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LinkedIn Announces Second Quarter 2012 Financial Results

2012-08-03T10:45:00.001-07:00

LinkedIn (LNKD) Corporation (NYSE:LNKD), the world's largest professional network on the Internet, currently with more than 175 million members, reported its financial results for the second quarter ended June 30, 2012:

It turned out to be much better than Facebook's disappointing results. Though Linkedin valuation's seem extermely absurd at a high P/E of 622, the growth is steady and looks very interesting. I would not suggest any one to buy Linkedin shares at current Valuations . You either get a "good news/good price" . Right now it's all good news for Linkedin and hence it's not at a good price :)

Revenue for the second quarter was $228.2 million, an increase of 89% compared to $121.0 million in the second quarter of 2011.
Net income for the second quarter was $2.8 million, compared to net income of $4.5 million for the second quarter of 2011. Non-GAAP net income for the second quarter was $18.1 million, compared to $10.8 million for the second quarter of 2011. Non-GAAP measures exclude tax-affected stock-based compensation expense and tax-affected amortization of acquired intangible assets.
Adjusted EBITDA for the second quarter was $50.4 million, or 22% of revenue, compared to $26.3 million for the second quarter of 2011, or 22% of revenue.
GAAP EPS for the second quarter was $0.03; Non-GAAP EPS for the second quarter was $0.16.

"LinkedIn had a strong second quarter with all of our key operating and financial metrics showing solid performance," said Jeff Weiner, CEO of LinkedIn. "Our ongoing investment in product innovation drove healthy engagement as measured by unique visiting members and member page views, and our three revenue streams all experienced significant growth."

Second Quarter Financial Details and Operating Summary

Hiring Solutions: Revenue from Hiring Solutions products totaled $121.6 million, an increase of 107% compared to the second quarter of 2011. Hiring Solutions revenue represented 53% of total revenue in the second quarter of 2012, compared to 48% in the second quarter of 2011.
Marketing Solutions: Revenue from Marketing Solutions products totaled $63.1 million, an increase of 64% compared to the second quarter of 2011. Marketing Solutions revenue represented 28% of total revenue in the second quarter of 2012, compared to 32% in the second quarter of 2011.
Premium Subscriptions: Revenue from Premium Subscriptions products totaled $43.5 million, an increase of 82% compared to the second quarter of 2011. Premium Subscriptions represented 19% of total revenue in the second quarter of 2012, compared to 20% of revenue in the second quarter of 2011.

Revenue from the U.S. totaled $147.3 million, and represented 65% of total revenue in the second quarter of 2012. Revenue from international markets totaled $81.0 million, and represented 35% of total revenue in the second quarter of 2012.

Revenue from the field sales channel totaled $129.4 million, and represented 57% of total revenue in the second quarter of 2012. Revenue from the online, direct sales channel totaled $98.8 million, and represented 43% of total revenue in the second quarter of 2012.

GAAP net income for the second quarter was $2.8 million, compared to net income of $4.5 million for the second quarter of 2011. Non-GAAP net income for the second quarter was $18.1 million, compared to $10.8 million in the second quarter of 2011.

Adjusted EBITDA for the second quarter was $50.4 million, or 22% of revenue, compared to $26.3 million for the second quarter of 2011, or 22% of revenue.

GAAP EPS was $0.03 based on 112.3 million fully-diluted weighted shares outstanding compared to $0.04 for the second quarter of 2011 based on 103.1 million fully-diluted weighted shares outstanding. Non-GAAP EPS was $0.16 based on 112.3 million fully-diluted weighted shares outstanding compared to $0.10 for the second quarter of 2011 based on 103.1 million fully-diluted weighted shares outstanding.

"Strong performance across our three product lines drove record levels of revenue and adjusted EBITDA," said Steve Sordello, CFO of LinkedIn. "As we continue to invest aggressively in technology, product, and our businesses, we remain focused on achieving our long-term goals."

For additional information, please see the "Selected Company Metrics and Financials" page on LinkedIn's Investor Relations site.

Second Quarter Highlights and Strategic Announcements

In the second quarter, LinkedIn:

Launched its first app designed for the iPad. The app was received positively, and engagement trends are encouraging as more than half of page views on the app are being generated by content-focused products such as updates, news and groups.
Simplified the design of its flagship social news product LinkedIn Today and added deeper integration into the homepage. Engagement on LinkedIn Today is now up more than 150% since the introduction of these new features.
Released Targeted Status Updates and Follower Statistics to all of the more than two million organizations on LinkedIn with active Company Profiles.
Completed the rollout of Talent Pipeline to the entire universe of LinkedIn Recruiter customers. In less than three months, Recruiter customers have already added more than one million prospective candidates into Talent Pipeline, enhancing their ability to quickly identify and hire new talent for their organizations.

Additionally, in July LinkedIn began rolling out a significant redesign to the homepage, enabling members to discover, share, and discuss the professional information that is most important to them. The redesign has begun to positively impact engagement metrics; for example, shares originating on LinkedIn, including status updates, are now at all-time highs.

Business Outlook

LinkedIn is providing guidance for the third quarter of 2012, and revising guidance upward for the full year of 2012 on revenue, adjusted EBITDA, and stock-based compensation, while narrowing the full-year outlook for depreciation and amortization.

Q3 2012 Guidance: Revenue for the third quarter of 2012 is projected to range between $235 million to $240 million. The company expects adjusted EBITDA to range between $42 million and $45 million. The company expects stock-based compensation to range between $27 and $28 million and depreciation and amortization to range between $20 million and $22 million.
Full Year 2012 Guidance: The company has revised its expected revenue range upward to $915 million to $925 million from the prior range of $880 million to $900 million. The company has also revised upward its expected adjusted EBITDA range to $185 million to $190 million from the prior range of $170 million to $175 million. The company now expects stock-based compensation to range between $85 million and $95 million, while the range for depreciation and amortization is now $75 million to $80 million.

