Key Financial Ratios to Analyze Healthcare Stocks

The Healthcare Sector is one of the largest market sectors, encompassing a variety of industries such as hospitals, medical equipment and the pharmaceutical industry. The sector is popular among investors for two very different reasons.

First, it is viewed by many investors as containing stable industries that offer a good defensive play to help weather general economic or market turn-downs. Regardless of the state of the economy, individuals continually need healthcare. 

Read more at:

https://www.investopedia.com/articles/active-trading/082015/key-financial-ratios-analyze-healthcare-industry.asp

Is BrExit offering a good stock-picking opportunity? - a guest post

The BrExit referendum was expected to be a close contest between those who wanted the UK to 'remain' within the Eurozone and those who wanted the UK to 'exit'. The actual result was unexpected. 

Actually, UK was never a fully integrated part of the Eurozone - as they maintained their own currency and visa system. A large number of those who voted for BrExit may have been duped by politicians into thinking that the 'leave' vote was an 'anti-immigration' vote.

The legal negotiations between UK and the Eurozone will start now to make the referendum a reality. That will take till the end of calendar year 2017. Nothing has actually changed on the ground yet. Still, stock markets over-reacted on the downside.

And therein may lie an opportunity. In this month's guest post, Nishit identifies some industry sectors that are unlikely to be affected whether UK eventually leaves the Eurozone or not.   

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BREXIT has happened and the world is behaving as if it is about to end. The stock markets are correcting and this is a time to add several good stocks.

What is BREXIT? It is simply the UK leaving the European Union. All trade agreements made with the EU will not be valid after 2 years (from the date when the UK triggers the Exit clause). Fresh trade agreements will have to be put in place with the UK.

Now, there are several sectors which could be affected, viz. the IT sector as also export dependent sectors like pharma, textiles and auto-ancilliaries. What will happen is that the currency market will be in a state of flux. The Pound will get weaker and the US Dollar will get stronger with safe haven demand. The US will try to devalue the Dollar for its exports to remain competitive.

International Trade will face some hiccoughs. At the same time, there are several sectors which are not dependent on exports. They are purely domestic consumption stories. These are Sugar, FMCG, Packaging and sectors whose products are mainly consumed in India.

A safe bet during these turbulent times would be to focus on sectors which have less exposure to exports and are more focused on the domestic markets. India’s growing middle class will continue to consume, and there will always be demand for soap, hair oil, cooking oil, toothpaste, biscuits, cigarettes, liquor.

Also, with news of a good monsoon, rural demand will pick up. Two wheeler and tractor manufacturers will be in demand. Last 2 years have been drought years so many farmers have not changed their equipment for a substantial time now. A good harvest can led to increase in rural demand.

The Power Sector also is not dependent on external factors ever since Coal India made plentiful coal available. When the markets fall, everything falls and this is a good opportunity to focus on such stories which are not affected by BREXIT.

Such falls give the best buying opportunities. Remember the 'GrExit' drama in August 2013 when the Nifty hit 5118. Those who bought then doubled or tripled their money.

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(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan. You can reach him at nish.stockid@gmail.com)

Modi effect on stock market – a guest post

After all the debate, discussion and anticipation, the Modi government has been sworn in and the council of ministers announced. The suspense of what will happen and who will get which ministry is over. Now it is time for getting down to business.

The first salvos have been fired by the PM – by first inviting heads of SAARC governments to the swearing-in ceremony and holding one-on-one discussions with them about bilateral issues and then, by setting up a SIT for unearthing black money in the economy. The first was an unexpected courtesy to our neighbours. The second is typical no-nonsense ‘walking the talk’.

What will Modi’s effect be on the stock market? In this month’s guest post, Nishit takes a look at the sectors that are likely to lead the next up moves in the stock indices if Modi continues to deliver on his poll promises.

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My previous month’s guest post began this way: “The market is going up as if there is no ceiling. Every day one sees their portfolios increase in value and everyone seems to be getting swept up by the Modi wave. Now, let us try and see what can derail this rally.”

Now, Modi has won the elections with a huge mandate. What next?

The first 6 months to 1 year are the honeymoon period for any Government. This is the period when they are given a degree of latitude. This is the time when the markets have hope in the new Government.

The new Government has promised jobs, growth and progress. How will they do this?

