SAIL looks good: Sukhani

Technical Analyst, Sudarshan Sukhani is of the view that Steel Authority of India, SAIL is certainly a better opportunity.

Sukhani told CNBC-TV18, "Ranbaxy Laboratories had a very big gain in the middle of the day, so I am assuming that must be on the back of some news or some information may be. There is no justification for that gain, if some good news has come for the company things will change, if not I suspect the decline will resume again."

He further added, "SAIL is certainly a better opportunity, if we are going to see a relief rally then it is worth looking at in the steel sector that is a big."

Disclosure: It is safe to assume that analyst & his clients may have an investment interest in the stocks/sectors discussed.

Buy Suzlon Energy, target of Rs 194: Nirmal Bang

Nirmal Bang has assigned a buy rating on Suzlon Energy with a target of Rs 194 in its October 7, 2008 research report. "We expect Suzlon to report a CAGR of 38.5% during FY08 to FY12E in net sales on the back drop of strong order book position and significant expansion plans of the company. These coupled with unprecedented demand for wind energy will drive growth for the company going forward. We expect Suzlon to report net profit CAGR of 54.7% during FY08 to FY12E. We assign a buy rating on the stock with the target price of Rs.194.0 per share which is 12X FY10 Diluted EPS of Rs 16.16 implying an upside of 52.6% from current levels," says Nirmal Bang's research report.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Remain invested in Tata Steel: Tulsian

Investment Advisor SP Tulsian is of the view that one can remain invested in Tata Steel with long term perspective.

Tulsian told CNBC-TV18, "We have been seeing metal stocks softening in the last 15 days or so because the prices of (hot rolled coils) HR and long products both have fallen by about 22-25%. With the global meltdown even when people are talking of recession in US and Europe, I do not think the prices will really improve. But I think one must understand in its whole perspective when the Indian companies like the Tata Steel or JSW Steel or Steel Authority of India, when the steel market was booming they were not allowed to raise their product prices but now having corrected that I think still the fall may not be that much, the correction or the dip in the topline will not be to that extent of 22-25% which we have seen across the globe probably this companies will be able to maintain their profitability maybe by implementing the cost cutting or improving the captive sourcing of the raw material."

He further added, "Tata Steel is dependent on the imported coal but for iron ore they have the captive source, so I think having corrected to Rs 350 you do not see much downside from here. If you are a trader probably this is the right time to enter into the stock and if you have the investment perspective definitely this seems to be a very good stock to remain invested."

Disclosure: Analyst doesn't hold the above stock.

Avoid Sterlite Industries: Subramanian

R Venkat Subramanian, Head - Alternate Investments Group at Kotak Securities is of the view that one can ignore Sterlite Industries.

Subramanian told CNBC-TV18, "Sterlite Industries is no more the issue of the restructuring etc, it is now the global commodity movements. Yesterday you saw the Brazil market was down 15%. The commodity cycle is turning, where will that stop is difficult to guess. So from that point of view may be the market is somewhat overshooting the current cycle but I would avoid. I think you will get better opportunities, even if it were to go up little bit, when you have some stability in the commodity markets and you have some ability to estimate what the prices are going to be at that time you may be able to trade out of Sterlite. But to call the bottom is risky and obviously the company management actions don’t give you comfort. So I would perhaps ignore that."

JSW Steel may slip to Rs 290: Gujral

Technical Analyst, Ashwani Gujral is of the view that JSW Steel can go as low as about Rs 290.

Gujral told CNBC-TV18, "All steel stocks are in freefall mode right now, so there is very little to choose from. We need basing formations in these stocks before they will bottom out. JSW Steel could go as low as about Rs 290 before it finds significant support and resistance here could be closer to about Rs 399-395."

Disclosure: It is safe to assume that analyst and his clients may have an investment interest in the above stock/sector.

Which Financials Will Survive and Thrive?

As the 18th-century English poet Alexander Pope famously wrote, "Fools rush in where angels fear to tread." We've seen evidence of that observation over the past decade, with the dot-com and real estate bubbles being the most prominent.

But after financial stocks largely cratered following the debacles at Bear Stearns, Lehman Brothers, and AIG (NYSE: AIG) (and sadly, that's only a few of the examples), it appears that fools and angels are fearing the same ground. But should they?

Sorry, Alex
Put simply, when we look back on these times, the current situation with financials will be seen either as a tremendous contrarian-buying opportunity or just the beginning of a long depression in the financial sector.

Even the best minds aren't sure right now which it will be. Although Warren Buffett made a multibillion-dollar investment in Goldman Sachs (NYSE: GS) last week, he was quick to note that his confidence was in Goldman itself and the prospects of the Treasury's bailout plan, and not necessarily an endorsement of the entire financial sector.

