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Thursday, December 29, 2011

Review of Dec 4700 PUT @ 68 dated: Dec 10,2011

Lets review the short term call given:
Recommendation Date: Dec 10,2011
Recommendation: Sell NIFTY 4700 PUT @ 68 on Monday Dec 12,2011. Buyback the PUT @ 2 on Dec 29,2011. Earn 12% return in one month.
Dec 29,2011 NIFTY-4700-PUT-Dec closed @ 53.85

Actual Result:
Profit: ((68-53.85)*50)-307.50 = 400
Returns: 400/25,000 = 1.6%
Well so that's it folks.. as we can see.. expectations are different and reality is a lot different. We expected 12% return in reality we got 1.6% but lets dig a little deeper..

Here is the price movement of NIFTY-4700-PUT-Dec from Dec9,2011 till the date of expiry (Dec 29,2011)

As we can see NIFTY-4700-PUT-Dec has moved from lowest price of 10.05 (Dec 27,2011) to a high price of 180.55(Dec 19,2011) giving us opportunities (10.05) and also some scary moments (180.55)

Conclusion: On Dec 9,2011 NIFTY was @ 4866 and Dec 29,2011 NIFTY @ 4646  a drop of 4.5% 
but we still got to close the month with a profit of 1.6% ..
Option "Selling"  Its an opportunity to get higher returns but not without potential losses.. everyone has to take a call ..
should I sell at 10 or wait for 2,
should I book losses at 180 or sell 1 lot  NIFTY-4500-PUT-Dec @ 50.50 (Recommended on Dec 16,2011)

This is not a one shoe fits all.. my current recommendation for NIFTY-JAN-4600-PUT @ 76.50 has been executed by "My own world...In my own Words" @ 87 which is at a great price.. So find your own battles.. (entry and exit points)
its recommended to take the final call yourself.. 
- Do not take bets which you cannot afford to loose..
- Always keep extra cash just in case you get margin calls

Another strategy is: Straddle from both sides..
- SELL NIFTY-JAN-4600-PUT @87    and
- SELL NIFTY-JAN-4900-CALL @ 40.40
Investment 50,000 you make (87+40.40) *50 -600(Transaction cost) = Rs 5770 i.e. 11.54% return.

This is only if NIFTY Closes between 4700 and 4900 by end of JAN 2012 Expiry ..your earnings will drop but your profits are protected till 127 points on either side i.e. you will not make losses till 4573 and 5027 in NIFTY..
(personally I would not recommend this as NIFTY @ 4646 is still closer to the bottom rather than at the top..)

Happy New Year!!
=Happy Investing

Wednesday, December 28, 2011

12.5% monthly return:SELL NIFTY JAN-4600 PUT @ 76.5

This is next leg of recommendation for short term.. 12.5% till end of Jan 26,2012. in 29 days..

4600 PUT available at 76.5 can be sold at current levels.. buyback at 2 or less..

Return 76.5-2 =74.5 x 50 = 3725-600(transaction cost) =3125 on investment of 25,000

that is a return of 12.5% in 29 days..

NIFTY 4700 PUT will be a sell tomorrow (Dec 29,2011) at any price below 10 or wait for target buyback Rs 2/=
PN: suggestion is only for one lot of NIFTY PUT. One can also select these options..
NIFTY-4600-PUT JAN @ 76.50 make 3125 on investment of 25,000 return 12.5%
NIFTY -4500-PUT JAN @ 55  make 2050 on investment of 25,000 return 8.2%

Wednesday, December 21, 2011

The rise of the US Dollar

Everybody is flummoxed by the strength of the US Dollar. Look at the facts.
Oct 2008 Monetary base for US was: 1.129 Trillion Dollars.
August 2011 Monetary base for US was: 2.658 Trillion Dollars

So ideally speaking with the excess dollars floating around in the market ..the value of dollar should fall. but we are seeing the rise of the dollar.. what's the reason?

The reason is simple. the excess dollars is not in circulation in the market. The excess dollars are parked with the federal reserve as excess reserves.

how much of excess dollars are held in Federal Reserve:
Oct 2008: -ve 381 Billion Dollars
August 2011: 1.57 Trillion Dollars.
As of Dec 14,2011: 1.52 Trillion Dollars.

How much dollars are in circulaton in the market:
Oct 2008: 1.46Trillion
Aug 2011: 1.00Trillion
Dec 14,2011: 1.1Trillion

So actually the dollars in circulation in the market right now is 350Billion Dollars less than what it was on Oct 2008 and hence we are seeing this rise in Dollar strength.

from Jan1975 the banks have always held "minimum required" reserves with the fed

The question in our mind is why this sudden rise in "Excess" dollar deposits with the federal reserve?
Well the Federal Reserve bank changed the policy on Oct 6, 2008. That starting Oct 6,2008 the Federal reserve will start paying interest on reserves and excess reserves to the big banks.. (link) [Read carefully the original implementation date was somewhere in Oct 2011]

Surprisingly I just found that the stock market decline also started from Oct 2008.. (Link) coincidence??

Conclusion: The current strength of the dollar is cooked.. Cooked by the world famous chef "Fed". The stock market crash 2008 and subsequent market volatility is also driven by the withdrawl of "Credit" from the system. keep a close watch on FED action.. live within your means.. banks are going to feel the brunt of credit squeeze ..

Historical data of FED Reserves(Total, Required & Monetary Base)
Old blog article which started it all Bill Gross's interview in bloomberg
Old blog article where I misinterpreted the FED Data and suggested fall in dollar

PN: these are my personal views about publicly available information. I could be wrong in understanding the information.. Please do your own deep dive before making any investment decision.

Saturday, December 10, 2011

NIFTY Option: 12% Return in 1 Month Dec 2011

Well the year is coming to an end and here is a chance to make 12% return in 1 month in NIFTY Options.

Sell NIFTY 4700 PUT  One lot.
Current Market Price: 68
Investment: 25,000

Buyback on Dec 29,2011.or before NIFTY 4700 PUT at Rs 2  or less.
NIFTY has not fallen below 4700 till Nov 3,2009  (chart below)

Current price of NIFTY 4700 PUT is 68.15

Sell One lot "NIFTY 29Dec 20114700 PUT" at 68.15 and buy back at Rs 1-2 on Dec 29,2011
Price difference: 68.15-2 = 66.15
1 lot: 50 units so Profit: 66.15x50 = 3307.50
you need to have 25,000 in your option trading account to sell one lot.

