5. The stocks selection process in the fund may be based on the collowing criteria. - 3year earning growth 25% CAGR. 3 year forward proce to earning ratio 5-7X - P/E expansion 10% per annum . Return otential of 100% over the 3year period.

Portfolio churn discipline

1. If a stock has acheieved a return of 100% before the completion of a 12 months period then its placeinthe portfolio may be reviewed. The stock may be held on if the fund manager s of the view that the stock will deliver a 33% CAGR return to the remaining tenure of the fund.

2. Any stock that achieves a return of the 50% with in a period of less than three months may be reviewed and may be held only if the fund manager believes that the 33% CAGR return potential still remains agter the cooling off period.

3. Any stock that achieves a return of 100% within a period ofless than 6 months may similarly be sold out and left for a cooling period of 10 trading days.

4. Any stock that does not meet at least 50% of targeted return s within 6 months of purchase may be sold out and left for a cooling off period of 5 trading days.

5. Hower, discretionof the fund manager on the above or nay changes there to, will be finial.

1. What could be the reason??

2. Any suggestion to invest / not to invest in it?

3. Or is it close ended, hence not much money for distributers and therefore no recommendations for it?

Sandip Sabharwal has the potential to achieve this in 1 year itself. I liked his strategy of betting on under-reasearched company with concentration in the portfolio. Timing of the fund is perfect !

Even as a close-ended funded it should disclose it at least at quarterly rests. Any updates anyone..

JM Core 11 Fund - Series 1 - Growth

Portfolio as on Mar 31, 2008

EQUITY*
Company Name	Instrument	No. of Shares	Market Value (Rs. in crores)	% of Net Assets
Voltas Ltd	Equity	3152108	56.63	9.87
Mahindra & Mahindra Ltd	Equity	766445	53.43	9.31
Praj Industries Ltd	Equity	3675356	50.06	8.72
Infrastructure Development Finance company	Equity	3314000	50.04	8.72
Country Club (India) Ltd	Equity	761426	46.51	8.11
Rajesh Exports Ltd	Equity	5935965	46.03	8.02
Gitanjali Gems Ltd.	Equity	2034165	44.94	7.83
Hindustan Construction Company Ltd	Equity	3317094	43.92	7.65
Bajaj Hindustan Ltd	Equity	2242215	42.25	7.36
Punj Lloyd Ltd.	Equity	1322808	41.11	7.17
Diamond Power Infrastructure Ltd	Equity	927100	31.26	5.45

Sintex Industries

Punj Lloyd

Praj Industries

http://www.valueresearchonline.com/stocks/snapshot.asp?code=2982 - Gitanjali Gems

http://www.valueresearchonline.com/stocks/snapshot.asp?code=16547 - Diamond Power Infrastructure

http://www.valueresearchonline.com/stocks/snapshot.asp?code=954 - Reliance Infrastructure

Hindustan Construction Co

Bombay Rayon Fashions

IVRCL Infra. & Project

Country Club (I)

Voltas

Launched in Feb 2008

Hitesh, do you want to sat that this fund has became a long-short fund.

Just goes onto show, no one is above market....the same market which can give an iconic status to an individual, can also make that individual kneel down before itself with folded hands. Long Live Mr. Market!!!!

Hitesh, do you want to sat that this fund has became a long-short fund.

He seems to be wearing sunglasses even while he is sleeping.......

The thing is that, the green taint makes them see red objects as green and when they wear red taint, they start seeing green objects as red.....

I believe, if you cannot see an opportunity in a challenge and the challenges in case of opportunities, you cannot be a good fund manager for a long term.

The best part i like about Mr. Market is that rewards exemplary out-of-box thinking and it punishes those people who take things for granted......

Sharekhan and a couple of others had a buy report on this one 6 months back@ 600 (pre split) now trading at 18 (after 1:5 split)

the promoter is giving the thumbs-up..................

or is it for his personal profit?