As he said in his 2008 Berkshire Hathaway shareholder letter, "You only learn who has been swimming naked when the tide goes out -- and what we are witnessing at some of our largest financial institutions is an ugly sight."

Put some clothes on!
While some of our largest and oldest financials have been running for the bushes in shame, Buffett's purchase of Goldman forces us to ask: Are there any other properly covered financials out there?

The 115,000 members of Motley Fool CAPS think so. They rate their favorite and least-favorite stocks, and their collective wisdom has proved to be quite robust: Our data has shown that four-star and five-star-rated stocks outperform the market.

So what do our CAPS members like? Here are the financials that have earned four and five stars -- the highest ratings possible -- from our CAPS community.

Company	CAPS Rating (5 Max)	CAPS Rating 30 Days Ago
Umpqua Holdings	*****	****
Interactive Brokers	****	****
optionsXpress	*****	*****
TD AMERITRADE (Nasdaq: AMTD)	****	****
Brookfield Asset Management (NYSE: BAM)	****	***

Source: Motley Fool CAPS data as of Sept. 26, 2008.

In addition, these stocks are all well below their 52-week highs, so they would be a good place to start looking for values in the financial sector.

Conversely, stocks with lowly one- or two-star ratings have underperformed the market and should be handled with extra care. Here are a few financials that are out of favor among the CAPS community.

Company	CAPS Rating (5 Max)	CAPS Rating 30 Days Ago
Citigroup (NYSE: C)	**	**
The Bank of New York Mellon	**	**
SunTrust Banks (NYSE: STI)	*	*
KeyCorp	*	*
PNC Financial (NYSE: PNC)	*	*

These low ratings don't mean that Citigroup or SunTrust will necessarily turn out to be terrible investments, but you should consider their lack of support from the CAPS community as a sign that there might be even more danger ahead.

See, CAPS has been pretty astute in calling some of the worst financial collapses. As far back as April 2007, Fannie Mae, Freddie Mac, and IndyMac were all one-star stocks, and in March of this year, Fool co-founder David Gardner used CAPS data to warn investors to stay away from Lehman, which was a one-star stock at the time. Heeding the CAPS community's advice to at least avoid investing in these companies would have saved you from huge losses.

Don't catch falling knives
Knowing which stocks you should avoid is as valuable as knowing which stocks deserve further research. Remember Buffett's rules of investing:

• Rule No. 1: Don't lose money.
• Rule No. 2: Never forget Rule No. 1.

Instead of sorting through the trash for financials that have deserved their recent markdowns, you're much better off looking for financials that have had very little to do with the toxic subprime mortgages and structured investment vehicles that are causing so many problems today. They'll be the ones that will survive and thrive when the market turns around.

Using our CAPS ratings is an invaluable way to kick-start your research or force you to rethink your investing ideas because those ratings have proved to have predictive value.

And we're using it, too. At our new Motley Fool Pro investment service, set to debut next week, we're using proprietary CAPS data to help us create an every-market, real-money portfolio. Using $1 million of the Fool's money, we'll be going long and short equities, exchange-traded funds, and options -- all to create a well-rounded and robust portfolio.

Now It's Wachovia's Turn

The banking crisis of the past several months has had one common thread: As soon as the bank in the spotlight goes under, a wave of negative attention immediately shifts to who's next.

After Bear Stearns' fallout in March, all attention shifted to Lehman Brothers. After Lehman Brothers failed, all attention shifted to AIG (NYSE: AIG). After AIG was bailed out, all attention shifted to Washington Mutual (NYSE: WM).

Now that WaMu's gone, Wachovia (NYSE: WB) seems to be the victim of the day. Shares were virtually decimated this morning after Citigroup (NYSE: C) made a last-second deal to take over its banking operations after a weekend-long bidding war with Wells Fargo (NYSE: WFC). What's this mean for shareholders? Nothing good. Citigroup will pay out a scant $2.16 billion worth of its own stock, which equates to around $1 per share, give or take.

Technically, Wachovia did not fail. As if it was acting to dispel fear that banks are dropping like flies, the FDIC specifically stated, "Wachovia did not fail; rather, it is to be acquired by Citigroup … on an open bank basis with assistance from the FDIC."

Yada, yada, yada … the best way to translate that is to assume it would have failed rather quickly had a deal not gone through. The FDIC is the organization that insures bank deposits in the event a bank fails; the fact that it stepped in to help Citigroup take over Wachovia's operations is testament to how dire the banking-industry situation is these days.

