The articles written on this blog are based on my personal analysis. The securities target prices are for information only and is not an offer to buy or sell. The reliance on these recommendations are not guaranteed as they are based on my personal assessment as a Financial Analyst. My analysis is based on Business TV Channels, Business/ Financial websites, and from Finance books. All views that I presented are to the best of my knowledge and I invest in Stock Market with this analysis in mind. While the information contained herein is from sources believed reliable, I do not represent that it is accurate or complete and should not be relied upon as such. Opinions expressed may be revised at any time.

Thursday, December 30, 2010


Just few months ago when SBP decided to restrict money supply again, there was a lot of concern in the market and market at that time was trading at 10,000 level. Many thought that market will take correction but that just didn't happen, infact, market surged by 20% and today it breached 12,000 level after more than two years. I still remember technical analysts were still bullish at that time and it seems they proved to be right.

Actually, we need to see our region first, all regional countries like China, India, Sri Lanka, Bangladesh are trading at a multiple of 16-24 while we are still around 8-10 region. So the foreign investors who can borrow Euro/Dollar at just 1%-2% rate found our market attractive. Remember our Rupee is very stable and it is expected to remain atleast for one year so the foreginers can invest with confidence.

Finally, also note the key point, our multiple hasn't changed much despite market upsurge. Why? Mathematically, denominator of "P/E" which is earnings also kept increasing and this has kept market multiple downward and still at 8-10 range which is still at a very discounted value.

The conclusion is that "true fundamental investors" were not wrong and they expected this market upsurge and in fact there is still upside remaining as per them. I also consider myself as a fundamental investor and I will very soon come up with market range for the year 2011 very soon as my upper range for 2010 was "11,200" and market has already breached this level.

Tuesday, December 28, 2010


Many investors are confused as they were not expecting the market to reach 11,900 on Dec 2010. To be honest, I also was not expecting this. As you all know my target was 11,200. This is certainly not the right time to enter in the market. I will come up with my target for 2011 very soon but for right now I believe it is better to be on a defensive side.

Amid of current political drama with MQM threatening to go out of Government and we know if this happened then law and order situation of Karachi which is already not good might get worse. Secondly rising oil prices, no news of leverage product, rising interest rates, and high fiscal deficit, nothing is good for market right now. Wait here, then why the market has performed until now? What has driven the market then? The answer is "Corporate Profitability". Companies has posted very good results and this is the most fundamental driver of any stock market. But for right now, I believe even corporate profitability might not be able to drive the market further up. We need some good news regarding the issues I discussed above. Therefore I believe correction should come at this stage with market hovering around 11,900 level and this correction would be healthy for the market to sustain an upward trend.

Thanks and Good Luck with your investments.

Sunday, December 5, 2010


Market was at 9,781 level when I posted my first article on this blog on July 07, 2010. Last Friday on 3 December, 2010 KSE 100 closed at 11,400. This is equivalent to around 16.5% return and this return is excluding dividends and if you roughly include dividends of let us say just 3% (however dividend return might be slightly higher for most of the shares that I recommended) then the total return becomes around 20% and this is just in six months period. Isn’t it wonderful? Market has certainly performed brilliantly during this period. However if you are following my blog then it must be in you knowledge that my upper limit for market is 11,200-11,500 and this is exactly where market has reached now. I would suggest profit taking at this level and if you don’t want to book your profits then at least don’t buy at this level if you have any excess cash. You should have 50-65% cash in hand right now. Wait for the market dip and then buy. There is no fundamental change and I believe 11,200-11,500 is a level where market does not look very attractive. For short term, market is facing following issues that could put the market in a declining zone:

  • We still don’t know about the leverage product, it’s characteristics and it’s time of implementation.
  • RGST is a hot issue and we don’t know whether government will be able to impose it or not.
  • Both the above-mentioned issues create uncertainly and I hope you know that very well “Market hates uncertainty”.
  • Muharrams are just there and there are very serious concerns of law and order during this religious event.
  • Because of Christmas season, foreign investor will be almost absent from the market and remember foreign investment has been the key driver of market for the last one and a half year.

Saturday, December 4, 2010


I believe this particular article is the best that I have written so far. Sometimes I think you are very lucky because what you are reading is the outcome of my hard work and a hundreds of hours of study and analysis. You are just receiving the result. For you “There is a gain without a pain”. However, the purpose of this article is not to just build your theoretical knowledge of investments but I want you to implement this and think strategically and if not strategically then at least use basic common sense which I put it as “Finance Sense”. I hope this will help you a lot.

People have different attitude towards risk. Some like to take risk and some avoid it. Usually we can safely assume that one who prefers to have a job rather than start his business is someone in a latter category. Because starting business is very risky, but working 8-10 hrs/day, insure that you will receive your cheque at the end of the month without any “risk” which means you know at the start of the month how much you will get at the end of month. However, in a business, you are not that much sure, any thing can happen, at the extreme levels you could make millions or you could loose everything that you have. Since most of the people in our world belong to this second (risk avoiding category) I can safely assume that most of my readers also belong to this second category. This article is written in keeping their views in mind. However, that does not mean at all that this article is not for business people.

The fact of the matter is that even those who want to avoid risk cannot avoid it all. They can lose their job, the inflation is 10-15% here in Pakistan and they would not be able to save enough for their retirement, they might not be able to reach their goal like purchasing new home etc, accumulate enough wealth and the last but not the least there is a mortality risk and in order to manage these risks efficiently you need to invest efficiently, i.e. invest where you have an ability & desire to invest. If risk avoider is not planning his financial matters then I believe that he is actually unknowingly taking a huge risk.