Sharekhan and a couple of others had a buy report on this one 6 months back@ 600 (pre split) now trading at 18 (after 1:5 split)

the promoter is giving the thumbs-up..................

or is it for his personal profit?

I keep hearing abt Country Club....thats why thought to ask if someone out here is tracking this company...and what are the future prospects of this company...currently it is at a very low valuation.....

If someone has any information please share....

the Kounty Klub promoter is giving the thumbs-up..................

or is it for his personal profit?

Sharekhan and a couple of others had a buy report on this one 6 months back@ 600 (pre split) now trading at 18 (after 1:5 split)

the promoter is giving the thumbs-up..................

or is it for his personal profit?

If someone has any information please share....

Well country club (and clubMahindra )is a time share company. They are as good as highway robbers for consumers. Once you signup and pay you are stuck with them for years. So company may be making good money but certainly its a nightmare for clients as they hardly get booking. These companies devote all their energies to entice new members so that money keeps coming in. Try some consumer website like moutshut.com for review on timeshare memberships.

I was surprised too but it's true. They use the M&M name to gain credibility. Go to one of their presentations to realise how much they promise and as far as benefits just google :club mahindra complaints review and check out for yourself the horror stories.

Time share may be a good concept but it is overpromised and underdelivered in India. The kind of audience they are targetting is also wrong so it creates bad taste when the customer realises the mistake later.

http://www.dnaindia.com/report.asp?newsid=1232195 - More fundmen are heading for the exit door

And to think....that most of the profits made by most fund manager is due to the bull market anyway.

That's why they say...being at the right place at the right time is imp.

Well, its not feeling sad about him, for surely as you said, he must have have made a lot of money. But then, he is quite candid about his mistakes, and that will go to his credit.

I think we all young people will be making errors at some point of time....nothing teaches better than mistakes done by self. And thats how we will become mature.

But if you think about it, managing funds for others is truly a herculean task. The criteria for selecting stocks for your personal portfolio and for the big fund is so very different......also, you have no control on the funds at the disposal. This makes it truly a challenging job......

Surprisingly, there is no shuffle in the picks - does that mean he carries the same conviction as his predecessor, or probably it's too early.

Update from Sandeep's http://sandipsabharwal.blogspot.com/2009/04/end-of-fearthe-rise-of-greed.html - Blog

http://sandipsabharwal.blogspot.com/2009/04/end-of-fearthe-rise-of-greed.html - The end of fear….the rise of greed???

There are various parameters that were being used by analysts to measure the fear factor that gripped the markets in the year 2008, specially after the month of September when the rumors of financial institutions going down in the Western world started gaining ground and which culminated in the collapse of Lehman Brothers, a virtual nationalization of AIG and government funding of various financial institutions.

There are various measures that analysts use to gauge the fear factor. Some of them are given below and the movement of these indicates that fear has now gone out of the markets to a great degree. Whether we will see a return of Greed is something that has to be seen going forward.

TED spread and other interest rate parameters

The TED spread is essentially the difference in the yields (i.e. interest rate in basis points, 100 basis points = 1 percent) between the three month US Government Treasury and the 3 month LIBOR (London Inter Bank Overnight Rate). The difference between these two indicate the risk averseness in the financial system and it is essentially the gap in the Bank to Bank borrowing cost vis a vis the safest (perceived) asset of US Government securities. After the collapse of Lehman Brothers this gap had shot up to nearly 5% as the yields on US 3 month Treasury bills fell to zero and 3 month LIBOR shot up above 5%. Over a period of time since then the 3 Month LIBOR has fallen to 1.10% and that on the 3 month US Treasury has risen to 0.15%, thus reducing the TED Spread to 0.9%. A TED spread below 1% is believed to prompt investment into risky assets which includes equities, emerging market bond and currencies etc. This indicates that money has now started to flow between banks where there was a total lack of confidence post Lehman Brothers collapse. Good results from Financial Institutions in the US are also helping this cause.