Quarterly Conference Call

LinkedIn will host a webcast/conference call to discuss its second quarter 2012 financial results and business outlook today at 2:00 p.m. Pacific Time. Jeff Weinerand Steve Sordello will host the webcast, which can be viewed on the investor relations section of the LinkedIn website at http://investors.linkedin.com /. This call will contain forward-looking statements and other material information regarding the company's financial and operating results. Following completion of the call, a recorded replay of the webcast will be available on the website. For those without access to the Internet, a replay of the call will be available beginning at 5:00 p.m. Pacific Time on August 2, 2012 through August 9, 2012 at 9:00 p.m. Pacific Time. To listen to the telephone replay, call (855) 859-2056, access code 96053756.

Upcoming Event

Management will participate in upcoming financial Q&A discussions at an investment industry event on September 6^th. LinkedIn will furnish a link to this event on its investor relations website, http://investors.linkedin.com/ for both the live and archived webcasts.

About LinkedIn

Founded in 2003, LinkedIn connects the world's professionals to make them more productive and successful. With more than 175 million members worldwide, including executives from every Fortune 500 company, LinkedIn is the world's largest professional network on the Internet. The company has a diversified business model with revenue coming from member subscriptions, marketing solutions and hiring solutions. Headquartered in Silicon Valley, LinkedIn also has offices across theAmericas, Europe, and the Asia-Pacific.

The LinkedIn logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=11096

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the company uses the following non-GAAP financial measures: adjusted EBITDA, non-GAAP net income, and non-GAAP EPS (collectively the "non-GAAP financial measures"). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

The company excludes the following items from one or more of its non-GAAP measures:

Stock-based compensation. The company excludes stock-based compensation because it is non-cash in nature and because the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. The company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements and facilitates comparisons to competitors' operating results.

Amortization of acquired intangible assets. The company excludes amortization of acquired intangible assets because it is non-cash in nature and because the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. In addition, excluding this item from various non-GAAP measures facilitates internal comparisons to historical operating results and comparisons to competitors' operating results.

Income tax effect of non-GAAP adjustments. The company adjusts non-GAAP net income by including the income tax effects of excluding stock-based compensation and the amortization of acquired intangible assets. The company believes that the inclusion of the income tax effects provides additional transparency to the overall or "after tax" effects of excluding these items from non-GAAP net income.

For more information on the non-GAAP financial measures, please see the "Reconciliation of GAAP to non-GAAP Financial Measures" table in this press release. This accompanying table has more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures. Additionally, the company has not reconciled adjusted EBITDA guidance to net income guidance because it does not provide guidance for either other income (expense), net, or provision for income taxes, which are reconciling items between net income and adjusted EBITDA. As items that impact net income are out of the company's control and/or cannot be reasonably predicted, the company is unable to provide such guidance. Accordingly, a reconciliation to net income is not available without unreasonable effort.

Safe Harbor Statement

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release and the accompanying conference call contain forward-looking statements about our products, including our planned investments in key strategic areas, certain non-financial metrics, such as member growth and engagement, and our expected financial metrics such as revenue, adjusted EBITDA, depreciation and amortization and stock-based compensation for the third quarter of 2012 and the full fiscal year 2012. The achievement of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any of these risks or uncertainties materialize or if any of the assumptions prove incorrect, the company's results could differ materially from the results expressed or implied by the forward-looking statements the company makes.

The risks and uncertainties referred to above include - but are not limited to - risks associated with: the company's limited operating history in a new and unproven market; engagement of our members; the price volatility of our Class A common stock; general economic conditions; expectations regarding the return on our strategic investments; execution of our plans and strategies, including with respect to acquisitions of other companies; expectations regarding the company's ability to timely and effectively scale and adapt existing technology and network infrastructure to ensure that its website is accessible at all times with short or no perceptible load times; security measures and the risk that the company's website may be subject to attacks that degrade or deny the ability of members to access the company's solutions or that our security measures may not be sufficient to prevent unauthorized access to our member data; our ability to maintain our rate of revenue growth and manage our expenses and investment plans; our ability to accurately track our key metrics internally; members and customers curtailing or ceasing to use the company's solutions; the company's core value of putting members first, which may conflict with the short-term interests of the business; privacy, litigation and regulatory issues; increasing competition; our ability to manage our growth and retain our employees; the application of US and international tax laws on our tax structure and any changes to such tax laws; and the dual class structure of the company's common stock.

Further information on these and other factors that could affect the company's financial results is included in filings it makes with the Securities and Exchange Commission from time to time, including the section entitled "Risk Factors" in the company's Annual Report on Form 10-K that was filed for the year ended December 31, 2011, and additional information will also be set forth in our Form 10-Q that will be filed for the quarter ended June 30, 2012, which should read in conjunction with these financial results. These documents are available on the SEC Filings section of the Investor Information section of the company's website at http://investors.linkedin.com/ . All information provided in this release and in the attachments is as of August 2, 2012, and LinkedIn undertakes no duty to update this information.

LINKEDIN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

	June 30,	December 31,
	2012	2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$ 286,376	$ 339,048
Short-term investments	330,761	238,456
Accounts receivable (net of allowance for doubtful accounts of $3,516 and $5,460 at June 30, 2012 and December 31, 2011, respectively)	136,536	111,372
Deferred commissions	15,715	13,594
Prepaid expenses	20,923	10,799
Other current assets	21,601	12,658
Total current assets	811,912	725,927
Property and equipment, net	152,448	114,850
Goodwill	113,268	12,249
Intangible assets, net	33,456	8,095
Other assets	28,078	12,576
TOTAL ASSETS	$ 1,139,162	$ 873,697


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$ 44,195	$ 28,217
Accrued liabilities	63,662	58,644
Deferred revenue	191,993	139,798
Total current liabilities	299,850	226,659
DEFERRED TAX LIABILITIES	40,612	18,551
OTHER LONG TERM LIABILITIES	15,525	3,508
Total liabilities	355,987	248,718
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Class A and Class B common stock	11	10
Additional paid-in capital	767,995	617,629
Accumulated other comprehensive income	129	100
Accumulated earnings	15,040	7,240
Total stockholders' equity	783,175	624,979

