What the index has been telling me is that it is those two or three stocks which have been holding the index value from disintegrating further. Like all the retail investors, the fall in the mid cap stock values too have been dragging my portfolio value lower. However I have still been buying into my existing portfolio, the only comforting factor being that the quantity available for the sum that is deployed now is far more than what was available six months ago. I have been taking solace from the fact that I do have one or two out performers in my portfolio which have not fallen much. In fact I sold one of my stocks which was trading within a 10 -15% range from the 52 week high. I felt it was fully valued at the current price and the same money could fetch me better bargains in some businesses I have been closely tracking……………
I sold a “lubricants” company which fetched me handsome dividends. But the rise in the stock price (not that I am complaining) makes the yield percentage a little less attractive. Further, auto industry facing recession, I felt I would be better off selling this company and buying another. I added two of my existing stocks. One is “Indian hotels” and the other being “Voltas”. I am a little skeptical about “Voltas” as it is an infrastructure related business. But its huge cash flows and robust order book along with cheap valuations further enticed me into buying into the stock. Also the thought that one should have an infrastructure business for an emerging economy like India egged me further. Also, having bought the same stock at much higher levels gives me another compelling reason to buy the same. As for the hotel stock, it has been my constant favorite. This is one industry which has entry barriers due to the high real estate requirements. Also the shift of the younger generation towards spending and having more holidays, eat-outs, parties also adds to the “appeal” of the business model. The fact that both the companies managed by the conservative “Tatas” too had its say! Anyway, I will know only after a year or two if my investments paid off! So like everybody else I too am in the waiting!!

It seems that the rumour mills have been busy churning out mails pointing to more companies susceptible to management frauds. These mails include some real big names too! At first I gave them a hard thought, then, I felt the best thing would be raise the bar when it comes to selecting stock investments in terms of "management teams". "Once smitten, twice shy! "

Now why would a leading infrastructure construction company like L&T buy stake in Satyam?!! A question which definitely needs answers to understand the investment idea behind this move by L&T. L&T has a software arm called L&T infotech with a sales base of over 1500 Cr. This makes a good case for investment in a software company. On the face of it I was inclined to think that this software subsidiary will be mainly catering to the in-house needs of L&T for its infrastructure projects. But a closer look at statements reveals that the bulk of the business come from the BFSI segment (banking and financial services) at 32% as on FY08. The existence of the software subsidiary justifies the move of the management to acquire Satyam, but the management has definitely treaded dangerous waters risking investigation in its multiple deals for purchase of Satyam equity in open market and a possible roadblock in further crystallizing the whole investment into a more meaningful business venture. I would infer that yes, the move to acquire a software biz was perhaps justified, but why Satyam? This definitely raises some concerns. The current recession could very well have presented more opportunities to L&T for an investment to expand its software biz.
Anyway, we shareholders are as always left to the whims and fancies of the board!!

More than Satyam management, what shocked me was that Price Waterhouse Coopers were their auditors who are also party to this shocking affair. I keep the auditors of any company as a very important yardstick in determining the quality of the team who is running the business. Some corporates who share my shock are some PWC clients like Colgate, Cummins, Maruti, Glaxo-SmithKline, Marico, etc. I hope there will be some reactions from these corporates to their auditors with regard to their Satyam affair.

As far as we retail investors are concerned is that we should renew our resolve to stick to companies with a good track record. Also be “wary” of sudden spurt in profitability and changes in accounting policies, etc. The annual report is our best friend.

Though Satyam's senior leadership say it is committed to the company, headhunters say they are determined to make offers that would be hard to refuse. Rival IT firms have begun using head hunters to track and approach senior Satyam executives. But what about those 50000 employees which form the mid and lower segment of the management? This could well be a grueling time for them with uncertainty in the career front. Spending will see a big check once again from the IT employees.

As of me, I will just wait and watch. Thank god I do not hold Satyam, although I came periliously close to buying Satyam shares in the past. But mutual funds I hold do have a good chunk of Satyam shares. Another episode which makes further strengthens my idea of handling my portfolio by myself and not give my money to money managers.