Saturday, January 18, 2014

Portfolio Management service vs investing in mutual funds

10 Best Biotech Stocks To Invest In Right Now

Thinking of putting money in a PMS product? Here is what you should keep in mind.

It is important to understand the differences between availing of a Portfolio Management Service versus investing in mutual funds.

The first thing which distinguishes a Portfolio Management Service from a mutual fund is that you directly own shares in various companies rather than units in a fund where there are many co-investors with you. The advantage here is that you know exactly what you own and depending on the agreement with your portfolio manager, you may have a say in selecting your investments. Your portfolio does not get affected with the subscriptions and redemptions of other co-investors as in the case of a mutual fund.

The second thing to consider is that there is a wide variety of portfolio managers. The total number of SEBI registered portfolio managers in India is at 268 compared to 51 registered mutual funds. With the variety also comes complexity. There are many agencies tracking the performance of various mutual fund schemes and information is widely available. In the case of portfolio managers however the information availability is an issue. All portfolio managers are required to give prospective investors a document called disclosure document. This document gives details of the past performance, organisation structure, key personnel etc. There is no central place where one can get the details of the performance of all portfolio managers and one would have to go through the disclosure document of each portfolio manager separately in order to make comparisons.

A reassuring factor while selecting a portfolio manager would be availability of references of existing and past clients who can vouch for their experience with the service provider. Some of the questions to ask apart from past returns would be volatility of returns, portfolio churn and investment philosophy. It is very important that the investment philosophy of the client and that of the portfolio manager matches so that there is no heart burn later on.

Investors should guard against unnecessary churn in the portfolio. Portfolio Management transactions are usually done with a single or limited number of brokers and many a times the brokerage is a big source of revenue for the portfolio manager. A high level of churn will incur avoidable expenses of brokerage, STT and short term capital gains tax. Tax authorities also tend to classify portfolios with a high level of churn as trading / business activity rather than investing activity. This classification will result in all income being taxed at the normal income tax rates rather than the concessional rates applicable to capital gains.

Operational aspects to be considered by prospective clients would include the kind of reports that are available to clients and their periodicity, whether reports are accessible on the internet, the auditors auditing the portfolio management transactions and whether the funds and securities are held by professional custodians rather than the staff of the portfolios manager.

For small investors, the entry level to avail of portfolio management services is steep at a minimum of Rs. 5 lacs per investor. This is the SEBI prescribed minimum amount. Portfolio Managers have an option of keeping their entry amounts higher than the SEBI prescribed minimum and many of them do so. In some rare cases the entry amount can be as high as Rs. 5 crores. Entry into mutual funds on the other hand is quite accessible at Rs. 5,000.

Friday, January 17, 2014

Link Between Stocks, Treasury Yields Weakest Since 2009

There’s been a lot of talk about whether higher yields will be good or bad for stocks–and not just from me. Well, at least one measure shows that investors have seriously reconsidered the relationships between stock prices and Treasury yields.

The 120-day correlation–which measures the strength of the link between two assets–between the SPDR S&P 500 ETF (SPY) and the 10-year Treasury yield has dropped to 16%, down from 58% three months ago and the lowest since August 28, 2009. A correlation of 100% means two assets move in lockstep, while a negative correlation means two assets tend to move in opposite directions. (Click for a larger image.)

To put that in plain English, investors have gone from betting that higher yields are good for stocks, to seriously questioning that relationship. Don’t be surprise to see the correlation turn negative soon, indicating that investors higher yields are bad for stocks.

Rising Treasury yields haven’t hit stocks with big dividends as hard as the overall market today. While the Dow Jones Industrials have fallen  1.2%, Verizon (VZ), which has a dividend yield of 4.2%, has dropped 0.3% to $48.75 today, while Pfizer (PFE), which has dividend yield of 3,2%, has fallen 0.1% to $29.01. Merck (MRK), which has a 3.5% dividend yield, is off  0.8% at $48.20.

Thursday, January 16, 2014

Top 5 High Tech Companies To Buy For 2014

Participants in the $3.7 trillion municipal bond market that finances schools, roads and other projects are likely watching in dismay as some of their investments go down the sewer, literally.

The costly sewage system revamp in Jefferson County, Ala., looks like a raw deal for muni debt holders who, for the first time, according to Bloomberg, will be forced to accept a loss of principal.

The Southern state’s largest county, encompassing the Birmingham metropolitan area, filed a 101-page consensus-based plan in U.S. Bankruptcy Court on Sunday that includes a cut of $1.2 billion in principal payments to holders of sewer-related debt.