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 1,139,162	$ 873,697


LINKEDIN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2012	2011	2012	2011

Net revenue	$ 228,207	$ 121,040	$ 416,663	$ 214,972

Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	30,367	18,403	55,500	35,186
Sales and marketing	75,740	36,019	141,624	65,380
Product development	60,080	30,414	107,173	55,149
General and administrative	30,974	16,673	55,828	30,287
Depreciation and amortization	17,548	9,602	32,430	17,761
Total costs and expenses	214,709	111,111	392,555	203,763

Income from operations	13,498	9,929	24,108	11,209

Other income (expense), net	(668)	11	(444)	460
Income before income taxes	12,830	9,940	23,664	11,669
Provision for income taxes	10,019	5,427	15,864	5,078
Net income	$ 2,811	$ 4,513	$ 7,800	$ 6,591

Net income per share of common stock:
Basic	$ 0.03	$ 0.07	$ 0.08	$ 0.12
Diluted	$ 0.03	$ 0.04	$ 0.07	$ 0.07

Weighted-average shares used to compute net income per share:
Basic	104,185	69,395	103,198	56,631
Diluted	112,317	103,129	111,813	100,131


LINKEDIN CORPORATION
SUPPLEMENTAL REVENUE INFORMATION
(In thousands)
(Unaudited)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2012	2011	2012	2011

Revenue by product:
Hiring Solutions	$ 121,592	$ 58,620	$ 224,152	$ 104,953
Marketing Solutions	63,105	38,570	111,055	66,253
Premium Subscriptions	43,510	23,850	81,456	43,766
Total	$ 228,207	$ 121,040	$ 416,663	$ 214,972

Revenue by geographic region:
United States	$ 147,253	$ 82,739	$ 268,102	$ 147,859
Other Americas ⁽¹⁾	15,047	6,146	27,056	10,745
Total Americas	162,300	88,885	295,158	158,604
EMEA ⁽²⁾	50,057	25,859	92,902	45,590
APAC ⁽³⁾	15,850	6,296	28,603	10,778
Total	$ 228,207	$ 121,040	$ 416,663	$ 214,972

Revenue by channel:
Field sales	$ 129,448	$ 66,699	$ 230,919	$ 117,327
Online sales	98,759	54,341	185,744	97,645
Total	$ 228,207	$ 121,040	$ 416,663	$ 214,972


(1) Canada, Latin America and South America
(2) Europe, the Middle East and Africa ("EMEA")
(3) Asia-Pacific ("APAC")



LINKEDIN CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2012	2011	2012	2011

Non-GAAP net income and net income per share:
GAAP net income	$ 2,811	$ 4,513	$ 7,800	$ 6,591
Add back: stock-based compensation	19,323	6,815	31,949	10,658
Add back: amortization of intangible assets	1,851	862	3,159	1,671
Income tax effect of non-GAAP adjustments	(5,933)	(1,414)	(7,923)	(2,392)
NON-GAAP NET INCOME	$ 18,052	$ 10,776	$ 34,985	$ 16,528

GAAP DILUTED SHARES	112,317	103,129	111,813	100,131

NON-GAAP DILUTED NET INCOME PER SHARE	$ 0.16	$ 0.10	$ 0.31	$ 0.17

Adjusted EBITDA:
Net income	$ 2,811	$ 4,513	$ 7,800	$ 6,591
Provision for income taxes	10,019	5,427	15,864	5,078
Other (income) expense, net	668	(11)	444	(460)
Depreciation and amortization	17,548	9,602	32,430	17,761
Stock-based compensation	19,323	6,815	31,949	10,658
ADJUSTED EBITDA	$ 50,369	$ 26,346	$ 88,487	$ 39,628

CONTACT: Press contact
         Hani Durzy
         hdurzy@linkedin.com
         650-605-0829

         Investor contact
         Matt Sonefeldt
         msonefeldt@linkedin.com
         650-605-0861

Facebook Up 10% Linkedin Up by 15%

2012-08-03T10:42:00.001-07:00

After a long time the much needed bounce back happened today. Facebook shares are trading at 22$'s up by 10% from previous day closing of 20$. Facebook shares hit a high of 22.16$ for the day and going good after the positive jobs data. Facebook shares were down to all time low of 19.82$ after news hit it's 82 million users are fake. At 19.8$'s a facebook share Zuckerberg networth is less than 10billion $'s and he's not anymore the tech's richest person. This values facebook at 42billion 60% less than the IPO price where it got listed . Current P/E is 122 which is too high.
Facebook should get its act right . With this kind of market capital erosion it would quickly run out of options to raise capital and get new money inflow which would hinder it's prospects of rising back to profits. Facebook will hit 1000 million users very quickly which would mean a user base of 100 crores i.e, nearly 1 out of 7 has a facebook a/c.
Biggest challenge would be to get it's act right in monetizing the platform. Facebook failed miserably to leverage it's platform to monetize the platform to full extent.
With a daily monthly page views of around 3.88 billion in its quarterly announcement, the business reported revenues of $1.18bn and a loss of $157m for the three months to the end of June.

Looking from a investment/business perspective it only matters how much an organisation can grow which would determine it's P/E and justify it's valuation. Facebook is already saturated and would grow slowly compared with it's previous growth history. I wouldn't suggest any one to buy the stock unless Mark Zuck turn the company into Green with quarterly profits. The share price gain is a temporary blip . I'm a firm believer of the term "stock's fluctuate within a trend" . Today's spike is just a blip and the long term story looks bleak until FB turns to Green . It may even hit 10$ by the end of the year if the news flow turns negative

Tulip Mania a classic Example of bubble and bust

2012-06-13T04:12:00.000-07:00

. Have you heard of tulip mania bubble ? It is a classic example of how stock market bubbles form and bust. If you analyse the story carefully you will understand how humans behave irrationally during times and how you can take advantage of the situation. The story dates back to 1619-22 and happened in Netherland's. It was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed. At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (or economic bubble). People were so crazy that at one point 12 acres (5 ha) of land were offered for a Semper Augustus bulb. I would say WTF!!!!!!!! ??? This is called peaks of speculation.

