by Karim Rahemtulla, Advisory Panelist
India has come a long way since 1997.
The year marked my first trip to the country – and I remember it well, as I headed back to America with a resounding "sell" ringing in my ears with regard to India's investments.
At that time, the market was clearly manipulated by several large traders. One in particular was Hershad Metha, referred to as the "Big Bull." And bull is exactly what he fed to the masses, as he borrowed money from the government-owned banks and plowed the cash into the stock market. Result? The mother of all (fake) bull markets, created by a man with a choice word missing from the end of his nickname!
Knowing this, and the precarious position of investing in emerging markets at the time, I issued a "don't touch with a 10-foot pole" rating on Indian stocks (shorting wasn't an option at the time). The market crashed, as did most Asian markets.
Since then, however, every time I've returned, the profitable investment ideas I've picked up have more than paid for each trip. Right now I'm bullish on the technology sector – and in one company, in particular…
The Best Way to Invest in a Volatile Stock
The last time I visited India a year or so ago, I led a group of investors on a research trip to find the most profitable private and public companies.
It was clear the market was overheated, but there was still opportunity. We visited several public companies, but tech giant Infosys (Nasdaq: INFY) jumped out as leader of the pack.
But liking a company is one thing. Investing your hard-earned money in it is another.
As we've advised many times in the Xcelerated Profits Report, the best way to invest in a volatile stock or market is to either do so in increments, or by using a strategy that mitigates risk while also providing a healthy upside.
Knowing that the market was ripe for a correction, we executed the covered call technique, where you sell call options against shares that you own in order to receive cash upfront, lower your original cost and reduce your downside.
Result? We ended up owning Infosys at around $30 per share (the stock currently trades around $48) – about 15 times earnings for a company growing its bottom line at twice that rate.
