio at below the market price - a piece of wholesale market timing that in scale and dexterity has few parallels in recent years. He also laid his hands on the prodigious cash flow of General Re, boosting still further the funds he has available to invest elsewhere.
In the event, it turned out that the management of General Re were not the type of owner-oriented, business-focussed management that Buffett normally relies on to ensure that his acquisitions work. One of the best sections in this new book details Buffett's uncannily accurate predictions of how Corporate America's love affair with one-way stock options and quarterly earnings management would end in tears for investors, as it eventually did so spectacularly in 2000 and since.
"Many businesses" says Buffett "would be better understood by their shareholder owners, as well as the general public, if managements and financial analysts modified the primary emphasis they place upon earnings per share and upon yearly changes in the figure. In the long run, managements stressing accounting appearance over economic substance usually achieve little of either".
As for stock market investors are concerned, Buffett explains his success quite simply: "Plenty of people have higher IQs and plenty of people work more hours, but I am rational about things. You have to be able to control yourself; you can't let your emotions get in the way of your mind". Everyone who has immersed themselves in the Buffett phenomenon naturally has their own explanations for his success. My own view on this is that his real genius lies not just in the quality of his analysis, or in the quality of his contacts, impressive though both are.
It was his decision to fashion out of Berkshire Hathaway, his holding company, a corporate vehicle that frees him to invest in a completely rational and unfettered way, free of the conflicts of interest and bureaucratic imperatives that bedevil most fund management operations. This is a luxury that is simply not available to most professional investors who act on your behalf, for reasons that anyone who has worked in a large organisation will readily understand.
Although Buffett has always refused to make specific predictions about the market, I have always found his throwaway lines a useful guide to what will happen next. His comment a couple of months ago that the bear market "could be over, but may not be" is potentially more significant than it sounds at first. It is his certainly his first even vaguely positive statement about the stock market I have seen since 1999. Although Wall Street's rally since mid-October has been a powerful one, it is not certain that the market cannot go higher still in the next 12 months, even if the UK market continues to lag for a while.

IPO(Initial public offerings)

Initial public offerings are also a channel for appreciation
of a part of the risk portfolio. There are many future great
companies in the pipeline and especially some who are old
and big companies who have only recently join the public company bandwagon to raise cash.

Look at the following sites for more info.

Ishares

Ishares are a good way of investment with limited risk. This is a Barclays product and offers quite a variety of index funds(although they are called shares). For investors in Netherlands(where I am currently resident) standard brokers do not display this product although they are quoted in all major stock exchanges of europe. Neither does the help desk of brokers (like ABN AMRO bank ) know anything about them. That is because the search engine of these brokers are outdated and bad. Infact search is not possible for certain exchanges at all (like Canada).

But fortunately there is a way out. That is to have the ISIN code at hand. These are avalilable at the following ishares website. With this code one can do transaction over the internet.


Sources of Performance Difference
Precise reasons for performance difference vary between iShares funds.

• Transaction costs - Each trade involves a set of costs, including the spread between the bid and ask prices.
• Annual fees - ETF funds charge an annual fee that includes the cost of portfolio management and custody of the securities in the funds.
• Rebalance costs - Index providers, such as FTSE or S&P, regularly rebalance their indices to reflect securities entering or departing from their indices. In rebalancing, index providers do not take into account the costs and timing considerations of buying and selling securities.
• Portfolio optimisation - From time to time it is not optimal or possible for regulatory or operational reasons to exactly replicate the index portfolio. In these situations, index fund managers optimise the portfolio with the goal to achieve the index returns without holding the exact constituents of the index.
  

Investment advice:

Based on the strength of the brazilian economy the advice for investors is to take a look at the following ishare:

iShare MSCI Brazil(IBZL)
iShare MSCI Emerging Markets


Only downside to this that most of these are quoted in US dollar which is currently depreciating.

The ishares as with many funds gives the portfolio a risk diversification as it is based on averaging of selected share prices.