Firstly, they have to tackle the infrastructure mess by clearing road projects and making coal available to the power plants. Stocks of Infrastructure and power companies would start moving once these road blocks are cleared.

Next, finance has to be provided for these projects. Banking and infrastructure lenders will be the next to move up. As provider of materials for infrastructure to be built, steel and cement companies will be the next ones to rise.

In the midst of all this, IT and Pharma stocks, which are seen as defensives and export oriented, will lag behind. This is because the rupee has strengthened which may lead to their profits being curtailed.

PSU stocks should be another category which needs to be watched closely. Gujarat government stocks have done well under Modi.

Also, company stocks of a few industrialists perceived to be close to Modi, like the Adanis and the Ambanis, need to be closely watched.

These are interesting times we live in. For the first 6 months and especially during the time till the Union Budget in mid-July, the markets may rise on hope. After Diwali, emphasis will shift to the performance and results delivered by the new Government.

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(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan.)

Stock Chart Pattern - Bilcare Ltd

The stock chart pattern of Bilcare Ltd is almost a mirror-image of the Sesa Goa chart pattern we looked at yesterday. Sesa Goa had moved up to make a new all-time high. Bilcare is struggling to get out of the bear market. Let us find out why.

Bilcare Ltd can best be described as a pharmaceutical ancilliary company. Starting out in medicine packaging, they have now morphed into a clinical trial supplies, services and project management company, with offices in USA, UK and Singapore.

Their related services include solutions for compliance and brand protection issues, as well as educational programmes to create a pool of clinical trial technicians.

Consolidated sales in Mar '09 grew 31.5% to Rs 856 Cr and EBITDA grew 19% to Rs 194 Cr. With good growth, positive cash flows from operations, regular dividends, P/E < 11, P/BV < 2, Debt/Equity < 1 - this is an almost perfect example of Graham's 'value pick' criteria.

So why is the stock languishing? Two words: Rakesh Jhunjhunwala! The big bull, a big shareholder and director, recently resigned from his directorship in the company and sold a part of his stake. That was a trigger for the bears, who had already mauled the stock, to launch a renewed attack.

The 1 year stock chart pattern of Bilcare Ltd is a clear example why a stock chosen on the basis of fundamental analysis alone can become a 'multi-sagger' :-

The stock had made a low of 275 on Jun 14, '06. It then climbed dizzily all the way to a bull market top of 1830 on Jan 1, '08 - only to give up the entire gain as it dropped like a stone to a low of 279 on Mar 9, '09. Such a 'mountain-like' pattern makes it very difficult for any stock to recover its former glory.

The stock rallied with the rest of the market on sharply higher volumes and briefly went above its 200 day EMA, as it made a high of 549 on Jun 4, '09. The correction started almost immediately, and the long-term average quickly turned into a strong resistance level.

The efforts by the stock to remain above its 50 day EMA has also been thwarted, and now the medium-term average has switched from a support level to a resistance level.

The MFI is below the 50% level and moving down. The slow stochastic has just slipped below the 50% level and the %K line is below the %D. Of late, down-day volumes are higher. Looks like the bear grip will remain strong for a while.

Bottomline? The stock chart pattern of Bilcare Ltd is not inspiring confidence. A fall to the 300-350 zone may be a better entry point for bravehearts - but only after thorough homework.

About advantages and disadvantages of mergers and acquisitions (M&A) and demergers

As a general rule, mergers and acquisitions (M&A) are value destructive for shareholders. Demergers or spin-offs are value accretive. In simple English, that means, avoid the shares of an acquiring company. But there may be money making opportunities in the companies being demerged or spun off.

There is a difference between a merger and an acquisition. Mergers are rare, as they happen between two companies that are equal in size and reach. Both companies lose their individual identities, and a third company is formed. For example, pharma companies Glaxo Wellcome merged with Smith Kline Beecham, and formed a third entity, Glaxo SmithKline.

In India, the situation was different. A much smaller but profitable and shareholder-friendly EsKayef lost its identity to the bigger but slower growing Glaxo. EsKayef shareholders were given Glaxo shares in the ratio of 1:2.

An acquisition, or a takeover, happens when a bigger company buys out a smaller company, with or without the smaller company's cooperation or willingness to be acquired. The usual motivations are economies of scale, killing a competitor, gaining market share and reach.