The Birmingham Business Journal quotes David Carrington of the Jefferson County Commission, which approved the plan, as saying the result reflects a hard-fought consensus between the county and its creditors:

"All of the various sewer creditors (the monoline insurance companies, the liquidity banks, the hedge funds, and particularly JPMorgan) will be getting far less than a full recovery. Every part of the settlement is the product of very intense, hard-fought, arms-length negotiations."

Top 5 High Tech Companies To Buy For 2014: DaVita HealthCare Partners Inc (DVA)

DaVita HealthCare Partners Inc., formerly DaVita Inc., incorporated on April 4, 1994, is a provider of dialysis services in the United States for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD). As of December 31, 2011, the Company provided dialysis and administrative services through a network of 1,809 outpatient dialysis centers located in the United States throughout 43 states and the District of Columbia, serving a total of approximately 142,000 patients. It also provides acute inpatient dialysis services in approximately 900 hospitals and related laboratory services throughout the United States. In addition, as of December 31, 2011, it provided dialysis and administrative services to a total of 11 outpatient dialysis centers located in three countries outside of the United States. On September 2, 2011, the Company acquired CDSI I Holding Company, Inc., the parent company of dialysis provider DSI Renal Inc. In November 2011, the Company announced that its wholly owned European subsidiary, DV Care GmbH, acquired ExtraCorp AG. In January 2012, the Company acquired controlling interest in NephroLife. In September 2012, the Company announced that its new guest services contact center located in Centennial, Colorado was opened. On November 1, 2012, the Company announced the consummation of the merger of HealthCare Partners Holdings, LLC (HCP), with Seismic Acquisition LLC, a wholly owned subsidiary of the Company, with HCP as the surviving entity (the Merger). The Merger, HCP became a wholly owned subsidiary of the Company. In January 2013, the Company acquired nine dialysis centers from Fresenius Medical Care (FMC), provider of dialysis services and manufacturer of dialysis products.

During the year ended December 31, 2011, the Company acquired a total of 178 dialysis centers, eight of which were located outside of the United States, opened 65 new dialysis centers, sold two centers, merged seven centers, and divested a total of 30 dialysis cent! ers in connection with the acquisition of DSI. It also added three dialysis centers under management and administrative service agreements that are located outside of the United States and added one center in which the Company owns a minority equity interest. The Company�� United States dialysis and related laboratory services business accounts for approximately 93% of its consolidated net operating revenues. Its other ancillary services accounted for approximately 7% of its consolidated net operating revenues during the year ended December 31, 2011.

Dialysis and Related Lab Services

As of December 31, 2011, the Company operated or provided administrative services through a network of 1,809 outpatient dialysis centers located in the United States and 11 outpatient dialysis centers located outside the United States that are designed specifically for outpatient hemodialysis. Many of the Company�� outpatient dialysis centers offer certain support services for dialysis patients who prefer and are able to perform either home-based hemodialysis or peritoneal dialysis in their homes. Home-based hemodialysis support services consist of providing equipment and supplies, training, patient monitoring, on-call support services and follow-up assistance. Registered nurses train patients and their families or other caregivers to perform either home-based hemodialysis or peritoneal dialysis.

As of December 31, 2011, the Company provided hospital inpatient hemodialysis services, excluding physician services, to patients in approximately 900 hospitals throughout the United States. It renders these services for a contracted per-treatment fee that is individually negotiated with each hospital. When a hospital requests the Company�� services, the Company administers the dialysis treatment at the patient�� bedside or in a dedicated treatment room in the hospital, as needed. In 2011, hospital inpatient hemodialysis services accounted for approximately 4.5% of its total United S! tates dia! lysis treatments. The Company owns two licensed clinical laboratories, which specialize in ESRD patient testing. These laboratories provide routine laboratory tests for dialysis and other physician-prescribed laboratory tests for ESRD patients. Its laboratories provide these tests primarily for its network of ESRD patients throughout the United States. These tests are performed to monitor a patient�� ESRD condition, including the adequacy of dialysis, as well as other medical conditions. During 2011, it operated or provided management and administrative services to 33 outpatient dialysis centers located in the United States and three outpatient dialysis centers located outside of the United States, in which it either owns a minority equity investment or are wholly owned by third parties. These services are provided pursuant to management and administrative services agreements.