For example, this morning's press release states:

The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that.

In return, the FDIC will receive $12 billion in preferred shares and warrants. To shore up its own balance sheet in the wake of this deal, Citigroup has halved its quarterly dividend to $0.16 per share and plans to raise $10 billion in a forthcoming stock issuance.

Whoa. Your eyeballs should pop out of your head when you read that Wachovia could potentially cough up more than $42 billion in losses on $312 billion in assets; that's an astonishingly high number that demonstrates just how utterly dreadful the situation is for banks leveraged up with adjustable-rate mortgage products, as Wachovia is.

Ah, yes -- yet another week kicking off with absolutely crazy news. Will this week be as crazy as the last two? Stay tuned. We'll keep you updated as the day's developments unfold.

Insure Your Portfolio Against Huge Losses

The stories are already beginning to trickle in. In the months to follow, the stream will no doubt become a flood: A couple whose retirement is in doubt because they had much of their portfolio in presumably solid, safe giants like Wachovia (NYSE: WB) or Fannie Mae (NYSE: FNM). Parents who no longer have the college money they were saving for their 16-year-old, because they kept all of it in the market too long, instead of taking it out at least three years before they would need it. Retired sixtysomethings who may need to come out of retirement because they can't draw down their already depleted portfolios.

And that's not even including damage to shareholders of supposedly recession-proof stalwarts General Electric (NYSE: GE), AT&T (NYSE: T), and Pfizer (NYSE: PFE), among many others.

It's twice as terrible to hear these stories, because they could have been prevented -- and much of the worry, stress, and loss sidestepped.

What lesson can we draw from the past year to help shield our portfolios from losses in the future? While almost nobody could have predicted the collapse of so many American institutions, from Lehman to AIG (NYSE: AIG), there is at least one step we can take to protect ourselves against future unknowns when the stakes are high: Use options for insurance.

Options are tools, not weapons
Around Fooldom, options have typically been given the polite brush aside. "Most investors," the argument goes, "do not need to use options to succeed over a lifetime." Which is true. "And most investors will lose money on options." Which is not true, and not entirely the point, if you use options in the right ways.

For those unfamiliar, options are simply the right to buy or sell a stock at a set price by a specific date. Options were introduced to the public in 1973 by the Chicago Board Options Exchange. They've enjoyed increasing trading volume annually for years as people learn about their value.

I was skeptical of options for several years, too, until I started to learn more about them from Motley Fool articles written around 2000. The past eight years, and especially the past five, I've happily used options in managing real-money public portfolios, as well as in my own portfolio. They've helped me to obtain better buy and sell prices, to bet against some positions or hedge others, and to insure against possible declines.

Buying put options for insurance, especially when you have a lot riding on a few positions, can be as smart as having insurance to protect your house against fire.

How puts work
A put option gives its holder the right to sell a stock at a set price by a certain date. Buying a put option when you also own the stock is basically buying insurance for your stock, or hedging against a possible decline.

For instance, if you own 1,000 shares of Citigroup (NYSE: C), currently trading around $23, you could buy 10 put option contracts (each contract represents 100 shares of stock) to insure your entire position against further decline.

Today, it would cost you about $3.75 per share to insure a $20 sell price (strike price) on your Citigroup shares all the way until mid-January 2010.

So, even if Citigroup fell to $0 during the next 15 months, the put option owner would be able to sell out at $20 – for a net sell price of $16.25 after accounting for the cost of the puts.

If Citigroup falls less far, and you still believe in its long-term potential, you can sell the puts for a profit and continue to own the shares.

On the other hand, if Citigroup is $35 per share a year from now, your $20 insurance policy won't have much value anymore. Still, you were protected on the downside for the past year, and you've profited with the stock as it increased.

There are also secondary benefits. The knowledge that your largest holding is insured may make you comfortable enough to nibble on newly beaten-down opportunities you see, or to keep holding the other, smaller positions you already own.

At the very least, with your key positions insured, you won't run for the hills and sell out at the very worst times. And when the markets recover, you'll participate.

When to use puts
It's not cheap to insure large positions for long periods of time, especially in today's environment. But in these times, that up-front cost can be dwarfed by the losses you might then avoid.

Generally, you should consider put options as insurance for positions that are large or vital in your portfolio, or that face more risk now than you originally presumed. Also, if you're preparing to sell a position in the next year or two, puts are a handy way to insure yourself a minimum sell price by your chosen sell date. You pay for the privilege, but from there it's all upside, with no worries about downside.