The biggest disadvantage of acquisitions is that they fail because of cultural mismatches. Every company is shaped over the years by the vision and background of its promoters or management. This is called 'company culture' - the way they project themselves in the market place, how they treat customers, employees, suppliers and shareholders, their social responsibilities, integrity and commitment, innovating capabilities.

No two companies do business the same way, even within the same sector. When one company acquires another, the cultural differences become very difficult to overcome. This leads to key personnel of the acquired company quitting and leaving with priceless intellectual property and customer relationships built up over many years.

Reverse takeovers, when a smaller company acquires a larger one, are even worse. Like Tata Steel buying Corus or Tata Motors buying Jaguar-Land Rover. In both cases, the the ambition was to become  global companies in quick time. But the prices paid in both cases were too high, and the timing was wrong. The shares of both companies tanked while they scrambled to raise money to cover the huge acquisition debt.

For shareholders of the company being acquired, an advantage could be a bidding war between two or more potential acquirers. This is currently happening with Great Offshore (earlier demerged from Great Eastern Shipping). Without any change in the fundamentals, the share price is going up as two likely acquirers are bidding up the offer price.

Opto Circuits is a notable example of an Indian company that has successfully used the acquisition route to grow its sales and profits quickly. Probably because they have shrewdly targetted companies with complementary products and geographical reach that were not doing well financially.

Demergers and spin-offs happen due to two main reasons:

1. Getting rid of an unwanted or less profitable division or subsidiary - like Larsen & Toubro did with its cement business, and ICI has done with its non-paint subsidiaries. Profitability and share prices of both companies increased significantly.

2. Spinning off a division or subsidiary into a stand-alone company because it has grown in size and value. Mahindra & Mahindra has done this a few times, with its financial services, information technology, holiday resorts subsidiaries.

Investors would do well to look out for companies that have 'hidden assets' in the form of profitable subsidiaries. Sooner or later, these subsidiaries will get demerged or spun off. With reforms in the financial sector a top priority of the Government, I would keep a close watch on companies with asset management (read, 'Mutual Funds') and insurance subsidiaries.

A few companies that come to mind are Reliance Capital (though I'm not particularly fond of the word 'Reliance'), Exide, HDFC, Sundaram Finance, SBI, Canara Bank.

(Interested readers can learn more about M&A from this article.)

Stock Market News, Financial News - Mar 3, 2009

Govt brings blue chip PSU subsidiaries under performance scanner

By Gunjan Pradhan Sinha, Indian Express Finance

The performance of subsidiaries of blue chip public sector companies may now come directly under the government's scanner. This will especially pin down high-profile arms of oil PSUs such as ONGC Videsh, Mangalore Refineries & Petrochemicals, Numaligarh Refineries and Chennai Petroleum Corporation to numerical financial and operational targets set by them in consultation with the government.

The department of public enterprises (DPE) has recently decided to include all subsidiaries in addition to parent companies while entering into a MoU at the beginning of the financial year. In the MoUs, firms agree to certain targets - operational and financial - agreed voluntarily in consultation with the ministry. (More ... )

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Auto sales grow in Feb but industry outlook still bleak

By ENS Economic Bureau

Automobile sales in February have shown that launching new vehicles even in tough economic times pays off. Market leaders Maruti Suzuki, Hyundai Motors India Limited (HMIL) and for the first time in 7 months even Tata Motors have managed to record positive sales growth.

Arvind Saxena, senior vice-president, marketing and sales, HMIL, said in a cautionary mood, "February 2009 sales saw a slight upturn with double digit growth for the industry but the overall market situation continues to be challenging and not much should be read into the February growth as last year in February the budget was to be announced and a substantial amount of sales were deferred till March. We expect a fairly flat sales growth curve for the industry for the first quarter ending March, 2009."  (More ... )

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Jubilant gets Canada regulatory approval for heart drug

By Financial Express Bureau

The domestic integrated pharma player Jubilant Organosys Ltd, now stands poised to grab a significant market share of the injectible drug, Sestamibi, meant for heart disease and coronary artery disease in Canada. The current market size of the drug stands at around $25 million in Canada. Jubilant announced on Monday that Draxis (the company's subsidiary in Canada), has received approval for the generic Sestamibi from the drug regulator Health Canada'.  (More ... )

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Spectrum fee relief to save top telcos Rs 4,000 cr each

By Anandita Singh Mankotia, Indian Express Finance

The country's top three GSM operators Bharti Airtel , Vodafone Essar and Idea Cellular will save around Rs 4,000 crore each in the current financial year, as the department of telecommunications (DoT), has left it to the new government to take a decision on charging a one-time spectrum acquisition fee from these companies for holding spectrum beyond 6.2 mhz.