The amount of overnight cash deposited at the European Central Bank also has fallen to its lowest in six and a half months, a possible sign banks are opting to put their cash to work elsewhere rather than park it at the central bank.

The two-year U.S. interest rate swap spread, a key measure of broader banking and financial market stress, narrowed by around two basis points to 54 basis points. That's within a few basis points of its lowest level since the global financial crisis erupted in August 2007.
Corporate bond spreads and spreads on CD’s have also come down sharply in the same time frame.

VIX

VIX, created by the Chicago Board Options Exchange in 1993, is the Volatility Index. It measures the market's expectation of near term volatility as reflected in the options prices of S&P 500 stock index. The volatility index (VIX) is also a measure of fear in the system and a higher level indicates a higher fear level and indicates that investors at that time are willing to pay a higher premium to buy protection (in very simplistic terms). VIX had shot up to almost a historically high number in October/ November 2008. Just to put this into perspective we have to go into the historic context starting from the year 2007 to actually see how high the fear factor went up to. Right through the start of the bull market in the year 2003 VIX had never gone above a value of 37-38. In the crash of May 2006 also the maximum value it saw was just 24. In 2007 as the first signs of the mortgage and financial crisis in the US started to come up VIX went upto 37 in the fall of August 2007. However as the markets started falling in the year 2008 till the climax in October 2008 this index went up to as high as 89 and has now come down to 37 levels.

Technically the VIX index has fallen below the upward sloping trend line, which started from August 2008. If it stays below the value of 37.6 over the next couple of weeks it will indicate a strong return of confidence and could lead to strong funds flow into risky assets.

GOLD PRICES

Gold another safe haven investment has seen its prices falling by nearly 13% from the peaks of February 2009. In the same time the equity markets globally have rallied more than 30%. This also shows indications of the fear factor coming down. In the period of extreme fear from 24th October 2008 till February Gold prices had risen from $ 680 TO $ 1000 a gain of over 45%.

US Dollar Index

As fear grew globally and lot of emerging as well as emerged countries started falling into problems which includes Balance of Payment crisis as well as defaults there was a steady influx into US assets from the beginning of 2008. (The irony being that US was the main cause of the crisis). As a result the US Dollar appreciated by nearly 30% vis a vis a basket of currencies measured by the US Dollar Index. I have talked about the reasons for the Dollar up move in an earlier article (The Dollar Conundrum). However now there seems to be a clear weakness developing in this currency, even though the move cannot be conclusively called until and unless the US Dollar Index falls by another 5% and remains at those levels for at least a couple of weeks. This is something we have to watch out for.

The above factors indicate some sort of stability and reduction of fear. However whether Greed will come back immediately or will take some more time is something that we will see empirically over the next few months.

The Morgan Stanley Emerging Markets Index has gone up from a level of 470 to 650 over the last six months. The key is to see if it is able to sustain above 600 levels for a couple of months. If this happens one will become reasonably sure that Greed and most probably a new bull market is starting off.

http://sandipsabharwal.blogspot.com/2009/04/what-are-kind-of-stockssectors-one_19.html - What are the kind of stocks/sectors one should be buying now?

Part I - The anatomy of the bear

As I sit to analyze the kind of stocks and sectors one should be buying into at this point of time with a medium term perspective it is important to analyze the anatomy of the bear market. In order to do this I would first go back to the last phase of the bull market, which was the main phase of excesses and extreme euphoria.