Considering 307.50 as transaction cost Net Profit: 3000/=
Investment is: 25,000
Profit Percentage: 3000/25,000 = 12%
investment time period: 18 days..
Caution: If nifty Falls below 4700 additional margin will be required. If NIFTY closes below 4640 or below on Dec 29,2011 you will be making losses. hypothetically if NIFTY closes at 4600 your estimated loss will be around 40-50 per share ie 50*50 = 2500

If nifty closses at any price above 4700 you will stand to gain Rs3000/= on an investment of 25,000

Other trading strategies are:
- Sell NIFTY 4600PUT Dec292011 at 44.90 and make a profit of approximately 2000 on an investment of 25,000  ie 8 % in 1 month
- Sell NIFTY 4500PUT Dec 29,2011 at 29 and make a profit of approximately 1150 on an investment of 25,000 ie 4.6% in one month.

Please note this is free advice.. I donot stand to profit from your trading in this options.. This is an advice for selling only ONE LOT (50) trading in more than one lot is not suggested. Please do your own deep dive before investing.

Monday, November 28, 2011

The Energy and Resource Institute (TERI): Smart Grid.

A Smart Mini-Grid (SMG) is an intelligent electricity distribution network, operating at or below 11 KV, where the energy demand is effectively and intelligently managed by diverse range of Distributed Energy Resources (DERs) such as solar PV, micro-hydro power plants, wind turbines, biomass, small conventional generators such as diesel gensets etc. in combination with each other through smart control techniques.

This integrated energy system comprises:
Variable loads which are connected to the distribution grid;
Diverse range of small, local generators based on distributed energy resources, for example, solar, wind energy, storage system; and
Control and power conditioning systems.

Benefits of Smart Mini-Grid
Foster demand side management & response;
Reduce power outages, increasing reliability, efficiency, and safety;
Reduce carbon footprint and minimize fossil fuel consumption
Provide customers autonomy to manage their electricity needs.

Energy is the key to economic development. In India alone, the demand is expected to grow at an annual rate of 6% in the next decade. Estimates by the Ministry of Power suggest that by 2011-12, India will need over 1,00,000MW of additional capacity installation to meet its power requirements. Few power stations of desired capacity can be installed in order to meet the demand. But power stations alone cannot meet the small dispersed loads in remote areas. Globally, the trend is towards managing existing energy resources and demand in an optimal and efficient manner. Over the years, smart grids have evolved for this purpose. Advanced sensing, communication, and control technologies are used in these smart grids not only for generation and transmission of power, but also distribution and utilization of electricity in an intelligent and effective manner.
This distributed generation-based power system/mini-grids can be installed and subsequently integrated to the conventional utility grid or used to provide electricity for localised loads only. It not only fosters effective inter-connection and utilization of multiple renewable energy resources, but also helps in advancing access to energy to the last mile in the most optimum manner by improving the efficiency of the overall system. Besides, it offers immense potential for improving energy access in both urban and rural areas.
TERI has designed, developed, and demonstrated the country's first-of-its-kind Smart Mini-Grid system. The objective is to optimally use smarter control of distributed energy sources combined with intelligent management of loads to improve the efficiency and reliability of the overall mini-grid system. The Smart Mini-Grid, built with the support of the Ministry of New and Renewable Energy (MNRE), was recently inaugurated at the TERI Retreat in Gual Pahari, Gurgaon.

A Smart Mini-Grid system is an application of digital technology which optimizes electrical power generation and delivery (see box). The system is based on the integration of multiple distributed energy resources (DERs) into the same grid. This system is also based on intelligent load and energy resource management. It is designed with local controllers for each of the distributed generation technologies as well as a central controller called intelligent dispatch controller (IDC) which communicates with the each local controller. Whereas the local controllers ensure maximum utilization of energy resources with permissible output power, the IDC performs complex system control functions and takes critical decisions such as automating the demand response, dynamically adding or removing DERs in a seamless manner (based on the existing demand) without affecting the grid stability.

A Smart Mini-Grid has greater resilience to loading as compared to the conventional grid system. It is marked by power flow through multiple routes, a feature common to the conventional grid system. However, unlike the conventional grid system, it is designed to avoid cascade tripping of network elements.

The system also has the capability to respond automatically to network problems and minimize network disruptions. It can anticipate and respond to system network problems and avoid or mitigate power outages, power quality problems, and service disruptions using real-time information from embedded sensors and automated controls. The grid is also equipped with a self healing system that enables it to rapidly detect, analyze, respond to power disturbances and restore power supply.

The TERI Smart Mini-Grid facility combines the following distributed generation resources--3.3 kWp wind generator, 1 kWp thin-film solar PV, 12.5 kW solar PV, 100 kWe biomass gasifier, 600 Ah, 48 V storage battery, and a diesel generator. The diesel generator has been added to the system to meet the intermittency of the renewable resources and hence ensure reliable power supply.

Such Smart Mini-Grid systems have great potential, not only in commercial and industrial complexes, but also in hospitals, shopping malls, apartments, residential complexes, educational institutions, remote un-electrified as well as electrified locations to ensure maximum flexibility, reliability, and safety with enhanced efficiency of the overall system.

Conclusion: SMART Grid system is nothing but a mini version of a conventional electricity distribution system the energy produced from different sources are consolidated and the most preferred source is used to provide the electricity. This technology will effectively make the conventional grid system less relevant as households can effectively sustain themselves outside the grid network with their own source of power..
Something to watch out for.

Link to Teri Project

Tuesday, November 22, 2011

Jayant Agro Organics: Arkema to buy China's sebacic acid leader Casda Biomaterials

The march is on.. foreign multinationals are on the lookout for castor production sources and its derivatives. As demand for renewable sources of chemicals increases.. India is the largest producer of castor (70-75% of worldwide production) and China is 2nd largest producer of castor oil and its derivatives.

Jayant Agro is the largest castor seed processing company in India  and producer of largest range of castor derivatives in the world  (Blog link)

Arkema continues to expand in specialty polyamides with the acquisition of Chinese companies Hipro Polymers and Casda Biomaterials

Arkema announces a project to acquire Chinese companies Hipro Polymers, a fast-expanding producer of biosourced polyamide 10.10, and Casda Biomaterials, world leader in sebacic acid, derived from castor oil and used in particular to manufacture this polyamide 10.10.