All the above companies have spectrum in excess of 6.2 mhz in some circles. In view of this, communications and IT minister A Raja had earlier said the government is working on a formula to charge these firms for the excess spectrum held by them. (More ... )

Stock Market News, Financial News - Mar 2, 2009

India manufacturing shrinks for fourth month in Feb

MUMBAI (Reuters) - Indian manufacturing activity shrank for a fourth straight month in February as the global downturn hurt demand and soured business sentiment, a survey showed on Monday.

The ABN AMRO Bank purchasing managers' index (PMI), based on a survey of 500 companies, rose to a seasonally adjusted 47.0 in February from January's 46.7.

A reading above 50 signals economic expansion while a figure below 50 suggests contraction. Manufacturing makes up about 16 percent of India's gross domestic product.  (More ... ) 

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ICAI hunts for skeletons in boards where independent directors quit

By JAYANT SINGH, Indian Express Finance

The sudden spate of independent directors quitting the boards of several listed companies following the Satyam Computer scam has sent warning signals buzzing at the Institute of Chartered Accountants of India (ICAI). Sensing a possibility of numerous skeletons in the closet, the apex regulatory body for accounting and auditing professionals has started dispatching letters to those companies where such directors have quit over the past one-and-a-half months, notifying them that the Institute will soon initiate investigation into their balance sheets.

"There has to be something wrong if so many independent directors quit suddenly after the Satyam issue came to light. It's for the best that we pre-empt the problem before another such case comes up," ICAI president Uttam Prakash Agarwal told The Indian Express. (More...)

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Drug Hits

Financial Express

The buzz emerging from the research laboratories of Indian pharmaceutical companies is hard to miss. Glenmark Pharmaceuticals is expected to launch its new molecule called Crofelemer for its anti-diarrhoea drug by 2010. Crofelemer, that was in-licensed by Glenmark in July 2006, was originally developed by the US-based Napo Pharmaceuticals. Currently, it is going through Phase III trials in the US.

Ranbaxy Laboratories achieved a significant landmark recently in its collaborative research programme with GlaxoSmithKline (GSK). It has commenced Phase I human clinical trials on the lead compound for treatment of respiratory inflammation. Ranbaxy could receive over $100 million in potential milestone payments for a product developed by it and subsequently launched by GSK in multiple indications and up to double digit royalties on worldwide net sales.

"Several research programmes are being pursued within the Ranbaxy-GSK alliance against anti-infective, respiratory and oncology indications," says Ramesh Adige, president, Ranbaxy Laboratories. Ranbaxy and Merck are also working together for discovery of antibiotics and antifungal drugs.  (More ... )

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Rupee extends drop on outflow concerns

MUMBAI (Reuters) - The rupee extended its drop to hit a record low of 52 against the dollar on Monday on heightened concerns of rising foreign funds outflows while arbitrage play between the onshore and offshore markets hurt.

At 9:51 a.m., the partially convertible rupee was at 51.76/79 per dollar. It had closed at 51.10/12 on Friday.

The rupee traded at 52 per dollar according to Reuters data, which dealers said was a miss hit and the deal could be reversed with the counter-party later in the day. They said the low was around 51.8 per dollar.

Stock Market News, Financial News - Feb 26, 2009

RIL restates accounts, profits down Rs 1,177 cr

By ENS Economic Bureau

Reliance Industries, India's most valued company, said its profit for seven quarters ended December 31, 2008, would have been lower by Rs 1,147 crores if it had followed the Accounting Standard 11 (AS11) as prescribed by the guidelines on 'effects of changes in foreign exchange rates' notified in the Companies Rules (accounting standards), 2006.

