Parchayi.com - Personal Finance Simplified

Tata Motors unveiled the Nano today - its highly anticipated 1 lakh Rs. ($2500 approx) car at the New Delhi Auto Show. The street price after taxes and destination fees will be about 1.2 lakh for the base model. Here are the specs: 30 HP, 624cc engine, Seats 5 (it seems). It has a 4 speed manual transmission and is completely barebones but at over 50mpg (20kmpl), it is fantastic with India’s high fuel prices. Tata also claims that the car meets or beats safety and environmental standards and is less polluting than two wheelers! If the Nano is a success, Suzuki will probably see a significant dent in its >50% market share in India. Their closest competitor the Suzuki 800 is twice the price of the Nano.

More info at Times of India

At the other end of the market, Tata is now the frontrunner for buying Jaguar and Land Rover from Ford. So Tata Motors has got you covered for everything from commercial trucks to the entire gamut of passenger cars and trucks. The stock fell 2.75% in the Indian market today amongst a broader 287 point decline in the market.

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I’m a loyal Blockbuster Online customer (but not a stockholder) and have been following the Blockbuster/Netflix battle for a while now. I applauded the Total Access service, was disappointed when they limited my Total Access DVDs to five per month and now after seeing how Blockbuster works I can comment on all the places they went wrong.

The first thing that Blockbuster did wrong was operate Blockbuster online and the stores separately. The next thing after the Total Access program was the fact the the online-store partnership was structured badly. When I return movies to the store, the store actually mails them out to the Blockbuster online location. I would expect it would have saved blockbuster money if they kept the online operation in the stores themselves.

The other problem for Blockbuster (not the customers) is that with Total Access, a customer can have more than 3 (or whatever their plan limit is) out at a time. And with no late fees at the store and no incentive to return the movie fast, the stores have an even bigger lack of new releases. What Blockbuster can do to make this process easy is rent the in-store movies in Blockbuster online envellopes so that I don’t have to drive back to the store to return it in addition to including the in-store rental in the three out at a time. This might piss off some customers (like me) for a short while but in the long run it will be better for both the stores and the online service because with this method all plans can have unlimited in-store exchanges and Blockbuster can still make money (save on mailing + drive more cutomers to the store). They an also possibly convince more store customers to join the online service by making everything simpler - X movies at a time regardless of online or in store.

What I think would be the ideal situation is that the store be no more than a return and pickup point for the online service rather than a separate entity that seems to be sucking the life out of Blockbuster. They can move to a smaller store format and have kiosks to compete with those fast becoming ubiquitous 1$ per night (with the per night part in really small print) DVD rental kiosks.

Maybe I’m taking a simplistic view and what I’m saying is not as easy to implement as I think it would be - but it could save blockbuster money, get them more subscribers and make their operations more efficient. It would be like running one company instead of two.

There are some good things to say about Blockbuster like their attempts at exclusive deals, their acquisition of movie link and their current Jackass 2.5 deal and I hope they continue on the path in competing with netflix. I am currently a happy customer and if things keep going well, I might become a stockholder.

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The India Fund Inc. now trades at a nearly 10% discount compared with a nearly 20% premium same time last year. The Indian stock market BSE index is now back over 14000 and stocks are doing well, however the premium on IFN does not seem to be improving. This is probably a good time to buy.

Premiums on Indian ADRs are also much lower than they used to be and it may be a good time to get in to those too. TTM is up about 18% since I bought some before my last post and that is without any increase to the premium. If the trend continues, the premium will rise too.

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I opened a position in Tata Motors Ltd. a few days ago when the share price in Rs. dropped below 700. According to my ADR premium tracker, the premium on TTM had dropped to almost nothing (currently it is about 2%). Also TTM had dropped about 20% YTD then so I took that as a good chance to do some bottom feeding on this stock.

Tata Motors is one of India’s largest automakers and has shown consistently strong sales growth by meeting market needs. Tata also plans a 100,000 Rs. (roughly 2500$) no frills car for the Indian market and if successful expectations are for it to be a strong success. TTM, though already one of Indias largest companies has room to expand along with the growing Indian economy and it also has the potential to grow through exports (which so far are not really noteworthy).

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A few days ago, I opened a position in INP (Barclays Bank Zero Cpn ETN(ITR) - see my previous post on INP) increasing Parchayi and my investment in India to 16% of our total investments.

A breakdown of our portfolio (including all stocks and mutual funds) shows 98% investment in stocks, 2% in bonds (via some mutual fund). Of the stocks 61% are US and 39% International. Of the International Stock 60% is in Emerging Markets and 40% in Developed Markets. Currently my target for our portfolio is 50/50 US/International and 60/40 Emerging/Developed so we are off the target portfolio as far as US/International goes, but my international part is exactly on target, by co-incidence more than design. About 28% of our portfolio is in individual stocks and the rest is in mutual funds/etfs.

As an investor it is always nice to have a target asset allocation and periodically check how far off you are. I have shown my breakdown by market but it is also nice to have a breakdown by cap, sector etc. to make sure that the portfolio is properly diversified. For example I realized that our portfolio is heavily weighted towards large cap stocks. So my next order of business is to increase mid-cap holdings. Our individual stock holdings are all in different sectors and the funds we own are mostly index funds that are not sector targetted.

It is a simple task to get all this information and it took me less than 5 minutes to get this information from different accounts.

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The only auto stock I own is Nissan Motor (NSANY) and that has been relatively flat for a while and so far I have never commented on the auto industry. 2006 was a not a great year for Nissan (US sales down 5.3% compared to 2005), while both Toyota and Honda managed gains. However December was a good month as Nissan launched several redesigned models and managed US sales gains of 4.4% over 2005 against analyst estimtes of a drop in sales. I think 2007 will show a continuation in this trend as the Hybrid Altima should hit any time soon and the sexy new 2008 Altima coupe will be launched mid year. I hope to see the NSANY ADR hit atleast 27$ this year.

Toyota sales crossed Chrysler for 2006 and narrowly missed crossing Ford. In 2007 Toyota is widely expected to leap over both Ford and GM to become the number 1 automaker in the world. Worldwide auto demand seems to be increasing as US demand reduces and you probably can’t go wrong investing in Toyota, Honda or Nissan. I picked NSANY because it sported a lower P/E, has a good dividend growth plan and I like their cars!

Just as a side note, the strongest growth in 2006 % US sales was from Suzuki, worlds no 7 auto maker after (GM, Ford, Toyota, Chrysler, Honda, Nissan). Also Suzuki was the no 3. automaker by sales in the Japanese market in 2006 (after Toyota and Nissan) and sold more vehicles than Honda. Suzuki has done well otherwise too and it would be nice to have a Suzuki ADR on the US exchanges.

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India Fund Inc. premium as of Dec. 1 was only 3.69% which is extremely low for IFN especially with the strong bull market in India. The BSE is at record levels nearing 14,000 and shows no signs of stopping. Inspite of this IFN has remained steady for the last few weeks causing its premium to drop. Also in the near future, there is a strong likelyhood of a dividend. It may not be as much as last years $5.53/share but I’m hoping it will be nice.

The other India Fund - Morgan Stan India Inv Fd - IIF was trading at a discount of 0.47% as of Dec. 1!! I don’t follow that closely but you might want to check that out as another option to invest in India.

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