This acquisition is a great opportunity in many respects. It will help us boost our position in China, one of Arkema’s geographic priorities for the last 5 years. With polyamide 10.10, it aptly complements our high added value polyamide 11 and 12 product range, and fits in well with our growth strategy in green chemistry », stated Thierry Le Hénaff, Arkema Chairman and Chief Executive Officer.

Both acquisitions are consistent with Arkema’s strategy to develop performance products, as well as the program presented by the Group in November 2010 to acquire around 1 billion euros of sales.

Both companies report aggregate sales estimated at $230 M for 2011, and employ 750 people on two sites in China.

The acquisition price is based on an enterprise value of $365 M for 100% of the capital of both companies, which are predominantly owned by a joint venture between privately owned Chinese specialty chemical company Feixiang Chemicals and Bain Capital, a global alternative asset manager with over US$60 billion under management.

We are happy to see the two companies to join the family of Arkema, global leader of renewable source based high performance polyamide, and believe that the business and product development of the two companies will be brought to a new high level », added Ji Li, President of Feixiang Chemicals.

By adding Hipro Polymers’ PA10.10 to its technical polymer portfolio, Arkema, the world’s only producer of polyamide 11 also derived from castor oil, would strengthen its world leading position in specialty biosourced polyamides (15 to 20% expected annual growth rate), becoming the only chemical manufacturer to offer a full range of long chain polyamides 10, 11 and 12. Arkema’s acknowledged reputation and application know-how in the end-markets of these various products should help speed up the development of Hipro Polymers, in particular in transportation (automotive, trucks), renewable energies, and electronics.

In anticipation of the rapid development expected over the next few years, Hipro Polymers’ modern and competitive industrial site, based in Zhangjiagang, 110 km from Shanghai, recently benefited from new investments to triple its production capacity.

With the acquisition of Casda Biomaterials, the world’s leading producer of sebacic acid, Arkema would benefit from sebacic acid integrated feedstock for the production of PA10.10, and, through this strategic raw material, would be able to supply diversified world markets such as lubricants, plasticizers and corrosion-inhibiting additives, as well as the fast-growing biosourced and biodegradable copolymer market.

The Casda Biomaterials facility is a competitive industrial base located in Hengshui, 250 km from Peking.

This project is subject to approval by the Chinese authorities, and the operation should be finalized in early 2012.

A global chemical company and France’s leading chemicals producer, Arkema is building the future of the chemical industry every day. Deploying a responsible, innovation-based approach, we produce state-of-the-art specialty chemicals that provide customers with practical solutions to such challenges as climate change, access to drinking water, the future of energy, fossil fuel preservation and the need for lighter materials. With operations in more than 40 countries, 15,700 employees and 9 research centers, Arkema generates annual revenue of €5.9 billion, and holds leadership positions in all its markets with a portfolio of internationally recognized brands. The world is our inspiration.

Saturday, November 19, 2011

Reliance Industries: Shale Gas Find: 41.6Trillion Cubic Feet: Interior Marcellus Assesment Unit

Digging deeper into Peak oil and future energy resources.. Shale gas report by United States Geological Survey (USGS) in Marcellus Assesment Unit (AU) is interesting information.

- First this is a report that was published by USGS in August 2011 .

- Reserves are always an estimation.. and it is a wide range  (reporting only for Interior Marcelleus AU)
- Conservative Estimate: - 44,607  Billion Cubic Feet of Gas (BCFG)
- Realistic Estimate:- 81,374 BCFG
- Wild Guess Estimate:- 139,106 BCFG

The report also states that  conservative estimate of Natural Gas liquids is: 1,497 Million Barrels of Natural Gas Liquids  (MMBNGL)


Now on Nov 14,2011 Task leader "Marcellus Shale Gas Resource Assessment" James L Coleman discussed about their report with US Senate committee.  (link)

It seems the old estimate of Marcellus Shale reserve was 2 TCFNG and 0.01 BBNGL and latest numbers are 84 TCFNG and 3.4BBNGL

The only large sources of oil reserves are in Deep water and it seems its a difficult task setting up a base and getting the oil out. Its much more economical to extract shale gas "on land" than these "Deep water" oil reservoirs. 

Reliance has significant stake in Marcellus Shale. So just don't count out Reliance Industries yet..  and maybe all this weakness in Reliance Stock is for a very very strong upmove in Reliance in the future..

Conclusion: "Contrarian Investing" is a good idea provided we have done some leg work.. Pls note I have no personal interest (investments) in Reliance Industries (all the more reason for Reliance Industries to rise faster ;-p) Donot Sell your reliance stock just yet or at 900 hold for long term.. People like BP buying into Reliance is not a flash in the pan its with much deeper knowledge than we can grasp.

Friday, November 11, 2011

Aviation Turbine Fuel Cheaper than Petrol by Rs 11-14 per Liter in Mumbai

The recent Kingfisher airline cancellation of flights and debt problem is in news. Govt it seems is looking to provide a revival package with debt recast etc..

1. Aviation Turbine Fuel (ATF) is cheaper than Petrol by Rs 11-14 per liter in Mumbai. (depending on the fuel supplier) Domestic flight Mumbai Prices (ATF): Rs 61.98 per liter (Indian Oil)

2. For international flights the (ATF) is still cheaper.. by Rs 25 per liter.
International Flight Mumbai Prices (ATF): Rs 48.7 per liter (Indian Oil)

3. Domestic Mumbai Petrol Prices: Rs73.81 per liter (Indian Oil)

So its amazing that there are 10 airlines in India and they can influence the govt and get ATF fuel at a price cheaper by  Rs 11-14 per liter of ATF fuel price.. while the whole country of 1.x Billion people pay more and cannot influence the Indian Govt enough to get a price parity to ATF fuel for Petrol??
As per DGCA 396.31 lakh people traveled by Air from Jan to August 2011  ie. in 8 months. 
-  49.53 lakh people per month .. which translates to 
- 1.65 lakh people per day(30 days)...

 there is one more change.. Source to Destination = 1, Destination to Source (back) = 2 since every time an individual travels its counted as a different passenger when actually its the same passenger travelling back..so actual number of unique people travelling is 1/2 ie 
- Approximately 82,565  unique passengers per day.

So there are approximately 82,565 individual air passengers who benefit from the ATF fuel prices while there are a millions of people in India who use Petrol and loose out due to higher fuel prices every day!!.

