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One Place Where Sentiment is Bad... And Opportunity is GreatBy
Friday, March 2, 2012
In the fall of 2008, as world markets were busting, I traveled to India to find bargains...
My guide was Rahul Saraogi, a hedge-fund manager who specializes in smaller companies in India. He took the DailyWealth team on a multi-city tour to visit everything from a high-tech outsourcing company to a paper plant. Every company we saw was outrageously cheap.
I took advantage of the opportunity by personally investing in India. I pocketed a triple-digit gain in 14 months... And it sure looks like it's time to consider investing in India again.
With most assets around the world off to a fantastic start in 2012, it's hard to find negative sentiment anywhere on the globe. But there is negative sentiment in India...
Yesterday, I talked to Rahul to get an on-the-ground update on India. He told me, "I have not met a single person here who is optimistic about the Indian markets (and business people here are generally optimistic). Also, globally, people are probably more negative about India now than at any time in the last decade."
That's what I like to hear. When stocks are hated, you can find bargains.
Rahul told me sentiment toward India is so negative because the economy has hit "rock bottom." GDP growth fell to "just" 6.1% last year. (Compare that to 1.7% growth in the U.S. in 2011.) China is still seeing "roaring over-investment" and needs to put the brakes on. But India can and will hit the gas...
And Indian stocks are cheap right now, especially smaller-cap stocks, like the ones Rahul follows in his fund...
He also pointed out the Indian rupee fell 16% in 2011 versus the U.S. dollar, so it's cheaper for Americans to buy in.
And the uptrend is in place this year... Most India funds are up over 25% year-to-date. (That's in just two months!)
This is exactly what I wait for in an opportunity – negative sentiment, combined with decent value, where the uptrend has begun.
It's a good time to start doing your homework on India now... whether it's buying a general India exchange-traded fund like the WisdomTree India Earnings Fund (EPI) at a P/E of 10.55 or looking at more specific names like Rahul does. (You can read his "on the ground" observations here.)
You may not have considered India before. But sentiment is bad, and opportunity is great. Last time around that was good for triple-digit gains.
Good investing,
Steve
Further Reading:
Steve first met Rahul in 2008 when he and fellow DailyWealth editors Tom Dyson and Brian Hunt traveled to research Indian stocks. "This is what a true free market looks like," Tom wrote. "As an investor, I'm impressed with India... It has one of the most advanced markets in the world. And it's loaded with investment opportunities."
Read about their trip – and some of the once-in-a-lifetime type opportunities they found – here: The Indian Stock Market Is Loaded With Fantastic Investments.
Market NotesA HUGE "RIP" FOR BIG CHEAP TECH It's been a heck of a 2012 for our "Big Cheap Tech" idea. The "QQQ" has soared 16% since the year began.
Back in September 2010, Steve pointed out how many of America's elite tech companies, like Apple, Microsoft, Intel, and Cisco, were trading for extremely low valuations. You just had to account for their giant cash hoards to realize it. Despite the reliable cash flows and dividends these companies boast, investors simply weren't interested in owning them.
As you can see from today's chart, the market is going wild for "Big Cheap Tech." Below is a chart of the "QQQ" fund. It's one of the market's most popular ways to take a diversified position in tech stocks... And it's heavily weighted toward the cash-rich giants we cited above.
Like most every asset, the QQQ fund suffered a sharp selloff during last summer's panic. It spent the next four months "collecting" itself and forming a price base. It used this price base to "rip" 16% since the year began. From a very short-term viewpoint, the QQQ is due for a "breather." But the long-term trend is UP for Big Cheap Tech.
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