Useful links for ishares:

1. FAQ

Steel market : A study

Iron Ore is the basic raw material used for the iron and steel making industry. Although iron has many specific uses (pipes, fittings, engine block), its main use is in the production of steel. Steel has several desirable properties. Making it the main structural metal in engineering and building projects and accounts for 90% of all metal used each year. Several types of steel exist containing varying amounts of iron alloyed either with other metals (chromium, manganese, nickel, molybdenum) or carbon to increase strength and durability.
Most iron ores mined today comprise the iron oxide minerals hematite, Fe2O3; goethite, Fe2O3,H2O, limonite, a mixture of hydrated iron oxides and magnetite, Fe3O4. Australia, China, Brazil, South Africa and Sweden are the world’s major iron ore producers and exporters, accounting for more than 88% of the world's iron ore exports

Nice website about the steel industry news is :
http://www.issb.co.uk/steel_news#steel_news.

With the rising price of oil the production cost of steel is also expected to increase.
Also european steel export is being negatively influenced by weaking dollar.

other notable thing from the long article on global steel industry
is that there are only three countries which account for global export of iron-ore which forms the core of steel manafaturing.

They are : Australia (248 million ton) , Brazil(243 million ton) and India ( 90 million ton).

The indian export suffered from extra export tax which is being currently relaxed. The problem with India is that the exploration of fresh source of iron ore is not being done and thus the resources are being underutilized. Moreover the national demand being large there is enough internal demand for ore. Thus one one hand a demand for national iron ore and the challenge to improve foreign trade surplus are competing with one another.

China imported 275 million ton in 2005 and 326 million ton in 2006, up 19% year-on-year.
[distribution: Australia : 127 million tonnes, Brazil: 76 million tonnes, and India 75 million tonnes]
EU imported 172 million tonnes in 2005 and 169 million tonnes in 2006.
Japanese imports were steady at 132 million tonnes in 2005 and 134 million tonnes in 2006.


Now which are the companies who are leaders in iron ore manafacturing and export ?
To answer this question the following website proves useful:

http://www.mbendi.co.za/indy/ming/iron/sa/br/p0005.htm

Here is the quote from the above:

" Brazil is the one of the world's largest iron ore producers and exporters. Iron ore has traditionally been country's largest export product, accounting for 5% of the total value of mineral exports. Japan (13%), Germany (11%), China (22%) and South Korea were the main importers of Brazilian iron ore. CVRD and MBR (Mineracao Brasileiras Reunidas), Samarco Mineracao and CSN (Companhia Siderurgica Nacional) are Brazil's largest iron ore exporters. Other major iron ore producers include Samitri, Ferteco. Ferteco is Brazil's third largest iron ore producer - and was purchased by CVRD in mid 2001. Ferteco operates the Fabrica and Feijao mines that are located in the Iron Quadrangle of the State of Minas Gerais"

Thus the companies that are publicly listed and thus profitable investment opportunities:

Companhia Vale do Rio Doce RIO (NYSE:RIO) (FR:Val_Py)(Ratio shows good cash position and a below S&P P/E).
COMPANHIA SIDER ADS (NYSE:SID) P/E: 16.91 , EPS: 3.33 anf fEPS:5.48(2007-dec) .

For people in Europe it is interesting to have the shares in Euro rather than in Dollar to avoid devaluation in currency.

Some analysis of the above two companies:(from Jubak's column)
"First, Brazilian iron ore and nickel producer Companhia Rio do Vale Doce (RIO) showed up in my Feb. 27 'Safe bets: 10 world-class foreign blue chips,' and then it popped up in today's column on stocks to buy for the commodities rally. I'd say that means it's time to add it to Jubak's Picks. The company is the low-cost (and largest) producer of iron ore in the world and has grabbed the lion's share -- 23% -- of the Chinese iron ore market. It's Companhia Rio do Vale Doce's big move into nickel with the 2006 purchase of Canada's Inco that makes the stock a buy in this rally. Nickel prices look set to climb by about 60% in 2007, and that's good news for a company that took on big debt to buy Inco and that has huge new nickel mines scheduled to go into production in 2008 and 2009. The company also has been busy buying coal reserves in Australia and Mozambique. Wall Street analysts project the company will earn $4.04 per share in 2007. As of April 17, 2007, I'm adding the stock to Jubak's Picks with a target price of $52.50 a share by March 2008."