The above image is a graph that shows the price's of tulip's vs time. on Feb 3 is the highest point at which the bubble started bursting and one general trend if you observe the entity comes down at a faster rate than the rate it which it started to move up. It takes long time for the bubble to get built and its gets bust very quickly. this is what I term as crowd behaviour. The same people are buying 2 days before and once the bust happens every one wants to sell and it causes a vicious loop which have cascading effect. And this trend goes on . even in our current economoy lot of bubbles are getting built we don't know when which one will gets bust. Generally the times after bust are the periods where you see some stagnation before an upmove. I would suggest investors to buy in this period since it offers a signifcant limited downside risk and huge upmove.

Speculation is a financial action that does not promise safety of capital investment along with the return on the principal sum.[1] A person or entity that engages in speculation is known as a Speculator. Speculation typically involves the lending of money for the purchase of assets, equity or debt but in a manner that has not been given thorough analysis or is deemed to have low margin of safety or a significant risk of the loss of the principal investment. The more the speculation the bigger the bubble being built.

Stock Market Game

2012-06-13T03:44:00.000-07:00

Stocks always constantly move up and down in a trend . The motive behind this is to catch the traders on wrong side. Stock markets are designed to cause losses to 90% of the players. The stock market by its very nature is designed for you to lose money. The rallies and reactions within any trend ensure this process is at work constantly. It is created automatically. The market behaves this way because it has to! The weak have to perish so that the strong can survive. Professional traders are fully aware of the weaknesses in traders under stress and will capitalise on this at every opportunity.

Just imagine if a stock is following a constant trend , then there wouldn't be any losers ideally. everyone would bet on the trend side right ? so in a market if some one has to win some one has to lose(*not always true). Hence the big fat people also called as professional traders aka syndicates design and move the stocks in a direction majority of people will get caught on wrong side.

A small trader(small by the size of $'s ) will always have majority odds against him.The professional traders are sooo big that they can move the market in whichever way they want irrespective of news , events, economy, other factors. If god has the ability to turn events I consider these guys analogous to gods in stock markets. Hence I would suggest to "follow the professional traders trend". We 're limited by the resources, knowledge, internal news and the best way to survive among these sharks is follow them :)

Salesforce.com's Purchase of Buddy Media

2012-06-13T03:39:00.001-07:00

How Will Salesforce.com's Purchase of Buddy Media affect Facebook?

Salesforce.com is all set to buy Buddy Media for a rumored $800 Million. Salesforce supposedly beat Google in the bidding. This deal follows Oracle’s recent purchase of Vitrue for $300 Million dollars. These two deals are great for all the companies operating in this space (Involver, Wildfire, AppAddictive) Companies that offer a suite of applications for Facebook publishing, Facebook page management, and Facebook ad campaign management stand to benefit the most. Among the independent enterprise Facebook platforms, only AppAddictive has all the components – Pages, Publishing and Facebook Ads API access.

Buddy Media and Vitrue are the platforms agencies and brands use to publish, design pages, and buy ads on Facebook.

When Google IPO’ed in 2004, it created the entire Search Engine Optimization and Search Engine Marketing industry where thousands of multi-million dollar companies exist around Google. (See image below)

Likewise Facebook’s recent IPO means Facebook will create the Social Media Marketing and Social Advertising industry where thousands of multi-million dollar companies will exist around Facebook in the future. (See image below)

When Google went public, its market cap was at $23 Billion. Google’s market cap is now $193 Billion. Google supports an ecosystem of several companies.

The theory of the Wisdom of Crowds and George Soros’ Theory of Reflexivity state that for most of the time, the market is relatively quite good about predicting the future valuation of a company. On the other hand, the theory of value investing is that at times, the markets can be terribly wrong about valuations. For instance, in the Internet boom, the markets were clearly wrong about the valuations of several dotcom companies that ultimately went bust.

But unlike the other dotcoms that held negative losses, both Google and Facebook are hugely profitable. In the case of Google, the “Wisdom of Crowds” seem to have held true. Google went on to become much bigger than its IPO price. What will be the case with Facebook?

Source: dailystocks.com

Nifty View for this week.

2012-06-13T03:14:00.001-07:00

   This is my first blog post on Nifty trading. I intend to use this blog as a log of my trading activity. I am a 23 year old , dribbling with stock markets from past 2 years. I am not an experienced trader or investor. I would consider myself as a guy who trades on opportunities rather than technical or fundamental analysis.
My journey so far made decent amount of money in stocks and commodities to keep my self recharged for the next bull run (I'm expecting after a crash ). I still believe I have one more year to accumulate my funds to invest in the bull run. I haven't seen any bull run's in my stock career but read about them a lot. Let's see how I will ride the wave. I would be updating my daily thoughts and my views on stocks here.
                                                I will also share my investments and my portfolio suggestions and articles here . so that everyone can see the live performance of my stocks. I will also share my views on investing and my thoughts on the stock markets.

Nifty Future is trading @ 5130 now. Nifty future was in discount for the whole month and it reversed yesterday. Nifty is quoting at a premium of 5 points which is very good for bullish traders who are on the long side. upcoming days Nifty would be higly volatile since two major events RBI policy on 18th june and greece election results.
                                              RBI is expected to cut the rates since IIP came at a very meagre growth of 0.12% . If the RBI don't cut the rates on mid quarter review date 18th june Nifty is expected to go and retest the levels of 4800 again.

My take for now : short nifty around 5180 with Stop loss of 5250. Buy out of money options if you don't want to take too much risk . my target is nifty would test atleast 4900 by the end of this month. if things don't pan out as expected. But that said if the greece elections and RBI policy turnout to be positive we can see nifty moving ahead breaking targets of 5400. So keep a tab on the news and trade safely.