Ancillary services and strategic initiatives

DaVita Rx is a pharmacy that provides oral medications to DaVita�� patients with ESRD. HomeChoice Partners provides personalized infusion therapy services to patients typically in their own. Intravenous and nutritional support therapies are typically managed by registered and/or board-certified professionals, including pharmacists, nurses and dieticians in collaboration with the patient�� physician in support of the patient�� ongoing health care needs. VillageHealth provides advanced care management services to health plans and Government agencies for employees/members diagnosed with Chronic Kidney Disease (CKD) or ESRD. Lifeline provides management and administrative services to physician-owned vascular access clinics that provide surgical and interventional radiology services for dialysis patients. Lifeline also is the owner of one vascular access clinic. DaVita Clinical Research conducts research trials principally with dialysis patients and provides administrative support for research conducted by DaVita-affiliated nephrology practices. DaVita Neph! rology Pa! rtners offers practice management and administrative services to physicians who specialize in nephrology. Practice management and administrative services include operations management, information technology support, billing and collections, credentialing and coding, and other support functions.

The Company competes with Fresenius Medical Care.

Advisors' Opinion:
  • [By Ben Levisohn]

    The S&P 500 got a lift from Sysco (SYY), which gained 10% to $37.62 after purchasing a competitor,� Davita HealthCare Partners (DVA), which rose 6.7% to $62.17, and Cabot Oil & Gas (COG), which reported stronger than expected production in the Marcellus region. Big losers include Newfield Exploration (NFX), which dropped 8% to $24.33 after offering disappointing production guidance, and Edwards Lifesciences (EW), which fell 5.4% to $62.73 after releasing disappointing earnings guidance.

  • [By Lauren Pollock]

    DaVita Healthcare Partners Inc.(DVA) and Fresenius Medical Care AG(FME.XE) & Co. traded higher after the Centers for Medicare and Medicaid Services said it will reduce payments to kidney dialysis providers by less than 1% over the next two years in a reversal of the much-larger cuts it had proposed earlier this summer. The move handed at least a temporary victory to dialysis providers like DaVita and Fresenius. DaVita’s shares jumped 4.4% to $59 premarket, while Fresenius’ stock climbed 7.7% to $34.71.

  • [By Holly LaFon]

    Last quarter, there were four winners: Chihin, Errold, Luishernandez and Clemo69. They correctly guessed that Buffett bought DaVita (DVA), Wells Fargo (WFC) and IBM (IBM). Congratulations!

Top 5 High Tech Companies To Buy For 2014: Western Alliance Bancorporation (WAL)

Western Alliance Bancorporation (WAL) is a bank holding company. The Company provides full-service banking and lending to locally owned businesses, professional firms, real estate developers and investors, local non-profit organizations, high net worth individuals and other consumers through its three wholly owned subsidiary banks (the Banks): Bank of Nevada (BON), operating in Southern Nevada; Western Alliance Bank (WAB), operating in Arizona and Northern Nevada, and Torrey Pines Bank (TPB), operating in California. In addition, the Company�� non-bank subsidiaries, Shine Investment Advisory Services, Inc. (Shine) and Western Alliance Equipment Finance (WAEF), offer an array of financial products and services to small to mid-sized businesses and their proprietors, including financial planning, custody and investments, and equipment leasing nationwide. It operates in four segments: Bank of Nevada, Western Alliance Bank, Torrey Pines Bank and Other.

The Company provides a range of banking services, as well as investment advisory services, through its consolidated subsidiaries. As of December 31, 2011, WAL owned an 80% interest in Shine. As of December 31, 2011, the Company owned a 24.9% interest in Miller/Russell & Associates, Inc. (MRA), an investment advisor. MRA provides investment advisory services to individuals, foundations, retirement plans and corporations.

Lending Activities

Through the Company�� banking segments, the Company provides a variety of financial services to customers, including commercial real estate loans, construction and land development loans, commercial loans, and consumer loans. Loans to businesses consisted 89.2% of the total loan portfolio at December 31, 2011. Loans to finance the purchase or refinancing of commercial real estate (CRE) and loans to finance inventory and working capital that are additionally secured by CRE make up the majority of its loan portfolio. These CRE loans are secured by apartment buildings, professional of! fices, industrial facilities, retail centers and other commercial properties. As of December 31, 2011, 49% of its CRE loans were owner-occupied. Owner-occupied commercial real estate loans are loans secured by owner-occupied nonfarm nonresidential properties for which the primary source of repayment (more than 50%) is the cash flow from the ongoing operations and activities conducted by the borrower who owns the property. Non-owner-occupied commercial real estate loans are commercial real estate loans for which the primary source of repayment is nonaffiliated rental income associated with the collateral property.

Construction and land development loans include multi-family apartment projects, industrial/warehouse properties, office buildings, retail centers and medical facilities. Commercial and industrial loans include working capital lines of credit, inventory and accounts receivable lines, mortgage warehouse lines, equipment loans and leases, and other commercial loans. Commercial loans are primarily originated to small and medium-sized businesses in a variety of industries. Consumer loans are generally offered at a higher rate and shorter term than residential mortgages. Its consumer loans include home equity loans and lines of credit, home improvement loans, credit card loans, and personal lines of credit. As of December 31, 2011, its loan portfolio totaled $4.68 billion, or approximately 68.4% of its total assets.