Now the australian counterpart for investment opportunities. Here is the website that has some information about the companies. To quote from them states:

"Australia is an iron ore-producing country. The following iron ore mines are located in Australia : BHP-OB23/25, BHP-Yandi, Brockman No.2/Syncline, Bungaroo Creek, Channar, Cockatoo Island, Fortescue, Goldsworthy, HIYandi, Homestead, Hope Downs, Jimblebar, Koolyanobbing, Marandoo, Middleback Ranges, Mining Area C, Mount Whaleback, Paraburdoo, Robe River Iron Ore, SASE jv, Savage River, Tallering Peak, Tom Price, West Angelas.
These Iron Ore Mines are active in the following commodities : Iron Ore.
They are owned by the following companies : An Feng, AuIron Energy Ltd, Ausmelt Limited, Australian Bulk Minerals, BHP Billiton, CI Minerals Australia Pty Ltd, CMIEC, Hamersley Iron Pty Ltd, Henry Walker Eltin, Hope Downs Management Services Pty Ltd, Itochu Australia Ltd, Kingstream Resources NL, Krakatau Steel, Mineralogy Pty Ltd, Mitsui & Co Ltd, Mitsui Iron Ore Development, Nippon Steel Corporation, OneSteel Limited, Portman Limited, Portman Mining Limited, Rio Tinto, Sumitomo Metal Mining Co. Ltd. "

So here are the possible investment opportunities:

1. Mitsui & Co Ltd.
2. Nippon Steel
3. Rio Tinto
4. Cleveland Cliffs
5. BHP billiton
   

Among the above companies the largest are BHP Billiton, Rio Tinto and RIO. Here is a recent news article that shows future trend in Iron ore prices.

"China Accuses Iron Ore Giants Of Cutting Supplies".

Key news in the above article is :

"The three mining companies produce about 75% of the globe's iron ore, a key ingredient used to make steel.
China, home to the world's fourth largest economy and reliant on huge amounts of the key ingredient, has been anxious to have its voice heard in iron ore contract price negotiations since ore prices surged 71.5% in 2005. After protracted and acrimonious negotiations, China agreed to a further 19% rise in iron ore prices for 2006 and then a further 9.5% increase in 2007.
China is the world's biggest consumer of iron ore, importing 326.3 million tons last year, an increase of 18.6% from 2005. This year China is expected to import 367 million tons of iron ore, the Shanghai Securities News reported earlier this week citing Luo Binsheng, the secretary general of the industry group."

A recent news shows consolidation of the chinese steel manafacturer Baosteel :

"China's steel making giant, Baosteel<600019> inked a letter of intent with iron ore producer Companhia Vale do Rio Doce (CVRD) for a steel slab manufacturing venture worth US$4 billion."

This kind of cooperation is likely to strengthen the position of China to dictate the global iron ore/finished steel product pricing policy. Moreover there is also a possibility that in the future china will find more iron ore reserves on its own territory and thus will reduce it's dependence on export. This will have perhaps the following impact.

• Increase in supply of iron ore that may balance the price of iron ore which has seen substantial rise in the last few years.
• China's increased dominance in the market fuelled by its economic growth.

In the short term(1-5 yr) there may be stabilization of demand/supply equation. And this will mean that the recent sharp share price increase cannot be supported. And in the long term if iron ore suppliers like India can play a more dominant role then they can also have a share of the profit in this sector. The pricing policy which is right now being dictated by countries like Japan cannot hold anymore.

In the long run if China manages to acquire firms in countries like Brazil then they will have a big friend and this will level out the pricing policy in their favour.

