Friday, May 18, 2012

Investor is the King

I am aware its not quite the case yet. Over time marketers and companies have been forced to shift from haughty to service attitude as consumer has become the King, not by coercion but market forces alone, so I thought, why not investor.

In the past it has bothered me - as to how to prevent ingrate promoters - beggars who pleaded for money during IPO - from taking advantage of small investors. How to counteract an ordinary micro investor being taken for a ride by well heeled promoters. Depending on how hot headed one is, an investors funded forum could get drone planes from Israel, remotely monitored from another continent, with poisonous darts and video/gps relay to selectively eliminate miscreants or follow the relatively more peaceful democratic approach. ( Drone planes may better be utilised for Indian politicians instead - is likely to do greater good for bigger numbers).

While I am a non-vegetarian so far, I know that there are animal rights activists and even I have had thoughts in the past to prevent slaughter of animals by opening a non-profit cooperative fund which is funded by sale of milk/eggs of same animals/birds and their own work and income during younger years, so they could die respectfully, and live of pension from same fund during older years. To do that, it would take decades of work and thousands of motivated individuals.

Those assumptions can become redundant in a flash by a new idea or discovery. Few months back I came across a game changing idea, in which artificial meat could be produced by stem cells in the lab by Dr Mark Post (http://jezebel.com/dr'-mark-post/ http://www.mate.tue.nl/mate/showempcompl.php/1618  http://www.youtube.com/watch?v=PYQWR3aC5g8) Guys, that shatters my neanderthal idea as shamelessly uncommercial, and it is scores on many other counts, no animals required, frees up land, no methane etc.

Similarly, last night when a friend of mine informed me that he recently sold a share at a loss due to slickness of nefarious promoters, I thought of what could we do short of slaying or suing them. An idea that occurred to me yesterday was Investor Rating Agency.

Investor Rating

Companies, listed or unlisted, need to get rated under Basel norms by one of the rating agencies for access to bank funding. SEBI has shallow reporting requirements for equity investor complaints.

How about an independent investor rating agency, which tracks score of equity investors in any listed company. While I am calling it an agency, it is essentially only a couple of people with software hosted on web. If SEBI does not buy the idea, too bad for them. The idea needs to be sold to either CSDL or NSDL. As a fundamental step, any shareholder should be able to vote online with Demat Account details, this can be verified with actual demat holding with NSDL/CSDL. For a minimalist start, an algorithm can compute ratings on a scale of A through F depending on aggregate score of investors in a listed enterprise (Promoter Rating will not count). I feel it can be a very light software with just an integration requirement, or two factor authentication, can be written by one or two persons in a couple of months.

Banks need to contemplate whether promoters who rank an F rating on Investor Score, and promoters having fixation to steal the money of equity investors - are not exposed to same risks of losing their funds to bandit gene pool. Would merely ratings by faceless credit rating agencies who have no money in the game suffice ? Isn't the predicament of banks similar to minority investors ? It would at least encourage transparency and candour if not significantly increase dividend payment across the whole market. That day shall come drone plane or no plane.




Tuesday, May 8, 2012

Short Term Trade - Cochin Minerals & Rutile

I could write a 20 page research report or you could help me write a para or two while you make sense of rest of material at leisure yourself. Importantly my analysis will not bias you.

Nearly all industries go through cyclical pattern of under and over investment. In the past ten years rare mineral mining companies scrounged through their existence, barely able to make ends meet. That changed in 2011 where under investment lagged many years behind required demand. Consequence was explosion in price of rare earth minerals such as rutile.

India ranks amongst top four countries including Australia, South Africa, United States for rare earth minerals. Investor are sitting at the edge of their seats to figure if this is a lasting trend.

What I do make out it - both miners, processors and ultimate producers are a very consolidated group. Less than 50 global players in each segment. In India only Indian Rare Earth ltd (http://www.irel.gov.in/) is engaged in mining. Less than five players including Cochin Minerals and Rutile are involved in processing. Ultimate users like Ceramics, Paint, Ink are also a small group like DuPont.

Biggest processing company in world is ILUKA from Australia with 30% market share. Number two player is Cristil Global.

Draw your conclusions from the following links, if you go through all links you would not need anyone's help, so fish it out brothers:


http://www.iluka.com/docs/mineral-sands-briefing-papers/iluka-pro-rata-entitlement-offer---appendix---mineral-sands-industry-overview.pdf

http://www.iluka.com/docs/asx-releases/iluka-annual-report-2011.pdf

http://ibm.nic.in/ilmeniteandrutile.pdf

http://minerals.usgs.gov/minerals/pubs/commodity/titanium/673303.pdf

TTP enjoyed a monopoly in the market until the KMML was set up in 1985. http://www.flonnet.com/fl2212/stories/20050617002603700.htm

http://www.bloomberg.com/news/2011-11-09/sierra-rutile-to-double-2012-prices-on-pigment-demand-from-china.html

http://www.bloomberg.com/news/2011-11-22/dupont-faces-squeeze-as-titanium-ore-advances-most-since-97-commodities.html

http://www.cristalglobal.com/home.aspx


http://www.icis.com/Articles/2012/01/16/9523409/tio2-producers-are-focusing-on-raw-materials-amid-feedstock.html

http://www.proactiveinvestors.com.au/companies/news/28228/base-resources-250-million-development-of-kwale-heavy-mineral-resource-valued-at-over-100share-28228.html

http://af.reuters.com/article/mozambiqueNews/idAFL5E8FOG2120120425




Disclosure: Invested yesterday and today for trading with expectations of some sustenance into next few quarters knowing that Mining cannot start next month or the month after to cover demand.