Investment Activities

All of the Company�� investment securities are classified as available-for-sale (AFS) or held-to-maturity (HTM). As of December 31, 2011, the Company had an investment securities portfolio of $1.48 billion, representing approximately 21.7% of its total assets. As of December 31, 2011, its investment securities portfolio consisted of the United States Government sponsored agency securities, Municipal obligations, Adjustable-rate preferred stock, Mutual funds, Corporate bonds, Direct the United States obligation and government-! sponsored! enterprise (GSE) residential mortgage-backed securities, private label residential mortgage-backed securities, Community Reinvestment Act (CRA) investments, Trust preferred securities, Private label commercial mortgage-backed securities, and Collateralized debt obligations.

Sources of Funds

The Company offers a variety of deposit products, including checking accounts, savings accounts, money market accounts and other types of deposit accounts, including fixed-rate, fixed maturity retail certificates of deposit. As of December 31, 2011, the deposit portfolio consisted of 27.5% non-interest bearing deposits and 72.5% interest-bearing deposits. Non-interest bearing deposits consist of non-interest bearing checking account balances. In addition to its deposit base, it has access to other sources of funding, including Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) advances, repurchase agreements and unsecured lines of credit with other financial institutions.

Financial Products and Services

In addition to traditional commercial banking activities, the Company offers other financial services to customers, including Internet banking, wire transfers, electronic bill payment, lock box services, courier, and cash management services. Through Shine, a full-service financial advisory firm, the Company offers financial planning and investment management.

Advisors' Opinion:
  • [By Investment Biker]

    Investment Summary: This article is on Western Alliance Bancorporation (WAL), a growth-oriented commercial lender in the Southwest. The banks looks set to improve profitability supported by economic recovery in Last Vegas, industry-leading revenue performance and operating leverage supported by expense control. The credit profile of the bank looks excellent with limited exposure to residential mortgage and well poised to grow its loan portfolio by 20% annually over the next 3 years. It is also well set on a path to credit recovery with improving fundamentals that justifies premium valuation going forward.

Top 5 Gold Stocks To Own For 2014: Ventripoint Diagnostics Ltd (VPT.V)

VentriPoint Diagnostics Ltd., a medical device company, engages in the development and commercialization of diagnostic tools to monitor patients with heart disease primarily in Canada and Europe. The company offers VentriPoint Diagnostic System that is used to generate critical shape and volume measurements of the right ventricle. Its VentriPoint Diagnostic System consists of commercial off-the-shelf computer and tracking system sensor, as well as patented and proprietary methods, and software. VentriPoint Diagnostics Ltd. is based in Calgary, Canada.

Top 5 High Tech Companies To Buy For 2014: Abcourt Mines Inc. (ABI.V)

Abcourt Mines Inc. engages in the acquisition, exploration, and development of mining properties in Canada. It explores for gold, siver, copper, and zinc ores. The company owns 100% interests in the Elder and Tagami mine project that consists of 34 claims and a mining concession covering an area of 876 hectares located near Rouyn-Noranda, Quebec; the Abcourt-Barvue property, which comprises 139 claims and 2 mining concessions covering 5,865 hectares located to the north of the mining community of Val-d�Or, Quebec; and the Vendome property that includes 59 claims covering 2,546 hectares located to the north of Val-d�Or, Quebec. It also holds a 100% interest in the Aldermac property that covers 303 hectares located in Beauchastel township near Rouyn-Noranda, Quebec; and interests in the Vezza property consisting of 85 claims and 19 cells covering 2,233 hectares in Vezza township, Quebec. The company is headquartered in Mont-St-Hilaire, Canada.

Top 5 High Tech Companies To Buy For 2014: Westmoreland Coal Company(WLB)

Westmoreland Coal Company operates as an energy company in the United States. The company, through its subsidiaries, engages in the production and sale of sub-bituminous coal and lignite to electricity generating plants; and the ownership of power plants in North Carolina. It owns 5 surface coal mines in Montana, North Dakota, and Texas; and 2 coal-fired power generating units with a capacity of approximately 230 megawatts in Weldon, North Carolina. As of December 31, 2010, Westmoreland Coal Company had estimated proven and probable coal reserves of 389.9 million tons. The company was founded in 1854 and is headquartered in Englewood, Colorado.