Conclusion: I am not advocating an increase in ATF or decrease in Petrol prices.. The question is about availability of all relevant information before making a decision about bailing out pvt companies. Definitely Kingfisher airlines does not need to be bailed out. in fact kingfisher airline market share is 18.8% which means we are talking about 15,522 individual passengers being impacted on a daily basis. The airline industry has been privatized and many other pvt airlines have shut shop we need to allow for kingfisher to also learn to swim or sink. The industry can accommodate these fluctuations.
India should spend more time and energy in providing better public transportation with connectivity. Railway network needs to be strengthened to carry more percentage of traffic (goods and individuals) 

Indian Cities Petrol Prices: By the way "Bengaluru" is the city where the Petrol prices are the highest.

Thursday, November 10, 2011

Jayant Agro Organics: Sept 2011 Results

Jayant Agro Organics reported its Quarterly earnings for quarter ending Sept 30, 2011 on Nov 9,2011. 
Let us see how the company is progressing and try and get a better understanding of how the company is doing.

First a lot of earnings for Jayant agro are in the subsidiary company specially Ihsedu Agro Chem. Ihsedu Agro Chem is a castor seed processing company located in the largest castor growing district in the state of Gujarat.
Ihsedu Agro Chem was a Gujarat Govt company in castor seed crushing. The promoters of Jayant Agro organics bought the company from Gujarat Govt.. increased capacity and added additional processing capacity. 

Castor Seed crushing capacity in the heart of castor growing district is a big advantage for  Jayant Agro specially in castor oil and related business where availability of raw material plays an important part.

So in case of Jayant Agro we will be looking at the "consolidated results" of Jayant as there is a pretty big difference between Jayant Agro standalone result and Jayant Agro consolidated results.

Another unique issue is that Jayant reports 3 months, 6 months 9 months and 12 months consolidated results. 
So Sept 30,2011 result includes the result of June 30,2011. Well lets see what do we have here..

Looking at the results for Year ending March 2010, March 2011 and 3 months ended June 30,2011 and 6 months ended Sept 30,2011 .. it looks like its business as usual with Jayant Agro. 
- PBDIT Margins are consistent around 5%
- Depreciation is decreasing in a gradual fashion.
- Interest payments are steady and hovering just below 2% level.
- Taxes are also around 1%
- Net Profit is also pretty steady at 2%

So when we look at the margins the business is making steady income and everything is on autopilot. 
On the sales front the company sales are increasing by leaps .. 
Year end sales March 2011 is: 1171.99Cr
6 months sales Sept 30,2011 is: 969.44Cr
6 months sales Sept 30,2010 is: 587.09Cr 

So on a year on year basis sales have jumped approximately 65% on a year-on-year basis.  Infact in 6 months ending Sept 30,2011.. Jayant has already clocked sales equal to 82.7% of sales for year ending March 2011.. So looks like demand is growing by leaps and Jayant is well positioned to supply castor oil and its derivatives to the market.

Interest rates: Looking at the interest rates its amazing that Jayant's interest rates are keeping pace with 65% topline growth.. generally capital requirements are steady across quarters but in case of Jayant we see that capital requirements increase every quarter and culminate with largest capital requirements for the year end figures.. I also remember that in the AGM there were questions raised as to why the interest payments are rising and keeping pace with growth in topline. Management said its under control and its part of doing business.. and not something to be worried.

Well after some more digging it looks like interest payments are about 2.02% of raw material requirements..(steady for March 2010, March 2011 and now Sept 30,2011..)  Interestingly there is a 2% interest rate discount for exporters by GOI .. Since India has high interest rates to keep inflation under check.. just so that exporters are not at a disadvantage exporters are provided with 2% interest rate discount.. Well putting all the  pieces together .. looks like Jayant Agro's interest rates are going to keep  pace with topline growth. so don't worry about it!! (wink wink) 

Interestingly net profit margins are also 2% .. Now that is a question I certainly don't have an answer for.

Conclusion: Jayant Agro is favourably placed with a flood of demand for bio based products. Castor oil and its derivatives because of their unique properties already had a steady demand.. now with this increased awareness for bio-renewable inputs .. Jayant Agro is front and center of a demand tsunami.. We can expect Jayant to report steady profits and also expect higher dividend payouts. 
Ihsedu Speciality chemicals the next generation castor oil derivatives subsidiary has not yet started commercial production. If and when it starts it will improve the margins of Jayant Agro.  Also a sebacic acid plant with 8000MT capacity is considering only 1 shift.. but max capacity could be 3 shifts so we could see 24,000 MT as actual production for sebacic acid and that would translated to some really interesting numbers.. 
(I think I am running way ahead of reality.. considering that the plant has not yet started commercial production :--) )

Wednesday, November 09, 2011

SIAM: Reinventing Mobility: Vision 2020

There is a lot of discussion about fuel price hikes..
Society of Indian Automobile Manufacturers (SIAM) had their 51st annual convention on Sept 7,2011. 
"Reinventing Mobility: Vision 2020"

In the end of 19th century electric cars outsold all other types of cars
- Electric cars had less vibrations, no foul smell, roads were limited and electric car range of 18 miles was sufficient.
- Gasoline/Internal Combustion Engine (ICE) cars had manual cranking to startup, vibration, noise and foul smell.

By mid 1920 better road network and limited range of electric cars was a big negative. Gasoline cars with electric starter and a longer range due to high energy density stole the show..  cheap cheap oil made gasoline cars affordable. Thus high energy density, cheap availability of fuel  and better road networks...were prime reasons for the death of electric cars.

Cutting the discussion short lets look at the summary of Vision 2020 (according to me):

- Automobile industry needs to reduce oil dependency and pollution to ensure sustainable growth in the future.
- To meet the challenges transition to electrified powertrain will completely change the Value equation.
- China adopted industrial policy to accelerate Electric Vehicle (EV) technology to leapfrog US/EU/Japanese auto industry - goal was to become dominant auto exporter of EV technology. 
- China strategy is failing due to high cost, low quality and consumer resistance for EV.
(this shows that EV and Plugin Hybrid Electric Vehicles (PHEV) adoption will be slow in China, US, EU and elsewhere.) << == Very Important observation.
- Necessary to restrain demand, but by providing good mobility and accessibility.. enhance public transportation specially for middle class .. charge full cost of vehicle use ..considering pollution, energy security, Green house gases.. through fuel, vehicle and usage taxes.
- Consider "Climate Policy" in Context - Strategies to reduce Green house Gases are the same strategies to reduce .. oil imports.. air pollution .. road infrastructure cost.. improve urban livability.. 