The oil and gas major's profit would have been lower by Rs 39 crore for the three months ended December 2008, following the practice, and by Rs 1,177 crore for nine months ended December 2008, the company said in a statement to the Bombay Stock Exchange (BSE). This follows a limited review of accounts for the quarter ended December 2008.  (More ... )

[Note: I had cautioned investors about investing in Reliance in a blog post on Jan 4, 2009: "Why rely on Reliance?"]

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Wider deficit to boost costs, capital outflows - Moody's

MUMBAI (Reuters) - India's wider fiscal deficit will boost funding costs and weaken investor confidence, leading to more capital outflows, Moody's Economy.com said on Wednesday, a day after the government unveiled a third stimulus package.

On Tuesday, India slashed factory gate duties and service tax to boost slowing growth, prompting Standard & Poor's to cut its outlook on the country's long-term sovereign credit rating to negative from stable.

"Although the tax cuts will inject much needed support into the economy, they may heighten concerns about the country's already large public debt," Sherman Chan, an economist at the Sydney-based office wrote.  (More ... )

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U.S. FDA says Ranbaxy plant falsified data

By Lisa Richwine

WASHINGTON (Reuters) - A plant owned by generic drugmaker Ranbaxy Laboratories falsified data and test results submitted in approved and pending drug applications, U.S. regulators said on Wednesday.

The Food and Drug Administration said it halted reviews of drug applications from Ranbaxy's Paonta Sahib plant in India.

Agency officials said they had not identified any health risks from Ranbaxy drugs on the market, but were continuing to investigate products associated with the plant. (More ... ) 

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Piramal Healthcare shares up on Sanofi buy report

MUMBAI (Reuters) - Shares in Piramal Healthcare Ltd rose over 15 percent on a newspaper report French drug maker Sanofi-Aventis has emerged as the front-runner to buy a substantial stake in the Indian firm at over 50 percent premium to its current price.

Sanofi-Aventis has completed due diligence and the deal could be closed soon, the Economic Times said, citing unnamed sources.

At 9.57 a.m., shares were up 14.75 percent at 205 rupees.

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Tata Motors and Ashok Leyland to cut prices

By Indian Express Finance

A day after the government announced a 2% cut in excise duty and service tax, leading commercial vehicle makers Tata Motors  and Ashok Leyland said, on Wednesday, the savings will be fully passed on to their customers.

Auto stocks went up in anticipation on Wednesday. The BSE Auto Index jumped 3%, closing at 2,622.38; Tata Motors was up 5.87% at Rs 139.85 and Ashok Leyland up 3.26% at Rs 15.50.

The government decision on Tuesday to extend a 4% Cenvat cut, announced in December, to beyond March 31, 2009, also helped the market sentiment. After the Cenvat cut, commercial vehicles (CVs) attracted a duty of 10%. The latest 2% cut is applicable solely to categories that attracted the 10% excise duty. (More ... )

Stock Market News, Financial News - Feb 24, 2009

Wall Street plunges to 1997 levels

Financial Express

Wall Street indexes plunged to their lowest close in nearly 12 years on investor disappointment with the latest plan from Washington to prop up the ailing US banking system.

The Dow Jones Industrial Average sank 250.89 points (3.41 per cent) to 7,114.78, crashing below its November 2008 bear market low and hitting its lowest close since May 1997.

The broad-market Standard and Poor's 500 index shed 26.72 points (3.47 per cent) to 743.33, its lowest finish since April 1997.

The tech-heavy Nasdaq composite slid 53.51 points (3.71 per cent) to 1,387.72, its lowest level since November 2008.

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Hindustan Oil Exp ties up $125 mln term loan from Eni

MUMBAI (Reuters) - Hindustan Oil Exploration Company Ltd said Tuesday it has entered into a loan agreement with Eni Coordination Centre, S.A., Brussels (ECC) for a $125 million term loan.

A loan by way of external commercial borrowing (ECB) will be utilised to part-finance various development activities of the company, it said in a statement.

On Friday, the company had said a consortium of banks had refused to disburse $87 million out of an earlier-negotiated $100 million term loan due to turbulent market conditions and added it is in advanced stages of making alternative arrangements.

At 11:05 a.m., shares in the company rose 2.53 percent to 58.70 rupees in a weak Mumbai market.

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BGR Energy says wins $8.57 mln order from Iraq

MUMBAI (Reuters) - BGR Energy Systems Ltd said it won a contract worth $8.57 million to design, manufacture and supply steel storage tanks from a state-run Iraqi company.

