Monday, May 28, 2007

A perfect short - if it ever gets listed.

The last few months have nothing been short of hectic. Hopefully I will be able to post more regularly now.

So here is where I stand today. I have 10% of the money in the two stocks I own - American Tower and Idearc. Idearc is up nicely, up about 35%, besides its 5% dividend yield. AMT is flat. Besides this, 40% of my money is in Vanguard S&P and Global fund, which has been a good strategy. 50% is in cash, which has been a bad choice, considering that I relocated to India and dollar depreciated in the last few months.

Should I change my asset allocation? Problem is - if I cash out of my Vanguard funds, I will pay short-term capital gains tax. At the same time, the market has gone up in a straight line since last September, except for a brief pause in February. While there is no point fighting the tape, at some point something unexpected is bound to occur. But can I really invest for the unexpected?

What are interesting stocks going forward? It will be difficult to follow the US markets now that my focus is in India. So this blog would become more focused on Indian stocks from now.

Here, it seems I have found the perfect short. It is called NHPC - National HydroElectric Power Corporation. It is currently owned by the government, and has filed for its IPO. If and when that IPO happens, one should go long it to make a quick buck. Over the long run though, this company is a Ponzi scheme.

The company's ROI is less than 5%, and it appears to have always been below 5%. The company survives on generous equity infusions by the government each year. What it means is that the company will keep diluting its equityholders each year after becoming public to fund any of the projects it talks so enthusiastically in its IPO. The government of India has really sent taxpayer's money down the drain with this company.

I am sure the IPO will zoom the first day of trading as happened with PFC. At that time, it would be a very good short for the long run.

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