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catoismymotor (66.27)

How I Will Play India

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March 16, 2010 – Comments (24) | RELATED TICKERS: EPI , TTM , IBN

How I Will Play India

 

How would you like to turn back the clock ten years and load up on Chinese companies? I believe we have an opportunity available to us like we had with China not so long ago. And it can be found in India.

 

India is in need of the following: power, water, sanitation, roads, railroads, agriculture, healthcare, communications, banking…If you can think of it they need it to be built from scratch or to be expanded or improved. They have an ever growing middle class, many speak English, have an internal push to better themselves and become a world power. The government is elected by the population which for me is a plus.

 

 My only regret at this time is the few offering we have to choose from if we wish to purchase individual Indian companies. I hope in time this will change. After a month of reading and researching I have concluded for me the best way I will choose to buy into this growth story: WisdomTree India Earnings Fund (EPI). I normally like to do my own driving but EPI has too many benefits to merely brush it aside because it is an ETF. It is comprised of 125 companies, 60% of which are small to mid caps and I like how the fund has the money spread around. In my opinion it is not too heavy in any one sector. I’ll limit my praises of EPI to what I have already shared. I encourage you to do your own research into what India has to offer. 

 

As you read above I do not own EPI. But I want to. I have one short term holding that I want to sell in order to make this purchase but I have a while yet to wait before that happens. I believe that a well purchased Indian ETF or individual stock will serve a LTBH investor for decades to come. 

 

Cato  

 

http://caps.fool.com/Ticker/EPI.aspx 

 

http://www.wisdomtree.com/etfs/fund-details.asp?etfid=51

24 Comments – Post Your Own

#1) On March 16, 2010 at 10:31 AM, walt373 (99.85) wrote:

Thanks. Do you where I can find out more about its valuation?

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#2) On March 16, 2010 at 10:50 AM, mrindependent (75.36) wrote:

In the longterm, there is a good chance that India will outperform China for two major reasons.  First, demographics are better because the population is not aging and secondly, the country has already made the transition to democracy. 

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#3) On March 16, 2010 at 11:12 AM, catoismymotor (66.27) wrote:

#1 - I provided two links at the bottom of the blog. They would make for a good starting point.

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#4) On March 16, 2010 at 11:42 AM, anchak (99.84) wrote:

Its a good choice Cato....the only issue is due to the fact that earnings factor - 4 stocks pull 25% of the index. Its a big concentration .....2 stocks are steady state on this ( relatively so only) - SBI and ONGC ( This one is not so much - due to the fact that is essentially and Oil Services play)

The other 2 are like wildly variant

Reliance - the big daddy of Indian stocks

and Infy: Possibly one of best managed Technology Services company around - but its a pure growth play - very high beta! 

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#5) On March 16, 2010 at 11:44 AM, chk999 (99.98) wrote:

I think you are absolutely right about India. The current problem is that we can't buy stocks on the BSE directly. They will probably liberalize the rules on this and then there will be a bunch of nice infrastructure companies to grab up. Consolidated Cement is on my watch list when they do that.

Chris - long TTM

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#6) On March 16, 2010 at 11:52 AM, anchak (99.84) wrote:

BTW.....If you don't mind funds - and a little broad based Asia-ex Japan exposure ( ie China) - look at PRASX ( T Rowe Price - New Asia)

They have a good research team - and you'll see they have more uncomventional ( mid-cap) holdings from the India space

EPI should almost track teh BSE Sensex - due to the mix 

 

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#7) On March 16, 2010 at 12:01 PM, Counterparty (< 20) wrote:

I've owned IFN for about 6 months now after doing some research on the best way to invest in India and reading an online article on the fund, the people behind it and the way is was managed.

I've been over there on vacation as well and I have to agree that it should outperform China on the simple basis it's about 15-25 years behind China in infrastructure development and you're talking about a truly massive market. The sheer size of its population and the standard of living compared to ours makes it probably the number one emerging market for the next 25 years. 

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#8) On March 16, 2010 at 2:43 PM, JakilaTheHun (99.93) wrote:

My only regret at this time is the few offering we have to choose from if we wish to purchase individual Indian companies.

This is the main reason why I tend to keep away from the emerging markets.  You really only have so many realistic options to directly invest in foreign companies as an American investor.  China is the major exception to the rule, but I'm rather skeptical of the Chinese markets right now and pressure from the US to eliminate the currency peg puts them in a potential lose-lose situation for the short-run.

Can't say I know enough about India to have drawn many conclusions.  I know there's a lot of corruption and it tends to be at the lower levels more than the top levels; but that doesn't necessarily mean there's not opportunities there.  Just that there are greater risks.  

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#9) On March 16, 2010 at 8:55 PM, soycapital (< 20) wrote:

Matthews has an India mutual fund also and they have been at it for some time, should have a pretty good judge what is going on over there in my opinion.

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#10) On March 17, 2010 at 12:22 AM, GLWinston (< 20) wrote:

Take a look at Ascendas India Trust.  It trades on the singaporean exchange (not to be confused with Ascendas Real Estate Trust which owns Singaporean assets).  You can buy through Schwab though commission is high 1-1.5%.  Dividend yield is 7.5% or so. I own a ton of the stock.  Their website has very good information on the company and its operations. 