The order for supply of floating and fixed-roof steel storage tanks will be completed in 12 months, it said in a statement on Monday.

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Authorities to crack whip on pharma cos to recover Rs 110 cr

By Soma Das, Indian Express Finance

District collectors will soon start knocking on the doors of the country's top listed pharma companies including, Wyeth Ltd, GlaxoSmithKline Pharmaceuticals and Dr Reddy's Labs for recovery of Rs 110 crore dues payable to National Pharma Pricing Authority (NPPA).

Of this, Wyeth Ltd owes NPPA around Rs 4.4 crore, while GSK Pharma owes Rs 7.5 crore.

The sum has been levied by the drug price regulator for overcharging on the prices of regulated drugs. The NPPA has initiated action against 31 pharma companies through 39 cases in Maharashtra, Andhra Pradesh, Uttar Pradesh, Haryana, Himachal Pradesh, Tamil Nadu, Madhya Pradesh and Gujarat.

An NPPA official said the companies have not only defaulted by selling medicines regulated by it at more than the permitted prices but also failed to act on follow up payment obligations. (More ...)

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NTT DoCoMo twin proposals get nod

Indian Express Finance

The cabinet committee on economic affairs (CCEA) on Monday approved Japanese telecom firm NTT DoCoMo's twin proposal to acquire 27.3% stake in Tata Teleservices Ltd and an open offer for 20.25% equity in Tata Teleservices (Maharashtra) Ltd. NTT DoCoMo will acquire 27.3% stake in TTSL for Rs 12,924 crore and for an open offer in TTML the Japaense firm would shell out Rs 949.07 crore, home minister P Chidambaram said.

The CCEA approval comes after the Foreign Investment Promotion Board (FIPB) had earlier approved the proposal. Subsequently CCEA's approval was needed as is required in cases of investment by foreign companies above Rs 600 crore.

Which sectors should you invest in?

In an earlier post ("Market Cycles and Sectors") on Dec 1, 2008 the sectors that receive prominence during different stages of the economic and stock market cycles were discussed.

Does that mean that you, as a small investor, should look at investing in all those sectors? Probably not.

Fund managers, who are under pressure to perform in the short term, have no alternative but to move in and out of sectors depending on the particular stage of the stock market. They also have access to company managements and better research resources and larger funds than small investors.

With considerably less funds and little or no research capabilities, small investors like you and me are better off choosing only a handful of sectors to invest in.

Some industries are in an environment that helps to create substantial competitive advantage. It is easier for the companies in such industries to make money.

Four sectors that I like - based on their competitive advantage and cash generation capabilities - are :-

1.  FMCG: Strong brands built up over the years create huge competitive advantage. Companies tend to be solidly profitable, debt free and generate a ton of cash (which is distributed to investors through generous dividends). The market leaders have been around for many years, so they are slow but steady performers.

This sector is practically recession proof and should form a significant part of a small investor's core portfolio. Companies to look at are HUL, ITC, Colgate, Nestle, Brittania, Dabur, Marico.

2.  Pharmaceuticals: Like FMCG, Pharma companies are recession proof, have strong brands, are hugely profitable and good dividend payers, and long term growth is assured because of the large population. MNC Pharma companies have access to better product pipeline from their overseas parents. Domestic Pharma companies profit from generics and contract research and manufacturing.

This sector should also receive pride of place in your portfolio. Companies to look at are Glaxo Pharma, Aventis, Sun Pharma, Lupin, Glenmark.

3.  Financial Services: Banks pay less interest to depositors and lend the money at higher interests. For current account holders, banks pay nothing at all. Many make more money by selling other financial products to their customer base - such as insurance, demat accounts, credit cards, mutual funds, home loans. Home loan companies tend to be highly profitable with long term growth assured.

Companies to look at are State Bank of India, Bank of India, HDFC Bank, Axis Bank, HDFC, LIC Housing Finance, Sundaram Finance.

4.  Media: Many companies have competitive advantage through regional language and regional market domination. This sector also tends to be recession proof.

The dynamics of the media business was covered in an earlier blog post on Sept. 8, 2008.

Are these the only sectors that an investor should look at? Obviously not. But this should be a good starting point in building a long term portfolio.

Future posts will cover other sectors and criteria for individual stock selection.