Use options to take advantage of your knowledge of a stock
I use options to leverage my existing knowledge of a stock's valuation and business model. Many lucrative option strategies exist for stock-based investors -- strategies that complement your stock portfolio, rather than compromise it. I'm not an options speculator or trader. I'm a stock-based investor who understands the power of options when used in conjunction with stock knowledge -- and when used for risk management.

US Senate passes new bailout package

Sourced from www.ibnlive.com

 

The US Senate on Thursday passed the much anticipated economic bailout plan. This bailout plan, with a price tag of a whopping USD700 billion is a result of continued bi-partisan efforts.

While 74 voted for, 25 voted against the bailout plan by the Senate.

This plan will allow the US Government to take over troubled assets from banks which will help to keep them afloat and avoid frozen credits. But will increase the burden for future taxpayers.

This version of the bailout plan has also increased the Federal Deposit Insurance Corp cap from 1 lakh to 2.5 lakh to help small businesses. The changes are aimed at the public perception that this bill will only help Wall Street, banks and well-heeled executives.

The previous bailout package was rejected in the House and the uncertainty had cost the Dow Jones index 200 points in the trading on Wednesday.
So, the US Senate planned to vote on a slightly revised version of the previously proposed rescue plan.

A group of representatives defended their vote on the bill on Wednesday, stating that there are other options that have not haven't been utilized.
"What we're saying is use every tool in the box that's appropriate for this situation," said Democrat from Texas, Lloyd Doggett.

But others in the Senate view the Bill's prompt passage as a necessity, not an option.

"It really is an issue that goes right to the heart of Main Street. If you don't have credit in America, then the Main Street can't function," said Republican from New Hampshire Senator Judd Gregg.

Senator Harry Reid, Democrat and the Majority Leader said, "I'm hopeful and confident that all sides, House and Senate, White House, will work together to achieve a goal that will be good for the American people."

Both Presidential nominees Barack Obama and John McCain were in support of the Senate plan which includes raising the FDIC Insurance cap from US USD100,000 to USD250,000.

But some House members on Wednesday warned that problems may persist even with Senate approval of the plan.

"If, and it's rumored that the Senate intends to jam through the same bill with only with a change on the FDIC limit. If they do that without a real pay for, I think there's still going to be tremendous problems in the House," said Oregon democrat, Peter DeFazio.

President Bush has warned that the situation is urgent and the consequences will grow each day this bill is not passed.

The bailout plan passed by the US Senate will rescue the battered US banking system and will go back to the House of Representatives. 

Bailouts Bring Belgium Together--Temporarily

Yves Leterme

LONDON - Belgium is a country divided into French and Dutch halves, and led by a fragile five-party coalition and a prime minister so embattled that he tried to quit only four months into the job. So it was somewhat surprising to see the Belgian government act with speed and unity this week to save the country's biggest financial institutions, Fortis and Dexia, injecting a total of 7.7 billion euros ($10.8 billion) into both.

Of course, Belgium did not act alone: governments in Luxembourg and the Netherlands also signed up for the 49.0% nationalization of Fortis (other-otc: FORSY - news - people ) over the weekend, while on Tuesday the French government and Luxembourg joined in for a comparatively smaller share of Dexia (other-otc: DXBGF - news - people ). (See "Dexia Next To Submit To Bailout.") But Belgium stumped up the most capital in both cases, and the sheer decisiveness of the action actually made the country look strong--not bad, considering commentators were predicting the disintegration of Belgium only a few months ago.

"People really are quite impressed by the quick and firm decisions taken by the federal government, especially the coordination and leadership of [prime minister] Yves Leterme," said Carl Devos, a political analyst at the Dutch-speaking University of Ghent. "We have portrayed Leterme over the past few months as a weak leader. Maybe that has not all changed, but in this crisis he has shown firm leadership. He has done what a leader needs to do."

Flemish Christian Democrat Yves Leterme has had a rocky career so far this year, as a controversial debate over regional autonomy threatens to push Belgium to the brink of disintegration. Dutch-speaking Flanders wants more political and fiscal autonomy, while the more economically sluggish French-speaking Wallonia is reluctant to give it; however, recognizing that the stability of the country is at stake, parties do seem set to begin key talks on federal reform.

But according to Ghent University's Devos, Leterme will have trouble maintaining the honeymoon image of his strong leadership. The government will be under pressure to balance the budget when it announces spending plans on Oct. 14, which could mean raising more taxes. And after that, Belgium's political parties will be gearing up for the regional elections slated for June of next year, which ultimately will come too soon for Leterme to have a good chance of surviving.

"What has happened to our country in the last year has been so tough, so hard and so ugly that there is absolutely no trust between the two parties," said Devos. "Even a minor incident will be enough to make the federal government fall."