Epilogue – The big blow off - This phase started from the month of September 2007 and lasted till January 2008. This was the period in which the Sensex went up from around 14500 to 21000. This was the time period in which valuations went up ridiculous levels, there was a huge deluge of money from hedge funds, there was extreme leveraging and retail investor frenzy was at its maximum. At the risk of repeating this was also the period in which even most professional fund mangers could not see the fact that the bubble had become so big that it had to burst. The genesis of the last phase of the bull market lay in the beginning of the rapid monetary easing by the US Federal Reserve subsequent to the start of the mortgage crisis and the beginning of the emergence of the financial crisis in the US and Europe. As a very good friend of mine puts it “ This was a phase where as the easing cycle started a large number of hedge funds thought that the liquidity is now going to over flow from a glass that was already full, without realizing that there was actually a very very big hole in the glass”.
This was the phase of the market where fundamentals were of no relevance and companies with grand plans and worst cash flows outperformed most of the other stocks. In this phase the BSE Mid cap index went up from 6000 to 10000 level a gain of a whopping 66%.

I will break up the bear market of the last 15 months into three parts

Phase 1 – The end of Euphoria – January to September 2008 – This was the first phase of the bear market and was pre Lehman Brothers collapse. In this phase there was a sudden reversal of liquidity flow and was also the phase in which commodities kept on rallying ( till around July to September depending on the commodity we are talking about) and was the phase in which inflation was a bigger concern in most emerging markets and euro zone. In this phase there was a very rapid increase in policy rates by central bankers all over the world as crude, copper, steel prices etc kept on rallying in the backdrop of a slowing global economy and reducing liquidity. This was the phase in which most market participants underestimated the scale of the problems in the financial systems in the Western economies and in general loss levels were underestimated. Economies all over the globe kept on moving from bad to worse in this period. However this was also a period in which lot of emerging market economies were believed to be relatively insulated and their suffering would only be due to collateral damage. This was the time period in which both mid cap and large cap companies fell in value. However this was also a phase where there was some sort of distinction in the markets between companies that would be relatively insulated from the slowdown effect. Companies that had good order books or a good execution history were relatively spared in the carnage. This was sort of a normal bear market phase in which markets fall by 25-30%.
In this phase hedge funds faced huge redemption pressures and most emerging markets saw significant outflows. In this phase which lasted till the middle of September 2008 the Sensex fell by 30% and the BSE Mid Cap index by 45%.

Phase II –End of liquidity and execution disbelief – September 2008 to January 2009 – This was the period in which financial institutions in the USA started collapsing. Although smaller companies were collapsing the big one like Lehman hit everyone on the head. This led to liquidity totally drying up globally. The three month LIBOR shot up to nearly 4%, yields on US Treasury bills became virtually zero as capital preservation became the prime focus. This was the time period in which there was forced selling from a large number of FII’s and Hedge Funds due to the virtual collapse of the financial system in Western economies. There was extreme panic in the month of October/November 2008 and led to the formation of a panic bottom in the markets in October 2008. This was also the phase till be beginning of December 2008 where there was a virtual collapse in mid cap stocks although large cap stocks started stabilizing after making the panic bottom. In this phase valuations were of no importance. There was huge execution disbelief and due to the liquidity crunch the market started doubting the execution ability of projects that were already awarded. In this phase order books lost their relevance and most market participants started believing that things will never improve. This was the time when central bankers globally started cutting rates aggressively and also started pumping huge amount of liquidity into the system. However the fear was so high that nothing seemed to have any impact. Markets started to improve from the beginning of December before Mr. Ramalinga Raju burst into the scene in the first week of January.
In this phase companies with high debt levels, requirements of refinancing, high forex exposure, requiring large working capital fell the most.
In this phase the Sensex fell by another 35% and the BSE Mid cap index fell by another 40%.

Phase III – Total Disbelief and the lack of confidence – January 2009 to Beginning March 2009 – Even as markets had started stabilizing from the beginning of December 2008 the Satyam scam broke out and this combined with the process of change in regime in the USA and a constantly deteriorating scenario in the economic scenario globally led to the virtual “Falling off the cliff” of the markets, specially on the mid cap space. This was the phase in which no one wanted to own any mid cap stock and even large cap stocks with suspect accounting standards or suspect managements saw their stock prices crashing extremely badly. This was a phase in which most Western economies stock markets made new lows and most emerging markets held on to their October lows in term of large cap indices. However mid caps continued their free fall. This was the phase in which I believe that mid caps finally bottomed out as investors who were still holding out finally lost patience and sold these stocks at dirt cheap valuations. This was the phase which was the total reverse of October 2007 to Jan 2008 where investors just wanted out of mid caps. This was also the time in which investors wanted to stick to the bluest of blue chips and risk perception was the highest.