Actually there are 3 presentations which are trying to address the future.
1 - The most presentable one is by Booz & Company (link
2 - Institute of Automotive Research at the University of Applied Sciences Nuertingen (Germany) (link)
3 - The Best presentation ..as far as addressing the real problem is  UC Davis (University of California Davis) (link)

Looking at the presentation of the 3 Keynote speakers .. we can see the real problem..  

Speaker1 and 2 are looking at the peak oil problem from an automotive standpoint and giving an automotive solution .. Electric Vehicle (EV) 

Speaker 3 Prof Daniel Sperling is looking at the problem holistically and saying.. 
- Reduce the adoption of person use vehicles.
- Encourage public transport
- Encourage city development to reduce requirement of long distance commute for work/play.

Conclusion: The most effective way to deal with "peak oil" crisis is to discuss it openly and make changes at the country, state, city, community and personal level and take a holistic view of the problem.  1/2 the oil used in the world is for transportation!!

Most likely solution adopted by Indian political system will be:
- Stop building/repairing highways motorways for vehicles. (make the journey .. a torture)
- Increase fuel prices (pinch where it hurts the most .. in the pocket)
- Create Metro rail and public/bus transport network. (will take its own sweet time..)
- Pray ..Middle class public will get frustrated by the long commute with bursting bladders and get the message (wink wink..) use public transport!! (Gotcha!!) 

Unfortunately freedom to choose and freedom to travel with personal space (provided by a car) .. will delay the mass movement of the working middle class to public transport .. till the very end...

Tuesday, November 08, 2011

How Are We Doing

This is a yearly review of performance of recommended stocks.
Diwali 2011: How Are We Doing
Diwali 2010: How Are We Doing

Jayant Agro Organics: Sebacic Acid used in Tissue Engineering

Sebacic Acid (SA) which is a derivative of Castor oil. Sebacic Acid has been found to assist in tissue engineering. Sebacic Acid when used along with Polycaprolactone (PCL) as a gel is cyto-compatible and capable of maintaining high cell viability. Addition of Sebacic Acid in PolyCaproLactone (PCL) increases the biodegradability of PCL. 

Title: Biocompatibility and biodegradation of polycaprolactone-sebacic acid blended gels.

Abstract: Tissue engineering aims at creating biological body parts as an alternative for transplanting tissues and organs. A current new approach for such materials consists in injectable biodegradable polymers. Their major advantages are the ability to fill-in defects, easy incorporation of therapeutic agents or cells, and the possibility of minimal invasive surgical procedures. Polycaprolactone (PCL) is a promising biodegradable and elastic biomaterial, with the drawback of low-degradation kinetics in vivo. In this work a biodegradable injectable gel of PCL blended with sebacic acid (SA) was prepared, to improve the degradation rate of the biomaterial. 

Sebacic Acid (SA) is known for its high degradation rate, although in high concentrations it could originate a pH decrease and thus disturb the biocompatibility of PCL. Degradation tests on phosphate buffered saline were carried out using 5% of Sebacic Acid on the blend and the biomaterial stability was evaluated after degradation using differential scanning calorimetry, dynamical mechanical analysis, and scanning electronic microscopy. After degradation the elastic properties of the blend decreased and the material became more crystalline and stiffer, although at a lower extent when compared with pure PCL. The blend also degraded faster with a loss of the crystalline phase on the beginning (30 days), although its thermal and mechanical properties remained comparable with those of the pure material, thus showing that it achieved the intended objectives.

After cell assays the  Polycaprolactone-Sebacic Acid (PCL-SA) gel was shown to be cytocompatible and capable of maintaining high cell viability (over 90%). © 2011 Wiley Periodicals, Inc. J Biomed Mater Res Part A, 2011.

The Energy Equation is changing fast.

I dont know where to start and dont know where to end it. We all have just seen a price hike in India for "Petrol" to around Rs 72 per liter. An american Gallon is 3.78 liters which means in India we pay close to Indian Rupees: 272.16 per gallon of "Gas" which assuming Rs 50 per Dollar is 5.44 Dollars per Gallon of Gas.

Again the question is not about the Price of oil but Peak oil.
- Peak oil means world has reached a peak (maximum) barrels of oil production. and this number will never exceed.
- Peak oil does not mean there will be no more oil .. but oil will be "MORE" expensive to produce.
- Food is the largest consumer of Oil Resource followed by Transportation and then Housing.
- According to published data "Peak oil " production was: 74.82 Million barrels per day on July 2008.

This is an old image with data from 2009 as the latest data.
If you see the chart "Peaks" are preceded or followed by "Drop" in production which basically means some of this is carry forward oil. (planning for Winter requirements or Peak driving periods)

Here is a more recent data provided by US EIA (Energy Information Administration).

Here also we can see new peaks but again preceded and followed by slump .. which means its more due to preparation for projected demand. Its better to look at yearly avg production.

Another important point of view worth pointing out is the "7 Month Data" looking from a different perspective. We are looking at countries which are still increasing production and countries which have a fall in production of crude.

Increase In Production: Persian Gulf Nations, Canada, China, Russia, United States and World
Decrease in Production: Egypt, Mexico, Norway, United Kingdom, Total Non OPEC.

- This is production figures for crude oil, does not include natural gas and plant liquids.
- China and US are increasing production based on Shale Oil??
- Canada is producing based on Tar Sands??
- Total Non OPEC is down which means without OPEC at World level we are producing less oil.

Again we are getting carried away in the details..
- India with annual fuel production of 500-700,000 barrels per day and imports of 1,500,000 barrels per day is in a very bad position.
- India with large production capacity of food, fruits, vegetables, milk is favorably placed to take care of the basic needs of  the population.
- Fertilizer's and pesticides require Oil.
- Energy requirements are also there for communication, transportation.
- Population control is a must to keep a population size that is sustainable.
- Debate about Peak oil and alternative society structures to build sustainable communities is very important.
- Ayurveda, Unani, Homeopathy traditional medicine should be encouraged for general well being.
- Off the GRID setup like Biogas, Solar and transportation are urgent requirements.
- learn important trade skills for a future with "Peak oil"
- Instead of debating Fuel Price hike we should be debating Peak oil and the required changes in social structure.
- Personal transportation is a strict No-No. Reduce unnecessary use of fuel guzzlers. Use public transport.

