Home Inns & Hotels Management (HMIN)

This Chinese budget hotel is hot stuff. Explosive growth is in the works – HMIN is expanding like crazy and will get a big boost from the 2008 Olympics. The problem is, HMIN is too expensive to consider buying at this point. Although there is nothing wrong with paying a premium for growth, there is a problem if that premium is ridiculous. 160 trailing P/E and 60 forward P/E is just too much. I am not at all surprised by HMIN's recent drop from 35 to 32 - it would probably be a safe bet to pick it up around 28.

ViaCell (VIAC)

There are two stocks that I can talk about today – Administaff (ASF) or ViaCell (VIAC). ASF had a 15% fall today after it lowered earnings guidance. I would say that the drop is justifiable – however, I think that the company’s business model will pull it through its recent problems – look to pick up the stock around 30 or before its earnings report on May 1. In contrast, VIAC’s recent rise from 5 to 6.5 on no news is not so justifiable. My pick of the day is to short VIAC. I believe that the earnings report on May 1 will quicken the inevitable fall.

Yahoo! (YHOO)

Stock prices have two components - growth expectations and the underlying value of the company. Since Yahoo’s last earnings call, the stock has been moving up because growth expectations have been increasing. This earnings call proved that the belief was unjustified. So the stock fell. Yahoo is still a great company. It has the most popular online portal in the world and I believe that Panama will be highly successful in boosting earnings. I would buy it sometime between now and the next earnings call. I am looking for it to drop some more - 25 would probably be a good time to pick it up.

My investing philosophy

1. There is nothing more important in making a buy or sell decision than a stock’s price.
2. I should not criticize a company’s business decisions – I take it for granted that they know their business better than I do.
3. Buy low, sell high. Stocks are volatile. Critical in deciding what is “low” versus “high” is to look at the past performance of the stock and its competitors.

I expect that this will change as I become a more experienced investor.

Tata Motors (TTM)

Bought at: 16.59
Target: 20-22

The SENSEX is really volatile. After being fairly in line / outperforming the SENSEX for two years, TTM has seriously diverged from the index in the last year. It seems like a great distressed value play. There has been no change to the fundamentals of the company since January, although the stock has fallen from 22 to 16 in the meanwhile. I believe that the recent run-up is from the rupee strengthening against the dollar (16 to 17.5).

I think that the price will go back up after TTM's next earnings call and once we start seeing the cash flows from their really cheap car ($2500, to be produced in 2008). But who knows? It might hit 20-22 before then and I'd have to reconsider.

Welcome

My Introduction to Microeconomics professor once said that you should never use the word "need" in his class - people never need anything. Nevertheless, if people want to increase their amount of capital, they need to invest. The reason for this is simple - consume less now and you'll be able to consume more later.

My words come with a note of caution. I believe that it is important to smooth out consumption over one's lifetime. Hence, it is important to spend the money that you receive from investing. A caution from Karl Marx: All of the things which you cannot do, your money can do. It can eat and drink, go to the dance hall and the theatre; it can travel, it can appropriate art, learning, the treasures of the past, political power - all this it can appropriate for you - it can buy all this for you: it is the true endowment. Yet being all this, it is inclined to do nothing but create itself, buy itself; for everything else is after all its servant.

Deep. What is the goal of this blog? To attempt to achieve above average returns for your portfolio. I'm sure a million other blogs exist with the same purpose. So it's really up to you whose advice you take.