In this phase companies with suspect management practices, suspect accounts, commodity companies or those with exposure to the Middle East countries fell the most.
In this phase the Sensex fell by around 23% and the BSE Mid Cap index fell by around 30%.

Part II

In part I of the article I wrote on the Anatomy of the bear market. Now I will cover what investors should be doing now.

The three phases of the bear market made most investors move away from capital good, real estate, infrastructure, financial etc stocks into defensive bets like FMCG, Pharmaceuticals, Utilities etc. By the middle of March 2009 these stocks dominated the portfolio of most funds and cash position in funds went up to very high levels.

As despair reached its depths the stocks markets globally started recovering from Early March. The policy actions taken by governments globally in easing monetary policy, making more money available through various programs, the start of quantitative easing i.e. printing of money and also the passing of stimulus packages all over the world resulted in confidence returning to stock markets globally. Economies all over the world also started stabilizing and the downward spiral in economic performance seems to have been broken for now.
Coming to India specifically we have seen signs of stabilization and growth starting in sectors like automobiles, consumer durables, cement etc. Steel consumption has also stared moving up due to greater execution of infrastructure projects. The economic performance seems to have bottomed out in India in January 2009. Liquidity scenario has undergone a sea change and as on today bulk deposit rates which had gone up as high as 13-14% in the last few months of 2008 have come down to 5-6%. Consumer sentiment has also started to stabilize and revive.
Global liquidity has also improved where both LIBOR rates as well as corporate spreads have contracted significantly over the last three months. This will also reduce the cost of refinancing of Forex loans.
Under the circumstances it is important for investors to revisit their investment strategies. The few strategies that should work over the next few months are as follows –

Reduce positions in defensives – This is clearly the time to move out of defensives like stocks in the FMCG, Pharmaceuticals and Utility sectors where companies have outperformed over the last 15 months mainly due to risk averseness despite the fact that earnings growth prospects of such companies are nothing great and valuations of such companies have reached levels which are nearly twice that of market valuations. As fear reduces and things look more benign there is likely to be a movement out of such stocks.

Increase exposure into commodities – Commodity stocks have taken a severe beating over the last few months due to falling commodity prices. Some commodities which are likely to be in surplus are still likely to remain subdued. However this is the time in which a phased build up in commodity stocks should make sense. With the kind of money that is getting pumped into the global economy combined with the imminent fall in the value of the dollar should result in commodity prices moving up. Although it is extremely unlikely that commodities will reach their 2008 peaks anytime soon, commodity stocks normally follow underlying commodity prices and as such a sector like steel, which should see prices bottoming over the next few weeks, should be a sector to watch. Similarly a sector like sugar where sugar stocks saw their peak nearly 18 months before the peaking of the overall markets should also do well. This sector has failed to perform due to perceptions of government intervention should do well post elections.

Financials - Over the last few months among the financial stocks, banks with a large retail base and specifically PSU banks have outperformed due to them getting a greater share of deposits in the turmoil of the last quarter of 2008. Private sector banks and NBFC’s got battered due to higher perceived NPA’s and both the lack of availability of liquidity and the high cost of money. Now with liquidity no longer being a issue and the system being flush with liquidity along with bulk cost of deposits falling much below retail deposit costs there is likely to be an inversion in performance where Private sector financial institutions and NBFC’s should outperform.

Infrastructure companies – Over the last few months stocks of infrastructure companies which includes construction companies have taken a sharp beating. This has happened even to companies with large order books. This was mainly due to perceptions on risk of execution of projects, cancellation of projects and slower execution due to poor liquidity conditions. The order book accretion of such companies was also likely to suffer due to the slowing economy. However prices of stocks in this sector have now fallen to just about 15-25% of their peak value and offer lot of value for medium term investors.