Conclusion: Stock market no longer seems to be a long term area for investment. Very Very stock specific investments will have to be made and keep in mind Peak oil and energy footprint of companies. Auto, transportation, Airlines, travel, are a strict No-No for investment ideas. Also real estate investment is a big risk. Banks (No). Mind you these are long term themes and we could see short term spikes.

EIA Monthly Data 
The Oil Drum 

Saturday, November 05, 2011

Sweet Spot for Growth.

Peak oil has been the underlying theme for investment ideas in this blog. Peak oil will certainly result in global growth coming to a halt. Current economic downturn on a world wide basis does have "Peak oil" as the underlying theme. Recent data with regards to shale gas will maybe give a window of opportunity to growth.

Shale gas resource data has been published by US Energy Information Administration. Top of the list is China and USA. USA is where the largest shale gas exploration work is done and first off the block with production. This has caused the natural gas prices in North America to be well below the world wide levels..

China and US as 2 large new energy sources.. we could be having a revival in economic growth.
India is busy importing the new energy from US for its growing economy.

Energy is the source of growth. The fact that US is producing surplus energy for export speaks of the volume of Shale gas being produced and confirms the reserves. We can expect the growth to be +ve in US. It has been said that efficiency in production ..though a good word will result in faster consumption of natural gas resources.

Conclusion: Shale gas reserves and technology to economically extract it will be a boon for world energy requirements. Subsequent efforts for exploration of  shale gas worldwide could keep the available world energy levels comfortable for the next couple of years at the least. Industries that can take advantage of cheap natural gas are set to reap profit.Current high energy prices could make some industries unprofitable. Hopefully this time (of relative stable energy prices) will be utilized for building a more energy efficient and sustainable industrial society.

Thursday, November 03, 2011

Bio Gas plant for home using food waste

The price of energy is steadily rising. Best Buy Investment idea's are based on the theme of "Peak oil" 
I have been looking around for some energy security (for home) and bumped into ARTI (Appropriate Rural Technology Institute) 

What we are looking at is "Biogas plant" for home. here are some points to keep in mind.
- This is a Biogas plant but it does not require any "Cow-Dung" "Manure"
- What is fed into the "Biogas Plant" is starchy food waste.(kitchen waste)
- This is a small unit 1000-1500 liters plastic tanks are used to build the unit.
- Cost for complete setup as mentioned is around Rs 15,000/= (but consider inflation.. as I see different price tags)
- Input is food waste.

Storyline:  Biogas plant does not require "Cow dung" The bacteria that generate "Methane" reside in the stomach of "Cows" and are available in the cow dung hence cow dung is used in biogas plants. 
So if you have added the bacteria into the biogas plant you can feed organic matter (just like you feed cow fodder) and you will get "Methane" 
If Organic matter is starchy then its great (That would be potato peel, rice, wheat, bread) 

Methane has a calorific value of 11,000Kcal/Kg If you want high output of methane then input should also have high calorific value. Cow-dung has low calorific value as it is the excreta and hence we need 40kg of cow-dung which requires 40 days to decompose making biogas plants large and unmanageable.
If you put 1 kg of starch you can generate the same amount of Methane (as 40kg cow-dung) in 24 hours making the Biogas plant compact and manageable. (that is the underlying principle)

Story in picture..

Story in Video

There are issues with Hydrogen Sulphide in Methane as its harmful for humans.
Link to ARTI related info:
http://www.samuchit.com/images/stories/products/std_designs.pdf (Price list)

I did find another company http://biotech-india.org  providing bio-gas plants and they do have more info like the BioScrubber technology to remove Hydrogen Sulphide.

By the way Gujarat Ambuja Export which uses Maize Starch "Big time" has "Bio-Gas Plants and has installed "Bio-Scrubbers"

Conclusion: Soon we will see energy price deregulation which also includes things like Zero subsidy on LPG cylinders (which means LPG cylinders will cost somewhere close to Rs700 per cylinder) considering the added advantage of organic manure for the gardens.. I think we have a winner in a "bio-gas" plant for home. 
just keep in mind the "Hydrogen Sulphide" issue

Wednesday, October 26, 2011

Diwali 2011

Its that part of the year when we look at how our investments are doing. Anyone who has been following the stock market will know that its pretty bad. Well lets look at the numbers for the recommended stocks

There are 28 stocks and the return from the day of investment is 4.9% ie an investment of Rs 10,000 in each of the 28 share would be worth 2,92,223.74. Profit is 12,223.74. Dividends have not been considered. If it wasn't for Venky's we would be in negative territory.  

Looking back at the stock prices my understanding is:
- Interest rate spike is one of the key reasons for the market downturn.
- Global liquidity squeeze is "on" which is restricting investment flows.
- Fear is directing investment rather than rational decisions.

There are multiple ways to look at the current market scenario. My belief still is that "Peak oil" is the prime underlying theme. Further extrapolation of "Peak oil" is high inflation (due to rising energy costs for transportation, energy, fertiliser) I also see "Growth falling" at worldwide basis. 

Growth would specifically impact discretionary items. Also if you see the trend of "Carbon footprint" "Eco-Conscience" the trend is moving toward minimalism.

Though there are 27 recommended stocks in the blog .. my personal investment is heavily geared towards my "Best Buy's" Jayant Agro Organics, Gujarat Ambuja Exports, Tata Communication and NHPC. These 4 cover 90% of my investment funds and all are somewhat linked to the "Peak Oil" theory.

Jayant Agro Organics:  Jayant as we have discussed time and again is one of the largest listed Castor oil and castor oil derivatives manufacturer in India. Castor is a replacement for crude in the chemical industry and is "The Green Chemical"

Gujarat Ambuja Exports: It is a play on the consumption story of India. GAEL is also a very fundamentally sound agro processing major. The management is committed and GAEL with time we should see the market acknowledge its sound fundamentals.

Tata Communications: Not much discussed in the blog but Tata Communications has quietly setup the largest network of submarine cables and connection endpoints in the world. This basically ensures that customers get a better deal signing up with Tata communications for their network needs than any other company. With Peak oil "Travel" is going to be more and more virtual. Whether you use "Tata Telepresence" or just plain simple "Video conferencing" you will be touched by "Tata communications"

NHPC: National Hydro Power Corporation is the largest "Hydro power" corporation in India and all set to maintain the status for time to come. Electrical energy with "Natural Water Cycle" as the source of energy is definitely very very attractive.