Now I am coming to the point, here are some of the basic ways of investing:

1) Invest in a Company
2) Invest directly in a Country/economy
3) Invest indirectly in Country’s economy i.e. invest in Stock Mutual Fund
4) Invest in Corporate Bonds/Fixed-Income Mutual Fund
5) Invest in a Commercial Bank/National Savings

If you are risky and young then you can choose a first option, (I would suggest you to read my previous article “Young Investor: Minimum Diversification” to apprehend this article completely). When you invest in just two or three companies there is a fair amount of risk (and hence return, remember the basic premise of finance: higher the potential risk higher the potential return). However, since you are a relatively risky and most importantly you are young and you have stable income you can certainly take this risk because this risk could be very rewarding for you in a long term.

If you consider yourself as risk avoider (risk averse) then you can choose a second option. Invest in 15-20 companies from different sectors, which should be the representatives of country’s economy. If you believe your country will survive then we can safely say the risk in this investment is much less than the previous one. Put it simply; instead of investing in few companies invest in the economy.

If you consider yourself as high-risk avoider (highly risk averse) then we still have a solution, buy a stock mutual fund. Stock Mutual Fund invests in stock market but their investment is much diversified and the money is managed by professionals. So if you are afraid of stock market and do not want to directly invest then this should be the right option. Remember they charge a fee. As per my knowledge there are around 27 Asset Management companies working in Pakistan.

If you are very high risk avoider then believe me, we still have a solution. There are two ways to invest in a company, you can buy its equity (shares) or you can give it debt, which means you can buy bonds. We all know very well that company first pay its creditors and then what is left over is paid to shareholders. Therefore, if you have bought a debt of a company then you should be rest assured that this is the least risky option of all. Because this is a fixed-income. Now let me also tell you that you can buy company’s debt directly if you can get an opportunity (Engro has recently launched Engro Rupiya offering a rate of 14.5% and even small investors can purchase this bond) but directly investing in company debt is not that much easy for small investors. Nevertheless, you can still invest in debt market by investing in a Fixed-Income Mutual Fund. These mutual funds invest in fixed income instruments and you can get a decent return, however, the expected return is less than a Stock Mutual Fund.

Finally, If you are the “Maha Risk Avoider” then actually you don’t need any advice because I hope you would have been very happily invested in an commercial bank or national saving scheme at the rate of 7%-11% which is not very bad for “Maha” risk avoider.

I thank for your patience but we are not done yet. What I really want is that one should be able to understand the importance of categorizing oneself in term of how risky he is and then invest accordingly. If you have ability and desire to invest aggressively then you should not end up investing in commercial bank for just 10%. I have no problems with “Risk Avoiders”, as far as they behave like Risk Avoiders as I stated earlier that even they sometimes unknowingly take a big risk.

Consider a simple case of how mismanagement of your wealth through not recognizing your risk category can lead you to invest inappropriately.

As an example, consider the after tax return from three strategies:

1) Stock Market Return for an “average” diversified Investor/Mutual Fund = 20%
2) Fixed Income Return/Bond from Corporate Sector = 15%
3) Return from commercial bank = 10%

Remember the return of stock market is used as a proxy of what an average investor could achieve, the return for different investors may be different i.e. for some investors it could be 40% and for some it could be 10% but over a long-term 20% return should not be a big deal if you or your stock mutual fund is an average investor.

Now suppose you have 100,000 Rupees, which you want to invest for 35 years for your retirement. Just check out the payoff of these different strategies after 35 years:

Stock Market = 59,066,823
Fixed Income = 13,317,552
Bank = 2,810,244

By showing these payoff (where the payoff of Stock Market is 4.5 and 19 times more than fixed income and bank respectively), I am not implying that you should invest in Stock Market. But what I want to tell you is that if some one had the ability & desire to take risk but end up investing in bank then his payoff will be just 4.7% and 21% of what he could had by investing in stock market and fixed income respectively. If you are “Maha Risk Avoider” and invest in bank then there is no problem at all. However, if you had marginal ability & desire to take risk but did not invest in fixed income, or you had good ability & desire to take risk but did not invest in stock market, then there is a problem.

Note that the calculations are shown for 35 year but the conclusion would be the same for any time horizon. Secondly, I am not implying that one should have a horizon of 35 years. You could have a different investment horizon e.g. 10 yrs or 20 yrs. However, remember this study is for long-term investment only (10yrs-35yrs). Let me stress this again, I am not saying that you should invest for 35 years.

Finally, the fact is, most people use a combination of these investments. Thus, the question should not be “Should I invest in Stock Market or Fixed Income or Commercial Bank? The correct question should be “In what proportion should I invest in Stock Market, Fixed Income and Commercial Bank/National Saving”? The answer of this question as described depends on you risk taking ability and desire. As an example, you could choose the allocation of 40%-40%-20% in Stock Market, Fixed Income and Commercial Bank respectively or if you have ability and desire to take risk then your allocation could be 70%-20%-10%.

Note: As an investment professional, I try to share as much as possible of what I have learned from my short experience of two and a half years or so. I believe field of investment is very dynamic and there is a lot of room for further discussion. Even investment professionals might disagree with me on some points. However, this is how this field is.

You can post a comment if you have any question or you can send me an email at tahiradeel001@yahoo.com.