Companies with large forex loans – Stocks of companies with large forex loans, FCCB’s outstanding etc. have got severely battered over the last one year due to the depreciation of the rupee, rising cost of forex loans and refinancing risks. These companies have been reporting forex losses continuously over the last few quarters. Due to the postponement of AS11 guidelines and expected appreciation of the rupee going forward such companies can outperform.

Alternative energy companies - With easing liquidity and bottoming out of crude oil prices, combined with clean energy investments proposed by the new administration in the USA we should see such companies coming back in focus. Stocks of such companies have come down to 10-15% of peak prices.

Automobiles – I am very positive on this sector as we are likely to see strong volume growth revival as well as margin expansion in this sector. This should be a big outperforming sector over the next two years. With consumer financing easing out, the economy reviving and interest rates starting to fall this sector is well placed.

Mid cap stocks in general – Today if one looks at companies on the large cap side (specially that are perceived to be the bluest of blue chips), taking an illustrative example of Reliance Industries the stock price is today 55-60% of its peak value, similar is the case with Bharati Telecom. Most defensive large caps like HLL, ITC are still trading near their peak prices. However today we see a phenomenon where a large number of mid cap companies with extremely robust business models, strong managements, strong cash flows, good profit growth have come down to 10-20% of their peak values. This is not restricted to high risk companies like those of the real estate sector but to a majority of mid cap companies. Out of the universe of nearly 1000 investable mid cap companies one can find at least 20 that can be multibaggers from here on. Incidentally to be multibaggers they just have to go to 50% of their peak values.
Hard work and proper due diligence done in this segment will give the maximum returns over the next two years.

Prologue – As pessimism reached its peak the stock markets globally have recovered sharply from the beginning of March. The MSCI Emerging Market Index is up 38% from its bottom. In India the NIFTY has also gained around 40% from the bottom and the Mid cap indices have also risen by a similar amount.

The thing to remember while investing is that “Money is made by investing when the perception of risk is the highest. At such times the actual risk of investing tends to be the lowest and the bridging of this gap is what makes money”.

http://www.blogger.com/email-post.g?blogID=5812693851148121542&postID=4019850408526860377 -

There is recovery from March lows, but return since launch is still -35%. Looks sticking with a concentrated midcap portfolio has taken its toll, backed by wrong timing.

This one trashes Sandip Sabarwal and calls some of his picks like Country Club speculative. JM Core 11 is down 41% since it started in Feb 2008.

Country Club: the guy who sticks out and is a sore thumb!!!!!!!!

This one trashes Sandip Sabarwal and calls some of his picks like Country Club speculative. JM Core 11 is down 41% since it started in Feb 2008.

He needs to realise that the means are as important as the end.

Otherwise we assume it's all a monkey's darts game and success and failures is all accidental.......purely dependent upon market direction

I think Mr. Sabharwal's team has done an excellent work......they made fools out of grown-ups....wonderful job, just keep on fleecing idiots!!!!!!

It's like giving your money to the sadhoo baba who promises 1% return/day.

Losing money in the stock market seems so very easy.... Just yesterday i heard of someone who lost 80% of his life's savings in a few months and his wife is worried he'll commit suicide...

Seems like he has no idea about P/E etc. Can one buy stocks just like that???

While we all read about these things in papers it never seemed so real to me.

“P/E ratio means the percentage of investors wetting their pants (pee**g) as the market keeps crashing!”

Return since launch in Feb-2008: (-) 26% annualised

3-year return: (-)22% against +5.6% for sensex

Is there anything more to be said?

Top holdings: LIC Hsg & ICICI Bk

Stocks held are individually ok (the usual MF types), but looks these guys have been pathetic with churning them. Perils of a concentrated portfolio backed by poor timing!