India: Frank's Finds
02/17/2006 12:00 am EST
"In our portfolio in recent years, we gradually migrated to Europe, then Japan, then China," notes Frank Cappiello. "Now, we are investing in India as well. We now have 30% of our assets offshore. This is a big move for us, but we're convinced we’re on the right track."
"When you look at India as an investor, the figures are truly amazing. There are 1.2 billion people, compared China’s 1.3 billion. And India’s population is growing faster, so they could pass China as the most populous nation in the world in another 15 years. Half the population is under the age of 25, so it’s still a very young nation.
"Meanwhile, the Indians graduate 250,000 engineers each year, vs. 100,000 engineers graduating from North American schools. This brings me to software. There is no question that in India, they are the kings in terms of software capability. When you look at software design, engineers in Silicon Valley are getting $110,000 a year. The same engineers in Bangalore or any of the software centers in India are getting about $30,000 and are equally as capable. You’d be surprised how often you have been serviced via telephone from India without knowing it. That’s a big industry.
"India is a ‘coming’ great economy similar to where China was in the late 1980s and early 1990s. Areas like telecommunications and transportation are going to go ballistic. One of the great things to invest in within India is the fact that they have a legacy of British law over some 150 years. People can be assured about their property rights. That’s a very important point. In India, democracy is already there.
"One way to invest in India is through a fund, such as Morgan Stanley Indian Investment Fund (IIF NYSE). Meanwhile, here are some stocks to investigate. Or alternatively, buy big-cap companies. There are two Indian banks to look at— ICICI (IBN NYSE) and HDFC (HDB NYSE). And investors can look at a generic drug company called Dr. Reddy’s Lab (RDY NYSE). There's also an Indian Internet company calls Rediff (REDF NADSDAQ), which I hesitate to mention, because it is a very speculative stock. It just went public. I bought it personally. However, I'd caution that some analysts are calling it the Google for India. You have to be very cautious when people are talking like that. But it’s worth a look."
"However, in my mind, the biggest thing about India is software and software outsourcers— companies which are growing 20% a year. Outsourcing in this sense means shipping something out and having it come back in a more refined form. The first one is Cognizant Technology (CTSH NASDAQ). The first thing you might think is that this company is located in New Jersey. That’s true. But basically, most of their business is outsourcing software to India. Other companies in this area are Infosys (INFY NASDAQ), Satyam (SAY NYSE), and Wipro (WIT NYSE). These firms have large stakes in the $18 billion market for worldwide outsourcing."