Investment portfolio

Following are the portfolio that has been selected on
basis of good company fundamentals mainly a good
P/E ratio and decent market/bookvalue.

Arcelor Mittal
Kennametal
Kloeckner
Philips
Salzgitter


Following have been chosen on basis of good growth prospects
(due to new products and new natural resource findings):

Anadarko
Apple
Equinox

Following shares have been chosen on basis of market leadership
and on basis of future growth of price of raw materials.

SSRI(Silver standard Resources Inc)
Uranium Participation Corp.(U:TSE)

Fundamental investment basics

This website blogs ideas and articles about financial investment.

Technical terms:

Bollinger bands:(Taken from : bollinger)

Bollinger Bands are a technical trading tool created by John Bollinger in the early 1980s. They arose from the need for adaptive trading bands and the observation that volatility was dynamic, not static as was widely believed at the time. The purpose of Bollinger Bands is to provide a relative definition of high and low. By definition prices are high at the upper band and low at the lower band. This definition can aid in rigorous pattern recognition and is useful in comparing price action to the action of indicators to arrive at systematic trading decisions. Bollinger Bands consist of a set of three curves drawn in relation to securities prices. The middle band is a measure of the intermediate-term trend, usually a simple moving average, that serves as the base for the upper and lower bands. The interval between the upper and lower bands and the middle band is determined by volatility, typically the standard deviation of the same data that were used for the average. The default parameters, 20 periods and two standard deviations, may be adjusted to suit your purposes:

Middle Bollinger Band = 20-period simple moving average
Upper Bollinger Band = Middle Bollinger Band + 2 * 20-period standard deviation
Lower Bollinger Band = Middle Bollinger Band - 2 * 20-period standard deviation

Two important tools are derived from the Bollinger Bands:

BandWidth: a relative measure of the width of the bands, and %b, a measure of where the last price is in relation to the bands.
BandWidth = (Upper Bollinger Band - Lower Bollinger Band) / Middle Bollinger Band
%b = (Last - Lower Bollinger Band) / (Upper Bollinger Band - Lower Bollinger Band)

BandWidth is most often used to quantify The Squeeze, a volatility-based trading opportunity. %b is used to clarify trading patterns and as an input for trading systems.

(Taken from: "http://www.pro-fundity.com/fundan.html")

Earnings: Company earnings are the bottom line – they are the profits after taxes & expenses. The stock & bond markets are driven by two powerful forces, earnings and interest rates. The flow of money into these markets is ferociously competitive, moving into bonds when interest rates go up and into stocks when earnings go up. It is a company's earnings, more than anything else, that creates value.Earnings per Share EPS: The amount of reported income, on a per share basis, that the company has available to pay dividends to common stockholders or to reinvest in itself. This can be very powerful to forecast the future of a stock's price by giving a more complete view of the company's condition.

Earnings Per Share is probably the most widely used fundamental ratio.Though EPS is more important, the price/earnings (P/E) ratio is another useful measure of whether a stock is fairly priced. If the company’s stock is trading at $60 and its EPS is $6 per share, it has a multiple, or P/E of 10. This means that investors could expect a 10% cash flow return:$6/$60 = 1/10 = 1/(PE) = 0.10 = 10%If it’s making $3 per share, it has a multiple of 20 (20 times $3 equals $60). In this case, what we’re saying as investors is that we will accept a 5% cash flow return;$3/$60 = 1/20 = 1/(P/E) = 0.05 = 5%Certain industries have different P/E’s. Banks have low P/E’s – say, in the 5 to 12 range. High tech companies have higher P/E’s – say, around 15 to 30.If your bank P/E is at 9 and the average is 8, you are paying a premium for the stock. It’s okay if you expect higher earnings. If your retail sector P/E is 16 and the company you’re considering has a P/E of 12, then you’re getting it at a discount.A low P/E is not a pure indication of value. You must consider its price volatility, its range, its direction, and any news that is worthy.The
(Opinions)
Beardstown Ladies suggest that any P/E under 5 and over 35 is suspect. The market average has been between 5 to 20 historically.Peter Lynch suggests that we should compare the P/E ratio with the company growth rate. If they are about equal, he considers the stock fairly priced. If it is less than the growth rate, it may be a bargain. In general, a P/E ratio that's half the growth rate is very positive, and one that is twice the growth rate very negative.

