Subject: IC940606: BANK ON IT

From: "Gray Zhu, 800-289-2498, 212-279-6700" <[email-masked]>
Date: Mon, 6 Jun 1994 22:50:53 -0400 (EDT)

==================    IC940608: Investment Club  ======================

1. how can an investor take advantage of a stock split or buy back?
2. BANK ON IT - Bank stocks are favored by Peter Lynch
3. Introducing India Market
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   (be sure to read the Disclaimer in the end if you have not read)

1. how can an investor take advantage of a stock split or buy back?
>From: [email-masked] (Yuan Jiang)

>Question:
>In what situations does a company buys back stocks or split stocks.
>How do they affect the going of the companies stocks.  How can an
>investor (buyer or seller) take advantage of such occassion?

Gray: 

company buys back stocks to raise the earnings per share (may not
happen immediately), when the earnings is up, the stock price normally
goes up. But this is a long term effect, and the company normally buys
back over a period of time.  Stock split makes the price lower so that
a investor who has $3500, cannot buy 100 shares of stock priced at $70
(in a cash account, you may do it in a margin account), can buy 100
shares after a 2 for 1 split.  Note that you pay a slightly higher
price when you buy less than 100 shares of stocks.  When there are
more buyer, the price could go higher, this is the law of SUPPLY and
DEMAND. Also the volume would go up making the stock more liquid. But
I do not think those effects are significant.

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2. BANK ON IT - Bank stocks are favored by Peter Lynch

(In the interest rising environment, banks actually made a little more
money, and their stock has appreciated as a result. To catch you
attention, I copied the first paragraph of an article by Peter Lynch
to introduce you to the area - Gray), here we go:

WORTH, april 1994

  the author, perhaps the most famous stock picker ever, tells how to
  profit from the best opportunities he has witnessed during  a 30-year
  career of beating Wall Street.

             BANK ON IT  -by Peter Lynch

My first column for worth appreared in the august/september 1992
issue. the subject was the great investment opportunities in the
scores of mutual savings banks and thrifts (a.k.a savings and loans)
that were going public. Perhaps you know what's happened since then:
The share prices of many of these new public companies have doubled,
tripled, quadrupled in the period following the initial offerings.  In
my 30 years of looking at stocks, I've rarely seen a group do as well
as this one has.

During good times for packaged foods, insurance, or retailers, not
every food packager, insurance company, or retailer is going to share
in the prosperity. An investor may find the right sector but choose
the wrong stock and lose money. But among the mutual savings banks,
it's hard to find a wrong stock. Of the 13 that began tradeing in
1991, the worst performance is up 89%. (for more on that year's
conversions, see "Class of 1991.") Out of 46 new issues in 1992,
there's only one loser to date. And of the 57 initial offerings in
1993, there are no losers; 30 have gained more than 30%.

I'm telling this old story to exercise my hindsight - who cares about
the wonderful investments we all might have made in years past? what
causes me revisit the topic is the 1231 mutual savings banks that
havent yet converted to public ownership. On top of those, a sizable
number of prior converts are trading in the market at bargain prices.

... (omitted)

THE TRAGEDY is that millions of people have turned down the investment
opportunity of a lifetime.

... (omitted)

WHEN YOU PAY the same price as corporate insiders, you're in with the
right crowd.

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3. Introducing India Market

Gray: India is the world's second most populous country. Following
independence in 1947, India pursued a policy based on strong
centralized panning, regulation and control of private enterprise,
state ownership, trade protectioism and strict limits on the
penetration of foreign capital and technoloty. In response to a crisis
in 1991 in its balance of payments, which threatened to destablize its
economy, the Indian Government initiated a program of structural
reform aimed at stabilizing the economy and promoting reliance on
market mechanisms. Asignificant component of the porgram is the
pormotion of foreign technology transfers and foreign investments in
key areas of the economy as well as the further development of the
private sector. - Thanks to my friend Ramam Mohotra for providing the
information.

The following are highlights in an FORBES article "Now we are out own
masters"

FORBES, May 23 1994

A half-century after India won its independence from Britain, 900
million Indians are finally winning their economic liberation from the
oppressive bureaucracy the Brits left behind -with the result that
India now has the look and feel of the next China and Latin America.

               "NOW WE ARE OUT OWN MASTERS"

(the following are highlights only)

o So far in 1994 India's stock market is up by 12% in dollar terms,
  tops among Asia's developing countries.

o Some 40 million Indians - the "super-haves," as the local media call
  them - live in households with annual incomes of over 900,000 rupees, 
  or $30,000; in purchaseing -power terms, $600,000 in the US.

o The 150 million people who live in households with incomes of 30,000
  rupees ($1000) and up, in local purchasing power, $1000 is the
  equivalent of around $20,000 in the US.
  
o Large foreign companies are also opening their wallets and endorsing
  India's reforms. In the past two years $5 billion worth of foreign
  investment projects have been approved by the Indian government;
  according to a recent report by Salomon Brothers, the Indian
  government expects another $10 billion to arrive by the end of next
  year.

o India has strength that China lacks, Unlike China, India operates
  with a rule of law. The law and the respect for individual rights and
  freedoms makes India much more stable than China.

o More engineers graduate each year in India than in China and South
  Korea combined.

o Exports last year rose over 20%, to $22 billion, and are on course
  for a further 20% jump.

- From Gray Zhu, Ph.D
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_______________________________________________________________________
 ALL INVESTMENTS INVOLVE WITH RISK, STUDY CAREFULLY BEFORE INVESTING.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~