My suggestion to investors is.. This is as good a time as any to take a good look at which stocks to sell and which stocks to buy. Markets will rise considering the huge pile of cash lying around.. not all stocks will do well stock picking is highly recommended. Avoid Auto, Airlines and discretionary stuff. I would also recommend that the "Best Buy" stocks must be considered for investment.

Friday, October 21, 2011

Jayant Agro: Fuel Line Made of Renewably Sourced DuPont™ Zytel® Nylon Provides Long-Term Resistance to Biodiesel

Castor oil derivatives specifically sebacic acid is used to produce "Fuel lines" used by diesel engines and bio-diesel engines. The renewably sourced long-chain nylon was chosen in preference to competitive grades of PA12 on the basis of its superior temperature resistance and long-term aging performance in biodiesel.

Geneva (PRWEB) October 18, 2011

The fluid transfer system supplier Hutchinson SRL, of Rivoli, Italy, has specified a DuPont™ Zytel® RS grade based on PA1010 for the production of fuel lines used with both diesel and biodiesel. The renewably sourced long-chain nylon was chosen in preference to competitive grades of PA12 on the basis of its superior temperature resistance and long-term aging performance in biodiesel.

The extruded, monolayer fuel line from Hutchinson is already in use on commercial new turbo and multijet diesel engines used on several Fiat vehicles, including the Fiat 500, Panda, Punto, Lancia Delta, Alfa Romeo MiTo and Giulietta. As well as seeking to increase the use of renewably sourced polymers to reduce dependence on fossil fuels, automotive component manufacturers, OEMs and materials suppliers are modifying engine and fuel systems to run efficiently on the latest generation of biofuels, including biodiesel.

Components for such systems must resist the chemically aggressive biofuels, temperature extremes and mechanical stresses for the lifetime of the vehicle. This specific Zytel® RS grade based on PA1010, which contains more than 60 percent renewably sourced ingredient by weight, offers properties typical of flexible polyamides with additional benefits such as superior high-temperature resistance when compared to materials such as PA 12, high chemical resistance and low permeability to fuel and gases. It is suitable for a range of extrusion applications including fuel lines, hydraulic hoses, corrugated tubes, transmission oil cooler hoses and pneumatic tubes.

“We were seeking a polymer for our fuel line application that was preferably renewably sourced, for a more sustainable solution, and was able to provide the best aging stability in biodiesel,” explains Katia Rossi, development manager at Hutchinson. “We considered a number of flexible polyamides, including PA12 as they had previously been specified for similar fuel line systems, but material testing showed Zytel® RS PA1010 to meet our requirements. It combines, for example, superior temperature resistance to PA12 with the best resistance to biodiesel at high temperatures.”

Data on aging performance in biodiesel was obtained by immersing the materials in the most common biodiesel – rapeseed methyl ester (RME) – at 125 °C (257 °F) for 1,000 hours and measuring retained mechanical properties. The B30 biodiesel used for testing is made up of 30 percent biofuel from rapeseed and recycled vegetable oil and 70 percent standard diesel and is suitable for many diesel cars.

By specifying the DuPont material for its fuel line for diesel engines, Hutchinson gains a longer-lasting solution that also is market leading in terms of its renewably sourced content. “With more than 60 percent by weight, this Zytel® RS grade based on PA1010 has one of the highest levels of renewably sourced content currently available for a high-performance nylon,” confirms Mario Delbosco, development programs manager at DuPont Performance Polymers. The renewable carbon in PA1010 comes from sebacic acid, which in turn is derived from castor oil.

The successful adoption of renewably sourced Zytel® nylon for the fuel line has encouraged Hutchinson to extend the application to other automotive manufacturers in Europe and beyond as well as other fuel system applications. Hutchinson is a subsidiary of the Total Group with representations in Europe, America and Asia, and is one of the world’s leading suppliers to the automotive industry. The product portfolio includes components for vibration technologies, drive train systems, sealants and adhesives, fluid transfer systems (low and high pressure), body parts and sealing systems as well as precision seals and molded parts.

DuPont offers more than 100 materials and product families for the global automotive industry. Through its global application development network, DuPont Automotive is committed to collaborating with customers throughout the value chain to develop new products, materials, components and systems that help reduce dependence on fossil fuels and protect people and the environment. For more information, visit automotive.dupont.com.

DuPont (NYSE: DD) has been bringing world-class science and engineering to the global marketplace in the form of innovative products, materials, and services since 1802. The company believes that by collaborating with customers, governments, NGOs, and thought leaders we can help find solutions to such global challenges as providing enough healthy food for people everywhere, decreasing dependence on fossil fuels, and protecting life and the environment. For additional information about DuPont and its commitment to inclusive innovation, please visit http://www.dupont.com.

The DuPont Oval Logo, DuPont™, The miracles of science™ and Zytel® are registered trademarks or trademarks of DuPont or its affiliates.

Conclusion: The race is "ON" just like the demand for "GOLD" as an investment was in every investors mind.  Renew-ably sourced, decreasing dependence on fossil fuels, and protecting life and the environment are the buzzwords and castor is the underlying source. The good part is castor derivatives have always been superior to crude oil derivatives so we are going to get better product/performance characteristics and demand is going to increase.. I hope India and Jayant can increase production with competitive pricing to increase their market share of the emerging "Green Chemicals" business.

Wednesday, October 05, 2011

Bharat Gears: Value Buy at these prices.

Bharat Gears:
CMP: 46.75
Market Cap: 35.69Cr
Debt: 58.14Cr
Sales TTM: 361.45Cr
PBDIT TTM: 34.31Cr
Net Profit TTM: 10.24Cr
6 yrs Avg Cash Flows from Operations:  +ve 24.28Cr

Bharat Gears Limited (BGL) is india's largest gear manufacturer  (I think its the largest gear manufacturer for Commercial vehicles, Farm machines and Construction equipment) . Bharat Gears manufacturers a wide range of Ring Gears and Pinions, Transmission Gears and Shafts, Differential Gears, Gear Boxes.

Bharat Gears has 3 divisions: Gears, Furnace and Automotive components.