William J. O'Neal, founder of the Investors Business Daily, found in his studies of successful stock moves that a stock's P/E ratio has very little to do with whether a stock should be bought or not. He says the stock's current earnings record and annual earnings increases, however, are indispensable.A key issue: The value as represented by the P/E and/or Earnings per Share are no good to you prior to your stock purchase. You make your money after you buy the stock, not before. Therefore, it is the future that will pay you – in dividends and growth. That means you need to pay as much attention to future earnings estimates as to the historical record.

Corporate Debt: This fundamental measure of company health can be found in two ways.First, the Debt Ratio is calculated by dividing the total debt by total debt plus total equity. This shows the percentage of debt a company has in relationship to shareholder equity. Smaller is better. Under 30% is good, over 50% is horrible.Another measure is the Debt/Equity Ratio which is the total debt divided by total equity. This is usually shown as a ratio, not a percentage. Again, smaller is better, Debt/Equity ratios of less than 1.0 are desirable.A company’s debt load can suck the life out of what might otherwise be a successful operation with growing sales and a well marketed product. Earnings are sacrificed to service the debt. Equity

Returns (ROE): Return on equity is found by dividing net income after taxes by owner's equity.Many analysts consider ROE the single most important financial ratio applying to stockholders and the best measure of a firm's management performance.What is important with this number is whether it has been increasing from year to year.

Price/Book Value Ratio (aka Market/Book): A ratio comparing the market price to the stock's book value per share. Essentially, the price to book ratio relates what the investors believe a firm is worth to what the firm's accountants say it is worth per accepted accounting principles. A low ratio says the investor's believe the firm's assets have been overvalued on its financial statements. This is another important metric to help us not overpay for the stock.Theoretically, we would like the stock to be trading at the same point as book value. In reality, all stocks trade at a premium (some value above book) or at a discount (when the share price is below book value).Stocks trading at 1.5 to 2 times book value are about as high as we should go, unless solid earnings justify a higher price. What we should be looking for are stocks below book value, at wholesale prices.Companies with low book value are often targets of a takeover.Book value is very important. Look for low book values but keep the data in perspective.

Beta: A number that compares the volatility of the stock to that of the market. A beta of 1 means that a stock price moves up and down at the same rate as the market as a whole. A beta of 2 means that when the market drops or rises 10%, the stock is likely to move double that, or 20%. A Beta of zero means it doesn't move at all and a negative Beta means it moves in the opposite direction of the market.

Capitalization: The total value of all a firm's outstanding shares, calculated by multiplying the market price per share times the total number of shares outstanding. Institutional Ownership: The percent of a company's outstanding shares owned by institutions, mutual funds, insurance companies, etc., who move in and out of positions in very large blocks. Some institutional ownership can provide stability and contribute to the roll with their buying and selling. This is an important indicator to us because we can piggy-back on the extensive research done by these institutions before taking it into their portfolios.The market will always overvalue and undervalue common stocks due to the human emotions that drive it. We can take advantage of this pattern using modern computer tools to sort through thousands of stocks and zero in on those most undervalued as well as those responding to the markets patterns, rolling within a channel.Peter Tanous, after interviewing the most prominent investors in the market today, "Investment Gurus," New York Institute of Finance, 1997, came away with this conclusion: "I think that our gurus proved the point without a doubt. The efficient market theory is flawed. There are simply too many examples of stocks that were discovered by a great manager before anyone else knew what was going on. Does that mean the market is inefficient? No. Here is the conclusion I have arrived at: The market is not perfectly efficient at all times. However, the market is constantly in the process of becoming efficient. By that, I mean it takes time for efficiency to be achieved."