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#11) On March 17, 2010 at 10:13 AM, lemoneater (88.51) wrote:

Heinz (HNZ) and Unilever(UL) both sell products in India. Everyone needs ketchup and soap:) Evidently Unilever is quite established in India as a company. http://www.hul.co.in/ I'd imagine other UK companies would have branches in India also.

 

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#12) On March 17, 2010 at 10:27 AM, anchak (99.84) wrote:

Lemon....That is a good observation. There's a slight hitch in the UL theory though.

Hindustan Lever ( ie HUL) is a blue chip stock on the BSE ie it has local shareholders to distribute profits to. So although I think the parent does get a share - its a set % age which is shareholder negotiable within proportions .

But this was 1 stock I outperfomed in late 2007 - when I first joined CAPS - same theory - except it didnt work out that well - did it ? :)

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#13) On March 17, 2010 at 10:33 AM, lemoneater (88.51) wrote:

Just as I imagined, Pearson Education (PSO) is also in India.http://www.pearsonedindia.com/Web/Home.aspx. Also 3M is there.   http://solutions.3mindia.co.in/wps/portal/3M/en_IN/World/Wide/

Some blue chip stocks are so lovable--so diversified and multi-national. I'm more invested in India than I knew!

 

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#14) On March 17, 2010 at 10:43 AM, anchak (99.84) wrote:

lemon ....so is Monsanto - but again local listing.

I think 3M is listed also....here

http://in.finance.yahoo.com/q?s=3MINDIA.BO

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#15) On March 17, 2010 at 10:53 AM, lemoneater (88.51) wrote:

@ #12 anchak, thanks for the info about HUL which has its own listing. I wonder what percentage UL gets as the parent company?

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#16) On March 17, 2010 at 11:13 AM, lemoneater (88.51) wrote:

Seems like all my multinationals are more indirect plays. This further illustrates the challenge of finding good India investments which are listed on foreign exchanges. No wonder why ETF's are an option. Helpful and interesting topic!

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#17) On March 17, 2010 at 11:26 AM, ETFsRule (99.90) wrote:

If you can afford to wait a few more months, there is going to be a small-cap India ETF coming out (sort of like BRF for Brazil and HAO for China). It will most likely outperform the other India ETF's. No symbol yet, sorry guys. Here's the story:

http://www.etftrends.com/2009/10/an-etf-india%E2%80%99s-small-cap-companies.html

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#18) On March 17, 2010 at 11:33 AM, catoismymotor (66.27) wrote:

ETFs,

Thank you for the heads up. I am not looking to make the purchase for six to twelve months from now. It will be interesting to see what the new ETF will be about.

Cato

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#19) On March 18, 2010 at 8:35 AM, catoismymotor (66.27) wrote:

I appreciate the contributions from everyone. The comments to this blog have been most positive and productive.   

Thank you,

Cato

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#20) On March 29, 2010 at 12:13 PM, djshagggyd (75.06) wrote:

Hello Cato and everyone,

Great post and commentary... I stumbled upon it while researching EPI and have found it very helpful.

I am also considering a purchase of EPI in the near future. I was considering IIF and VEU, but so far, I think I like EPI best.

Cato, what do you think is a good entry point for EPI? Right now it's up around $23.40... but I was thinking of waiting until it got back around $21. Do you think that's reasonable?

Have a great week!

~djshagggyd

p.s.-for more ramblings regarding EPI check out my blog

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#21) On March 30, 2010 at 2:05 PM, catoismymotor (66.27) wrote:

DJ,

I don't know if we will see it at $20 again unless the market freaks out. I think waiting for it to approach $21 for an entry point would do no harm.

When I invest I use the Dollar Cost Averaging (DCA) method. That means that I, the investor, buy with a fixed amount of money at a designated time each month. It has the advantage of decreasing the stress you'll find yourself under when trying to wait for the market or stock to go your way. The DCA method will allow you to catch your picks when they are high and when they are low. More often than not you will achieve a good average purchase price for your picks over the course of time. Using this method is not for every Fool but it has helped me a great deal since 80% of my purchases are meant to be held a minimum of five years. Type "Dollar Cost Averaging" into the search bar at the top to find articles about the pros and the cons.

Keep up the good work.

Cato

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#22) On March 30, 2010 at 2:29 PM, djshagggyd (75.06) wrote:

Thanks Cato!

I just learned about D.C.A. about 6 months ago and have been using it pretty succesfully with GE. I was thinking about using a similar approach for EPI. It's helpful to know you think it's a sound method.

I'm going to give it a little more thought and research... but I think EPI is probably going to be my next pick. I would like to wait until it comes down to between $21-$22... but I may start my DCA plan before that point.

Thanks again for the insight and for helping me on my quest for knowledge about EPI. Have a great week Cato!

~djshagggyd

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#23) On May 07, 2010 at 9:49 AM, catoismymotor (66.27) wrote:

Back in March I said I am not looking to make a move into EPI for another 6-12 months. After yesterdays events I am thinking of maybe stepping that up a bit.

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#24) On May 10, 2010 at 2:33 AM, djshagggyd (75.06) wrote:

Hi Cato, hope you're well! 

I hopped into EPI in real life a little earlier than I originally said I would... (started at $23)... but using the DCA method I was able to get a hearty amount of shares at $21.50... which will nicely off-set my original haste. And I still have more set aside for EPI... (in case the market continues to flop around like a waffle in a wind-storm).

Best of luck friend! Have a good week.

~justin 

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