Technical stuff :
                            The recent run up in nifty is not supported by volume if you look at the chart.

Image courtesy : hbjcapital.com I am a regular reader of this blog and I would suggest everyone
to read/follow this blog since it is a gold mine of financial information.

Key take aways from the chart : volume seems to be drying up. Hence wait for an exact signal as per the VSA trading strategy to pounce upon the opportunity.

Upcoming events which will impact nifty trend
Greece election result
Inflation data
RBI : 18th JUNE .

Invest in Gold

2012-06-13T02:59:00.004-07:00

Any investor has to be aware of the different forms of buying gold. Jewellery, the most traditional and the dominant form of buying gold in India is in fact not an investment idea.

The reason is that there are heavy losses in the form of wastage and making charges. This can vary from a minimum of 10 per cent to as high as 35 per cent for special and complex designs.

Bank Coins again not an investment idea as the premium that banks charge for their coins is anywhere between 5 and 10 per cent.

Gold has Steady growth over the past years to know more about the gold value now click here

http://www.nsegold.com/tools.php

Also the bank coins have lesser liquidity as they are not bought back by the banks.

World Gold Council Coins, these are coins issued by jewelers who are part of the WGC network.

They have lesser premium over the market price (1 per cent to 2 per cent) and are redeemed at the market price when one takes them for selling off.

Bullion Bars, are good modes for investment but the minimum investment here is much higher than a common investor can think of.

Gold Exchange Traded Funds are a hot option these days.

These are like mutual funds that invest only in gold.

They are proving to be an easier and safer mode to buy gold.

The charges are very less and the gold can be accessed electronically.

The disadvantage is that one never gets to 'see' one's holdings.

Current Income

Gold in any form does not give any current income.

The only exception is the dividend option in the Gold ETFs. If held in the physical form, there is only outflow of cash for the maintenance of lockers.

Capital Appreciation

Historically, gold has been the perfect hedge for inflation. This is based on data right from the year 1800 AD.

Since last 10 years, Gold has been hitting new levels. The pace accelerated after S&P downgraded US credit rating a few days ago.

The downgrades by S&P which makes investment in US treasury more risky, inflation in India, general slowdown in economy, and the weakening dollar have made Gold prices soar.

In the short run when market conditions for other investments especially equities and realty are turbulent gold is a very strong bet.

The idea for gold investment will be to use it at times when the markets are falling and when the inflation is very high -- which makes the current conditions ideal for this.

A 5 per cent of the overall investment portfolio can be considered for gold investments (bullion, WGC coins, Gold ETFs).

Jewellery is not an investment as far as personal finance goes. It is only an expense for pleasure, symbolizing wealth.

Risk

Gold does not carry much risk at least in India, as we hardly see deflation in the real sense.

Even when the official figures where showing negative inflation (deflation) during the last year, the actual prices of food items were increasing.

This was reflected in the gold prices too.

The real risk with buying gold is in the opportunity cost of investing in other avenues that can actually give higher returns.

Liquidity

Gold scores the highest in terms of liquidity, compared to all other investments.

At anytime of the day and any day gold could literally be converted to cash. Banks would give you a jewellery loan.

(Remember though that many banks do not give loans on coins, including their own). So would your friendly neighborhood pawn shop.

They can also be sold in some pawn shops, though many are cautious to purchase in these outlets for fear of 'stolen jewellery'.

Gold jewellers would exchange your gold possessions for other gold jewels.

But the problem here is that there is going to be making and wastage charges involved again.

Here we lose the value (to the extent of 10 per cent to 35 per cent) of gold jewels.

An unfortunate social aspect in most families in India related to liquidity is that, gold has sentiments attached and is the last item to leave the house in case of financial difficulties.

This negates the entire purpose of gold having liquidity.

Tax Treatment

Gold suffers capital gains tax as per the IT act.

So it is better to ask your jeweller for the bill.

Close to 90 per cent of the gold jewellery traded in India is unbilled.

This is a serious problem for those who look at gold as an investment.

Only the branded jewellers would automatically give you a bill.

At other places, ask for one.

We can make use of indexation benefits when calculating the capital gains of gold. So the tax payable will not be much.

Gold does not have any other tax benefits.

Convenience

Gold scores very high here.

But with the per gram price rising, the smallest single investment is becoming higher.

With the emergence of Golf ETFs the convenience to hold gold for the short term has increased many folds.

Instead of holding cash for the short term, one can today make investments in Gold ETFs.

Conclusion

Gold has proved itself time and again to be the perfect hedge for inflation.

But to look at it as a hedge avenue, Indians are yet to consider this market actively as the purchases continue to be dominated by jewellery.

Gold only beats inflation.

It fares poorly when compared to real estate or shares when compared on the basis of real inflation adjusted returns in the very long term.

Any serious investor however is advised to have a certain percentage of investment in gold to hedge inflation.

Source:
Rediff.com

How to invest in Stock Markets in India -source Investopedia

2012-06-13T00:29:00.003-07:00

"How to invest in Indian Stock Markets?" is a question everybody wants to ponder upon and obviously the noobs who wants to invest and earn money in short-term wants to know more about these. Hope you find some info about the Indian Stock Market here.

The Definition of a Stock

Stock is a share in the ownership of a company. Stock represents a claim on the company's assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether you say shares, equity, or stock, it all means the same thing.

Holding a company's stock means that you are one of the many owners (shareholders) of a company and, as such, you have a claim to everything the company owns like a tiny sliver of every piece of furniture, every trademark, and every contract of the company. As an owner, you are entitled to your share of the company's earnings as well as any voting rights attached to the stock.

A stock is represented by a stock certificate. This is a fancy piece of paper that is proof of your ownership. In today's computer age, you won't actually get to see this document because your brokerage keeps these records electronically, which is also known as holding shares. This is done to make the shares easier to trade. In the past, when a person wanted to sell his or her shares, that person physically took the certificates down to the brokerage. Now, trading with a click of the mouse or a phone call makes life easier for everybody.