Clients for Gears and Automotive components include: Ashok Leyland, Godrej, Mahindra & Mahindra, Tata Motors, Axles India, Hero Motors, Mahindra Sona, GE Aviation, Carraro-India, Italy, China, Hindustan Hardy Spicer, New Holland Fiat India Ltd, Toyota Kirloskar Auto Parts, CLAAS-India, France,  Hyva India, Paharpur Cooling Towers, Transaxle Manufacturing of America, Dana Corporation USA, JCB India, SAME Deutz - Fahr, Voltas, Eaton USA, JDCW USA, Spicer India, ZF China, Elgi Equipments, JDEPL India, Swaraj Mazda, Agriking Tractors and Equipments, Escorts, John Deer Iberica, Spain, TAFE.

BGL Furnaces engineers and constructs batch and continuous heat-treating furnace systems in technical association with AFC-Holcroft, Michigan, USA.

More than 110 BGL-AFC-HOLCROFT heat treating furnace systems are in service at several customers' plants in India, including Ashok Leyland, Automotive Axles, Bajaj Auto, Ceekay Daikin, Endurance, Fairfield, Greaves, Hindustan Motors, Mahindra & Mahindra, Mukand, National Engineering Industries, Precision Fasteners, Premier Automobiles, Raunaq Auto, Sona Koyo Steering, Sundaram Fasteners, TATA-Timken, TELCO, Tractor Engineers and Varroc.

Company has redeemed 1Cr worth of preferential equity which had 10% interest rate. Bharat Gears also has "leased" some of its manufacturing equipment with estimated lease obligation of 9.65 cr (last year 5.08Cr) and one year lease payment due of 2.49Cr (last year 1.56Cr) This is interesting cause this is the model being used by "Telecom players" and I must say it should be beneficial for Bharat Gears.

There are expansion plans with a new plant at Satara but I think it will take a year or more for it to really start building (right now land has been purchased)

Conclusions: Bharat Gear seems to be cheap.. its market cap of 35.69Cr is equal to 34.31Cr  PBDIT for year ending March 2011. It has also been reporting consistent +ve cash flows. Leasing of equipment seems to be working for Bharat Gears and looks like it is going to drive the growth as Bharat Gears can get latest equipment at a  fraction of cost and service the demands of the customers.. Its target automotive segment is: commercial vehicles, farm machines and construction equipment which are all growth areas for a growing economy like India. I would expect Bharat Gears to close the year with 400Cr or more of sales. Dec and March are the most profitable quarters.

Company Website
Bhart Gears Annual Report 2011:
Bhart Gears Annual Report 2010:
Bhart Gears Annual Report 2009:
Bhart Gears Annual Report 2008:

Monday, October 03, 2011

Where to get research info for Free.

I was just thinking its very important to learn fishing (investing) so that we can all start fishing.
Here is a list of places to go for ideas.

1. NSE and BSE sponsor research for companies using their "Investor Protection Fund".

NSE Link :  http://www.nseindia.com/education/content/reports/eq_research_reports.htm
(dont know why the link is not working)
This is a better link for NSE (link)

2. Economic Times Top 500 companies in India based on revenues
ET-500 Home Page (link)
ET-500 Complete List (link)
3. Edelweisse Score for Stocks
The good part of Edelweisse site is that they did catch the consolidated data for Jayant which is generally missed by others.

4. MoneySights website.

What I like in moneysights website is that along with fundamental analysis the "Upside Potential"  which could indicate that the stock is fundamentally good but under-priced or over-priced. 

5. Hindustan Bulls : Candle sticks, Technical Analysis.
Sometimes its good to see and get some idea how the candle stick data looks.

6. Money Control: MoneyControl is where I generally start as almost all data is available directly from BSE/NSE

7. GeojitBNP Paribas: What I like is the Market cap data for 5yrs on month-month basis ..which is very important to see to what level the stock can fall (support) and at what price are we getting in.

8. Technical Data: EMA 500, 200, 50 is good for technical related info.

9. Screens to filter stocks based on parameters..

10. Quantitative data for stocks..

Saturday, October 01, 2011

Jayant Agro: Ford Focus 2012: Features First Castor Oil based Automotive Foam

Ford mixed things up a bit when it introduced a special soy-based automotive foam to make up the seat cushions of many of its vehicles in 2008, but now the automaker has teamed up with BASF to produce a special new foam to make a soft-touch dashboard.

Ford and BASF have developed a seamless soft-touch dashboard that comes from plant-based castor oil and offers greater flexibility, durability and faster production than a traditional petroleum-based product.

“Working with BASF, we now can offer our North American customers the new Ford Focus with the industry’s first seamless soft-touch instrument panel that’s stronger, better-looking and better on the environment,” said Bari Brown, Ford advanced product development engineer. “Castor oil from plants helps deliver sustainable interior foam that reduces petroleum use while improving vehicle craftsmanship. It’s beneficial both for the customer and Mother Nature.”

Ford says the new material is “significantly more durable” than the material it used previously, offering 36 percent more tensile strength. Tear strength improved by five percent, while unwanted elongation from temperature or impact stress reduced by 12 percent.

The automaker says it will also reduce production time by 43 percent, an added benefit, but the real benefit and goal of the product was to create a more sustainable car that has a smaller impact on the environment.

Dan Pierce of Ford Motor Company told Leftlane that the automaker already has soy foam in 75 percent of its seats and most of its headliners, something it intends to eventually move to 100 percent. With the new castor oil-based foam for the dashboards, Ford intends to take a similar path towards eventually completely phasing out traditional petroleum-based foam in all of its products.

Pierce says the new dashboard has been slowly integrated into the 2012 Focus product lineup, and is now at 100 percent utilization in all models being built.

Link to original Article (Link)

Ford Focus sales in America 2010: 172,421 units

Conclusion: Castor oil is the best replacement product for crude oil. In-fact castor oil properties are better than petroleum based products (as mentioned above). The only reason crude oil replaced castor oil was because "Crude oil" was cheaper and abundant. Now with crude oil prices at $ 80-100 USD and Peak oil a reality.. Castor oil will fast replace Crude..  
Maybe the real underlying reason could be the virtual ban by European Union of crude oil based plasticiser (Bio-Plasticiser Surge in Demand )

Jayant Agro Organics is the largest processor of Castor oil in India 
Market Cap:  Rs 1,249 million 
Year end March 2011
- Sales:  Rs11,719.9 million
- PBDIT: Rs 634.5 million
- Net Profit: Rs 245.7 million 

Deep Deep Value and a must have (only for long term investment) 
Old Blog articles of interest: