Interview with SINLetter's Asif Suria - Part 2

For Part 1 of this interview, click here.

Q. What is your general outlook on economy at this point in time - for the world in general and US in particular?

A. My general outlook for the US is negative. The GDP number that came out recently probably benefited more from inflation than it did from actual growth. Some market participants are speculating that the growth component was probably less than 1%. We have a huge budget deficit, a couple of wars with almost no allies, high personal debt through credit cards and HELOCs, low wage growth and still have to work off the excesses of the housing bubble (I am still seeing "cost per click" bids in the range of $13.83 to $19.53 for the keywords "no equity home loans" on Google). The only bright spot was the unusually high job growth number that came out last week. In case you are interested, the sponsored links for the search term "no equity home loans" on Google are from LendingTree.com (a division of IAC/InteractiveCorp that is hurting right now) and Countrywide Financial (CFC). I sometimes regret not rolling my Countrywide puts into new puts as I mentioned in this blog entry.

As far as the world is concerned, I believe that India and China are currently overvalued but I like Malaysia (EWM), Turkey, U.A.E, Israel and South Korea (EWY).

Q.If you were to recommend one stock for the next 5 years, which one would it be?

A. This late in a bull market I think it may be prudent to actually scale back on positions. Instead of individual stocks, I would prefer buying the water ETF PowerShares Water Resources (PHO) that consists of a group of 25 stocks that cover various water related investments ranging from desalination to bottled water. I picked this ETF for my November investment newsletter and as I usually tend to do, will add it to my personal portfolio as well. If I had to pick a stock, I would pick children's clothing retailer Gymboree (GYMB). I realized that retail stocks are extremely out of favor at this time but I think Gymboree is attractive at these levels.

Q. Do you think individual investors can beat the market over a long period of time like 20-30 years? Or should they just stick to index funds?

A. I believe if investors are ready to work hard and do their due diligence, they can indeed beat the market over a long period of time. I do not subscribe to the efficient market hypothesis and believe that you end up getting the good with the bad in a broad index fund. Index funds are useful tools for investors who have a moderate to low appetite for risk and cannot spend considerable amounts of time researching new opportunities or keeping track of their existing portfolio. They can also be useful tools for downside protection by using one of the UltraShort index funds like the UltraShort Russell 2000 (TWM) as mentioned in the September 2007 investment newsletter. As the Oracle of Omaha Warren Buffett once said "I'd be a bum on the street with a tin cup if the markets were always efficient".

Interview with SINLetter's Asif Suria - Part 1

Asif Suria is the founder of SINLetter (Suria Investment Newsletter), which is a free investment newsletter with a focus on international investing. I have been a loyal reader of this newsletter for the past several months, in which he highlights two stocks every month and provides excellent research for the same. His SINLetter picks have handsomely beat S&P, Nasdaq and Dow with total returns of 114.81% since inception in August 2005. You can subscribe to SINLetter here. He has been kind enough to agree to an interview for my blog, so folks, read on ....

Q.Can you tell us a little bit about your investing background - what got you interested, how did you start?

A.I can credit my dad for my interest in investing as some of my earliest memories were of him pouring over annual reports and financial newspapers. I used to deposit dividend checks for him in my teens and more than a decade before he retired, his income investing strategy was so well executed that he could pay for almost all our household expenses with his dividend income. I had been following the market for years and started investing in mid 2001 assuming that the dot com bear market was probably getting ready to go into hibernation. After a great start where I managed to get returns of almost 30% in a six month period (call it beginner's luck), things headed south and I lost a nice chunk of change. Thankfully this experience made me read almost every scrap of material I could find about investing and the markets. I learnt from my mistakes as well as by reading the works of gurus like Benjamin Graham and Peter Lynch.

Q. What was your first stock pick, and why?

A. My first stock pick was Oracle (ORCL). I picked Oracle because I was working as a data warehouse analyst at the time and understood the tech industry and specifically the database sector best. This has been something I have relied on ever since by picking stocks of companies that I have had some personal experience with or understand well. When I bought a Seagate external hard drive, I also bought the stock of Seagate Technologies (STX) since I realized that flash was not going to replace hard drives anytime soon as many on Wall Street feared. Since I used Ameritrade as my discount broker, I also picked up the stock after noticing their fat profit margins and high insider ownership. I often found great travel deals through Priceline.com (PCLN) and in late 2002 at a $1.51 (before the reverse split), I thought the stock was a great deal too. I have since sold all three stocks but they proved to be very profitable trades.


For part 2 click here.