Why would a company want to share its assets and earnings with the general public? Because it needs the money, of course. Companies only have two ways to raise money to cover start-up costs or expand the business: It can either borrow money (a process known as debt financing) or sell stock (also known as equity financing).

Debt financing:Debt is borrowing money from an outside source with the promise to return the principal, in addition to an agreed-upon level of interest. Although the term tends to have a negative connotation, startup companies often turn to debt to finance their operations. In finance, debt is also referred to as “leverage.” The most popular source for debt financing is the bank, but debt can also be issued by a private company or even a friend or family member.

Equity financing: This involves selling shares of your company to interested investors, or putting your own money into the company.

Mezzanine financing: Lenders who set up this debt tool offer the business unsecured debt (no collateral is required). The tradeoff is a high interest rate, in the 20- 30 percent range. Plus there’s a catch. The lender has the right to convert the debt into equity in the company if the company defaults on payments. Despite the high interest rate, mezzanine financing appeals to entrepreneurs because it offers quick liquidity, and even though it can be converted to equity, the issuing bank usually does not want to be an equity holder, meaning they’re not looking to control the company.

Hybrid financing: Most likely you’ll turn to a combination of debt and equity financing to fund your venture. The question then becomes: What is the proper combination? When deciding optimal capital structure, a common finance theory is the Modigliani-Miller theorem, which states that in a perfect market, without taxes, the value of a firm is the same whether it is financed completely by debt or equity or a hybrid. This, however, is considered too theoretical since real companies do have to pay taxes, and there are costs associated with bankruptcy. There are several other theories and formulas on determining optimal capital structures.

For ordinary shareholders, not being able to manage the company isn't such a big deal. After all, the idea is that you don't want to have to work to make money, right? The importance of being a shareholder is that you are entitled to a portion of the company’s profits and have a claim on assets. Profits are sometimes paid out in the form of dividends. The more shares you own, the larger the portion of the profits you get. Your claim on assets is only relevant if a company goes bankrupt. In case of liquidation, you'll receive what's left after all the creditors have been paid

Issuing stock is advantageous for the company because it does not require the company to pay back the money or make interest payments along the way. All that the shareholders get in return for their money is the hope that the shares will someday be worth more than what they paid for them. The first sale of a stock, which is issued by the private company itself, is called the initial public offering (IPO).

It is important that you understand the distinction between a company financing through debt and financing through equity. When you buy a debt investment such as a bond, you are guaranteed the return of your money (the principal) along with promised interest payments. This isn't the case with an equity investment. By becoming an owner, you assume the risk of the company not being successful - just as a small business owner isn't guaranteed a return, neither is a shareholder. As an owner, your claim on assets is less than that of creditors. This means that if a company goes bankrupt and liquidates, you, as a shareholder, don't get any money until the banks and bondholders have been paid out; we call this absolute priority. Shareholders earn a lot if a company is successful, but they also stand to lose their entire investment if the company isn't successful.

Another extremely important feature of stock is its limited liability, which means that, as an owner of a stock, you are not personally liable if the company is not able to pay its debts. Other companies such as partnerships are set up so that if the partnership goes bankrupt the creditors can come after the partners (shareholders) personally and sell off their house, car, furniture, etc. Owning stock means that, no matter what, the maximum value you can lose is the value of your investment. Even if a company of which you are a shareholder goes bankrupt, you can never lose your personal assets

Risk

It must be emphasized that there are no guarantees when it comes to individual stocks. Some companies pay out dividends, but many others do not. And there is no obligation to pay out dividends even for those firms that have traditionally given them. Without dividends, an investor can make money on a stock only through its appreciation in the open market. On the downside, any stock may go bankrupt, in which case your investment is worth nothing.

Although risk might sound all negative, there is also a bright side. Taking on greater risk demands a greater return on your investment. This is the reason why stocks have historically outperformed other investments such as bonds or savings accounts. Over the long term, an investment in stocks has historically had an average return of around 10-12%.

Why a German bailout will make euro zone worse? -source ET

2012-06-13T00:04:00.003-07:00

Although Europe may seem far away from the economic life of the average American, the fate of the euro zone weighs heavily on the United States economy. Pension funds have invested in bonds issued by southern European states, while banks and insurance companies have underwritten a sizable fraction of the credit-default swaps protecting investors against default.

It's no wonder, then, that President Obama is urging Germany to share in the debt of the euro zone's southern nations. But in doing so, he and others overlook several critical facts.

For one thing, such a bailout is illegal under theMaastricht Treaty, which governs the euro zone. Because the treaty is law in each member state, a bailout would be rejected by Germany's Constitutional Court.

Moreover, a bailout doesn't make economic sense, and would likely make the situation worse. Such schemes violate the liability principle, one of the constituting principles of a market economy, which holds that it is the creditors' responsibility to choose their debtors. If debtors cannot repay, creditors should bear the losses.

If we give up the liability principle, the European market economy will lose its most important allocative virtue: the careful selection of investment opportunities by creditors. We would then waste part of the capital generated by the arduous savings of earlier generations. I am surprised that the president of the world's most successful capitalist nation would overlook this.

This does not mean there can be no systematic risk-sharing between the states of Europe. But for that to happen, the countries should first form a common nation, with a constitution, a common legal superstructure, a monopoly on power to ensure obedience to the law and a common army for external defense.

Otherwise, there is nothing to counter the strong centrifugal forces created by redistribution schemes, which would inevitably lead to political eruptions that would threaten the stability of the Continent. The European Union has enjoyed a long period of stability because it abstained from sizable interregional redistribution. This period would end if we redistributed incomes or debt without creating a United States of Europe.

Unfortunately, not one of these conditions is met in Europe today and won't be in the foreseeable future, because the euro zone countries, above all France, are unwilling to give up sufficient sovereignty.

