Why MNCs should be part of your long term portfolio?
In this issue:
» China doing its best to end the dollar's reign
» Hunt for talented leaders in BRICs
» Is US$ 200 barrel oil a near term possibility?
» India looking for ways to get oil supplies in order
» ...and more!
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00:00 | Chart of the day | |
Today, the cases are quite the reverse. The MNC may be an Indian company having operations in the US, Europe or Japan. Some may even have subsidiaries in those countries. Instead of sending talent abroad, the Indian MNC may be offering jobs to Americans and Europeans. And most importantly the Indian MNC may be exporting superior quality products at cheaper rates. Thus it may seem that Indian investors would be better off focusing on home grown stories for long term investments.
No denying the fact that some Indian companies could turn out to be bigger wealth creators than those in the West. But does that mean that the MNCs from US or Europe can be completely ignored? We do not think so. There continue to remain some entities from the West that have retained competitive advantage over centuries. Professional managements in these entities have nurtured leaders for decades. Further they have capital, technology and brands at their disposal like no one else. Fortunately for us some of these entities are listed in India.
If one goes by today's chart of the day, a higher share of profits from offshore markets may lure the MNCs to invest more resources in India. The need to grow at a rapid pace may also lure them to Indian capital markets more often. We believe Indian investors should not ignore this long term opportunity if it comes at a reasonable price. Better regulation on rights of minority shareholders of MNCs listed in India makes the case for investing in them even stronger.
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Do you think some MNC stocks could be value accretive to your long term portfolio? Let us know your views or post them on our facebook page.
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Quite naturally, global MNCs have displayed their keenness about making the best of this changing scenario. But there is one major challenge that these biggies are facing. The challenge is about finding the right talent.
If a certain poll is to be believed, India, China and Latin America are going to witness the greatest shortage of executive talent this year. And this is not happening for the first time. China and India have consistently made it this list in the last three years.
Global businesses are looking for talented leaders with international operational experience who can move smoothly between different cultures and also have deep local roots. Now that's quite a scarce combination. So finding the right business leaders will surely remain a big challenge.
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So will this be the ultimate solution? We have our doubts. U.S knows it pays well to bully India and will do so again if India opts for Turkish banks. The oil supplies from Iran have not been hit yet as Iran is relying on India's goodwill. However, we don't think it will be wise to stretch it too far. If supplies are disrupted, it will be costly to enter the spot energy market or strike fresh deals as oil prices are boiling already.
We believe it is high time that India puts its foot down and signals U.S to back off. Our relationship with Iran is too crucial to be governed by U.S. As gas supplies continue to dwindle and energy demand rises like never before, oil policies are the last area where we can afford to slip.
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04:45 | Today's investing mantra |
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6 Responses to "Why MNCs should be part of your long term portfolio?"
Sonny A Jacob
Apr 28, 2011I think China's SDR proposal will remain a dream only, at least in near term. In order to do this, they have to pull back at least $2tn ADR reserve and convince Japan to follow suit. But US may not allow that to happen. Remember even in 80s, Iran wanted to get back few Billions for which they had to hold the entire Embassy crew as hostages.
Mohan singh
Apr 28, 2011Grains are rotting, but people are going hungry and inflation is high. Such grave situation can happen only because of corrupt and callous politician and IAS babus. Short term solution is to 50% of the MNREGP wages as food grain. Remove all IAS babus from this job and hand over the responsibility of logistics to some honest professional and ban export of food materials by subsidising it with tax payers money. Export of subsidised food materials is a henious crime committed on the people of India by corrrupt politician and IAS babus
BALA SUBRAMANYAM PRABHALA
Apr 28, 2011FIRST AND FORE MOST. CORPORATE GOVERNANCE ISSUES NEED NOT BE DOUBTED IN GENERAL. THEY RAISE CAPITAL ONLY ONCE ANY NO FURTHER DILUTION. THEY HAVE ALMOST ZERO DEBT. THEY ARE GOOD DIVIDEND PAYMASTERS. THEY HAVE EXCLUSIVE BRANDS, AND R&D CAPABILITIES, AND GOOD EMPLOYERS TOO. THEY ARE AGAIN IN GENERAL ASSET LIGHT HIGH TOP AND BOTTOMLINE COMPANIES. THE LIST GOES ENDLESS. SO THEY ARE A GOOD PORTFOLIO FIT.
shome suvra
Apr 28, 2011India needs more capacity of supply to fight inflation where FDIs can take a strategic role. Investing in MNCs during inflation is a good strategy as these cos provide the translational business advantage reducing the systemic risk.
Kapil
Apr 28, 2011Totally agree... there is no doubt the the MNC companies have continues to outperform due to robust processes & controls, global expertise and excellent parentage.
A shining example of this is the Performance of the Birla Sun Life MNC fund which invests in MNC companies and has given 20% returns in the last 3 years, as against BSE Sensex Annualised returns of just 4.3%.
ramamohanrao g
May 1, 2011It is indeed wise and undisputed to have MNC Stocks inany one's portfolio.On issues like corporate governance,investor interests they are streets ahead.We have various examples of hoe some indian companies cheated the investors,thru the loop hole in the existing corporate laws and our exasparatingly slow legal system.Rao