Wednesday, January 15, 2014

For Clear Channel CEO Robert Pittman, Not Just Any Private Jet Will Do

Clear Channel Outdoor Holdings (NYSE: CCO  ) has just renewed CEO Robert Pittman's employment agreement. And that in itself is a little odd. The company's share price has shown no real net gain at all since his appointment in October 2011, but perhaps it's early days.

And it's not the $1.2 million salary, it's not even the $2.7 million in restricted shares. It's the specific mention of the make and model of the corporate aircraft to which Mr. Pittman will have access.

I've been writing about pay and governance for more than 20 years and I've never ever seen specific mention of the kind of corporate jet in a CEO employment agreement.

The Dassault-Breguet Mystere Falcon 900 clause

This is how the agreement terms it: "During the term of his employment, CCMH [Clear Channel] will make an aircraft (which, to the extent available, will be a Dassault-Breguet Mystere Falcon 900) available to Mr. Pittman for his business and personal use and will pay all costs associated with the provision of the aircraft."

Now, don't misunderstand me, this is not really a corporate jet, it's an airliner. It's bigger than most of the planes I've ever flown on, usually in the company with another 130 people. There's a picture of it here.

Now, we all know that Steve Jobs had a Gulfstream V, but that's because Apple (NASDAQ: AAPL  ) bought it for him rather than paying him a salary.

But don't worry, if the Dassault-Breguet isn't available, the agreement continues, the company will charter a comparable jet. This is beginning to sound more like a contract between a driver and a car hire firm than a CEO employment agreement. And while we're on the subject of cars and drivers, those will also be provided for Pittman for his use in the New York area or, as the agreement has it, "as well as anywhere else on company business."

What will they think of next?

Ownership spider web

But what can you expect of a company with such a complex structure it's sometimes difficult to figure out who Pittman actually works for? The agreement is actually between him and CC Media Holdings, (CCMH), and he will serve as the chairman, CEO, and director of CCMH, as well as of Clear Channel Communications (CCU), an indirect subsidiary of CCMH. He will also serve as the chairman, CEO, and a member of the board of managers of Clear Channel Capital I, LLC, an indirect subsidiary of CCMH. On top of that he will serve as executive chairman and director of Clear Channel Outdoor Holdings (CCOH), which is an indirect subsidiary of CCMH, Capital I, and CCU.

What is it about media companies? 

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Sunday, January 12, 2014

Did Verizon Make A Smart Move?

The recent purchase of Vodafone's remaining interest in Verizon Communications creates an interesting opportunity says Jim Jubak, but it probably is not the one you think.

I normally don't like to buy stocks that are predicated on a company not executing its strategy, but I think if you're looking at the recent deal between Vodafone and Verizon—over the Verizon wireless partnership, that's exactly what you see when you look at Vodafone. So Verizon and Vodafone had a partnership that controlled Verizon wireless. Verizon has spent $172 billion, some ungodly amount of money, to go out and buy the stake in Verizon wireless that it didn't have, so it gets the whole thing.

What Vodafone gets is a lot of cash, and what Vodafone has said looking around is, "Uh-oh, if we have a lot of cash and if we don't put it to work, we become an acquisition candidate ourselves." Because we've got a lot of cash, we've got some decent assets, and, in fact, right now, it looks like we're a pretty good pure play on Europe for a company like AT&T, that wants to build up its market share in the Euro zone.

So, the strategy that Vodafone is going to pursue to try to avoid becoming an acquisition candidate itself is to go out and make small acquisitions. There aren't a whole lot of acquisitions, you can buy a few players in Europe, you can buy some players in the emerging markets. The idea is that they'll be able to spend down their cash, at least the cash that remains after they have paid their dividend, and Verizon is also going to pay part of those prices in stock, so they won't have all cash, but basically, the idea is that you spend enough money so that you don't have a lot of cash sitting there, so that an acquirer can't use your cash to basically acquire you, and that's the strategy.

Now, I'm hoping that once the dust is cleared, that Vodafone is reasonably priced enough, so that I might actually be able to put some money on the hope that this strategy doesn't succeed, because I think Vodafone, as an acquirer of other small wireless companies is a whole lot less interesting as an investment, than Vodafone as a company that's going to be acquired. The likely acquirer, looking at markets, you know, looking at the size of the companies and various sundry pieces of who owns pieces of what, is AT&T. So, what I'm looking for is Vodafone being able to spend $5 billion, $6, $7, $8 billion, but still having a lot of cash, being a very attractive candidate, and there being some bid from AT&T for those assets in Europe. That, I think, would be the best thing that would happen if you're an investor in Vodafone is for Vodafone's strategy not to work.

This is Jim Jubak for the MoneyShow.com video network.

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