Even a European nation, however, should not socialize debt, a lesson demonstrated by the United States in the 19th century.

When Secretary of the Treasury Alexander Hamilton socialized the states' war debt after the Revolutionary War, he raised the expectation of further debt socialization in the future, which induced the states to over-borrow.

This resulted in political tensions in the early 19th century that severely threatened the stability of the young nation.

It took the experience of eight states and territories going bankrupt in the 1830s and 1840s for the United States to shed socialization. Today no one suggests bailing out California, which is nearly bankrupt but is expected to find its own solutions.

Criticism of bailouts in general does not mean, however, that Europe should eschew immediate help to crisis-stricken southern European countries. While help to avoid insolvency is dangerous, help to overcome brief liquidity crises is justified. The European Economic Advisory Group, an international think tank, has proposed providing liquidity help in the first two years of a crisis, with selective defaults according to maturity and socialization of excessive losses thereafter.

We are, however, already in the fifth year of generous liquidity help to Europe's uncompetitive members. Since late 2007, the European Central Bank has helped with an international shift of refinancing credit, also known as Target credit, from the core euro states to the periphery, to which the German Bundesbank has contributed $874 billion. Greece's and Portugal's entire current account deficits were financed that way.

Moreover, since May 2010, the E.C.B. has bought more than $250 billion in government bonds, while nearly $500 billion has come from rescue programs and help from the I.M.F. Add to that two European rescue funds, and you have a total of $2.63 trillion.

It is unfair for critics to ask Germany to bear even more risk. Should Greece, Ireland, Italy, Portugal and Spain go bankrupt and repay nothing, while the euro survives, Germany would lose $899 billion. Should the euro fail, Germany would lose over $1.35 trillion, more than 40 percent of its GDP. Has the United States ever incurred a similar risk for helping other countries?

Understanding Long term and Short term Capital Gains -source moneycontrol.com

2012-06-12T23:47:00.000-07:00

There are various asset classes like equity, debt, gold, & real estate where you invest according to the time horizon of your goals and risk appetite. The gains from these investments are termed as capital gains and taxed differently. Since any tax liability impact your returns from the investment, it's important to have awareness on the net gains you will receive.

The capital gains from above mentioned asset classes is classified as long term or short term based on the holding period of investment. For e.g. in real estate, if you have held the asset for more than 3 years it is treated as long term. Contrary to this in equities, investment for more than a year is treated as long term.

Here are some calculations to show how long term and short term capital gains are derived and how it can help in reducing your taxability:

1. Long term Capital Gains: A long term capital gain arises when you hold any asset for a defined period. This period ranges from one year to three year across different asset classes. The table below shows the holding period for long term gains in various asset classes and the applicable tax rate:

As can be inferred from the data, equities enjoy zero taxability on long term capital gains while in real estate or physical gold investment you have to pay a flat rate. Due to these variations the post-tax returns from these asset classes can vary substantially. There are provisions in income tax to reduce LTCG through indexation or save LTCG tax from some of these instruments by investing it in other alternatives.

Indexation Benefit: Inflation constantly erodes real value of money through rise in prices. Due to this even if your investment have risen four times the purchasing power of money will have went down 50% from the time you made investment. To reduce the impact of inflation on your investment, indexation benefit is provided in calculating long term capital gains. Through this benefit you can adjust your capital gains from inflation by applying an appropriate factor from cost inflation index to the original units.

Here is how indexation benefits works:

Cost of purchasing a property in 2007- Rs 3500000

Cost of selling the property in 2011 - Rs 5000000

Inflation Index- 2007 - 551
2011 - 785

Indexed Purchase cost- 3500000*785/551= Rs 4986388

Long Term Capital Gains= 5000000-4986388 = Rs 13612*

Tax on LTCG= 13612*20%= Rs 2722

Education Cess= 2722*3% = Rs 82

Total Tax on LTCG = Rs 2804

*The non- indexed gain would have been Rs 15 lakh

Thus, the indexation benefit reduces the tax liability substantially which otherwise would have been a huge payout for any investor.

2. Short Term Capital Gains: Investments in any asset class if held for a very short period is taxed as short term capital gains. Except equity, short term gains from other assets is included in investor's income and taxed at slab rate. The data below highlights the taxation structure in case of short term capital gains:

*Education cess of 3% is applicable on all tax rates

This is how short term capital gains are calculated:

Cost of Equity Mutual Funds units bought in 2011- Rs 100000

Price of same units sold after 6 months - Rs 120000

Short Term capital Gains - Rs 20000

Tax Applicable- 20000*15%= Rs 3000

Education Cess - 3000*3%=Rs 90

Total Tax payable= Rs 3090

With complex capital gains tax structure, it's wise to first make yourself aware on the net returns i.e. post tax returns you will earn, whenever you intend to make any investment. This will help in analyzing the amount of wealth creation you will create after paying your tax liabilities.

- Jitendra Solanki

The author is a Certified Financial Planner and Founder of JS Financial Advisors. You can reach him at jsfadvisors@gmail.com

Interest rates have to fall to 5.5-6% to spur growth - source Firstpost

2012-06-12T23:44:00.002-07:00

Edelweiss Chairman Rashesh Shah feels a 25 basis points (0.25 percent) cut in the repo rate is likely when the Reserve Bank of India (RBI) meets on 18 June for a review of its annual monetary policy. However, Shah says this would hardly be enough. The economy needs four or five more cuts and rates need to come down to the region of 5.5-6 percent to bring the growth momentum back.

“The factors are in place for a 25 bps rate cut on 18 June. But unless there are four or five more cuts after that, it won’t make much of a difference,” Shah told Firstpost in an interview. “Even after a 25 bps rate cut, you’ll still be at 7.75 percent. You need rates down to 5.5-6 percent at least to spur growth. I don’t know whether the RBI has room for four-five cuts this year.”

Edelweiss Chairman Rashesh Shah said the markets were hoping for more cuts this year even after a possible rate cut on 18 June. Firstpost

Shah, whose Edelweiss Group offers a range of financial services from asset management, life insurance to home loans and investment banking, said the markets were hoping for more cuts this year even after a possible rate cut on 18 June. “But inflation remains sticky. It’s not coming down. If oil prices go up again on a quantitative easing (QE3), then once again there will be implications. Oil long is always equal to dollar short. In India’s case, much of the consumption-driven growth is a result of social spending. For inflation to come down, the supply side constraints have to be opened up,” he said.

“If you’re consuming but there’s no supply because investments are not happening as they should, that’s always going to be inflationary. On the other hand, if you squeeze consumption, there’s the risk of GDP coming down, which is what we’re witnessing,” Shah explained.

The GDP growth rate, he said, has to ideally be 150-200 bps higher than inflation. “So if inflation is at 7, your GDP should be 8.5-9. Inflation and GDP at 7 is not good. And inflation higher than GDP will not be a good time for India.”

Pointing out that inflation won’t be addressed merely by oil prices coming down, he reiterated that the supply side must be freed up. Commenting on the initiative taken by the Prime Minister’s Office on kickstarting core projects, he said if investments started now, the results will be seen in a year or 18 months. “It’s good we’re starting now at least. But we have to see action rather than just talk. Diesel pricing, freeing FDI in retail and insurance…a lot of things are there to be done. Real confidence will come once these things happen. Now it’s largely sentiment driven,” Shah said.

Pointing out that generally governments act only when there’s a crisis, he said the fall in the rupee and the GDP figure of 5.3 percent for the fourth quarter of FY12 had now created a sense of crisis. “That’s how all democracies work. We don’t allow governments to work unless there is a problem. We allow them to fix problems only after it has happened,” he pointed out. “The macro parameters will take a year or year-and-a-half to return to better levels, though the sentiment may improve before that.”

He said a possible exit of Greece from the eurozone will also have implications for India. This apart, if oil climbs back to $108-110 levels on QE3, there will be a fresh panic situation in the country. “We in India are constantly worrying about one thing or other. But a 10 percent increase can happen in oil after falling 18 percent in May. We can’t always worry.”

Shah reckoned that India will do 6 percent growth, which is “not great.” He said: “At 6 percent profitability won’t be high, employment creation will also not be high. At that rate, it will create three million jobs a year when we need 8-10 million jobs. Everything is sub-par at 6 percent.”

Govt to spur growth with core projects- source Deccan Herald

2012-06-12T23:41:00.004-07:00

As against impressive growth rates in the past years, the GDP grew by just 6.5 per cent last fiscal, the lowest in nine years.

At the meeting, the Prime Minister made no announcement about any major next generation reform policy initiatives that the government might intend to take, though there have been speculations about it.

Foreign investors in particular have been pressing for next generation reforms to revive investments and spur growth. But, he said achieving the stiff investment targets during the fiscal year in the six sectors will be "key to success and will inspire confidence about the overall economic growth rate."It is "imperative to take measures to give a boost to our economy. There is a need to revive business and investor sentiment," the prime minister told the meeting. He emphasised the urgent need to take effective measures to "reverse the situation and revive India's growth story.

These will turnaround India and take it back to a growth path of 9 per cent."Among others, the meeting approved to award 9,500 km of roads for construction this year in the place of 7,000 km target set earlier. Similarly, in railways, shipping and more crucial aviation sectors, the targets have been enhanced in order to meet the government's reform commitment.

Infrastructure sectorIndia requires $1 trillion for the development of the infrastructure sector during the 12th Plan (2012-17) of which it expects 50 per cent from private sector. In railways, it was decided to award contracts on the elevated rail corridor in Mumbai among other things.

In shipping, it was decided to award work for two new major public-private partnership port projects, in addition to capacity addition targets which are three times the targets for the last year.

In civil aviation, work would be awarded on three greenfield airports in Navi Mumbai, Goa and Kannur and new international airports at Lucknow, Varanasi, Coimbatore, Trichy and Gaya. Contracts worth almost Rs 50,000 crore will be awarded in the port sector this year.

India to sell unused foreign debt limit on June 20 - source Reuters

2012-06-12T23:35:00.000-07:00

India will sell the unused foreign debt limit in government and corporate bonds to overseas investors on June 20, stock market regulator SEBI informed custodian banks on Wednesday, a source told Reuters.

The unused limits in government bonds to be auctioned under the no-residual maturity restriction category is 14.64 billion rupees, and under residual maturity of over 5 years is 38.37 billion rupees, theSecurities Exchange Board of India (SEBI) told banks.

Under corporate bonds with no residual maturity or sector restriction, the unused limit to be sold is 15.99 billion rupees and under corporate bonds long-term infrastructure category the amount to be sold is 78.02 billion rupees.

Sahara Group to buy New York's Plaza Hotel - report

2012-06-12T23:32:00.001-07:00

REUTERS - Sahara Group is set to buy New York's landmark Plaza Hotel for $570 million, The Times of India reported on Tuesday.

The deal for the Plaza, the 105-year-old luxury hotel near New York's Central Park, is expected to be announced by the end of this month, The Times reported, citing a source close to the talks.

The Plaza is jointly owned by Elad Properties, an Israeli-owned real estate company, and Saudi-based Kingdom Holdings Co <4280.SE>, according to the hotel's website. It has been managed by Fairmont Hotels & Resorts Inc since 1999.

Elad, has agreed to sell its stake to Sahara Group, the Times reported, citing a source.

Kingdom, the investment vehicle of Saudi billionaire Prince Alwaleed bin Talal, will hold a 25 percent stake once the deal is completed, according to the report.

The report also said Fairmont would continue to operate the Plaza for two years before handing over control to Sahara.

Sahara could not be reached immediately for comment. Elad, Fairmont and Plaza officials did not immediately return calls seeking comment.

Sahara bought London's Grosvenor House Hotel in 2010 and is in negotiations to buy out some Marriott hotels in London, according to the report.