Sterlite (SLT) is trading at a very reasonable value; no doubt higher than the bad bear values, but with sufficient upside potential for both long term investors and speculators. Please access “The Quant Report” here (or link straight through to the Sterlite file) for data based on which below commentary is based.

Operating Risk

The complete list of Indian ADRs traded on U.S. exchanges is listed below:

Some great news for investors who can only buy domestic based product: After the successful launch of Van Eck Global Brazil Small Cap earlier this year, a similar product is now slated for India. I am very excited about this, as one of my pet peeves has been the lack of mid-sized or even smaller type ADRs listed in US markets for either Brazil or India. You can throw a dart and hit a Chinese small or mid-cap, but have to dive under piles of hay looking for Brazilian / Indian needles.

No symbol yet, but per IndexUniverse.com:

With a mix of developing countries such as China, India, Indonesia and developed countries such as Taiwan, South Korea, Singapore and Japan, Asian economies are becoming stronger and as a result investor interest is running high for Asian equities. New Asian companies have been listed on US markets in recent years and still more are being newly listed regularly.

Among the hundreds of Asian ADRs that are traded on a daily basis, the following are the 10 Most Traded Exchange-listed ADRs:

Investors yesterday sold off on the news that Sterlite (SLT) is making a convertible note offering of $500 million, convertible in the US listed ADS. Yes, convertible notes have a dilutive effect on the stock.

Yesterday I also commented that the convertible note offering is being done to finance an expansion project and as long as the interest payment on the note is lower than the return on capital the company is able to generate, one should view this as a positive value creating news and that the investors are wrong to sell off on this news.

There were two bits of news yesterday on one of my favorite emerging markets/commodities plays. Sterlite Industries (SLT) plans to become the largest copper smelter in the world and has announced a 400 ktpa brownfield expansion project in India along with a captive power plant generating 160 MW. The project is expected to be commissioned by middle of 2011.

The total investment in this capital project is estimated to be $500 million.

Copper has long been called the "metal with the PhD" or the "smart" metal because of its apparent ability to predict changes in the economy based on metal demand and pricing. Copper is used in many industrial capacities, but especially in piping in residential and commercial construction.

On Mar 6, we discussed the signals copper was sending about the status of the global economic recovery as metal prices were soaring but the stock market was not in a blog post called Dr. Copper Sends Signals.

At the end of each trading week, Hillbent scans for the equity market for potential anomalies which exhibit extremely oversold and overbought conditions. Past observations have revealed that such candidates may experience reversal corrections to the upside or downside once the market reconfirms that their fundamentals remain solidly intact or relatively poor. From a contrarian perspective, these lists may also serve as a precursor to changes in institutional sentiment and underlying fundamentals.

(The purpose of this report is not to provide specific recommendations, but instead serve as a time-saving reference tool and starting point for investment ideas as the upcoming trading week unfolds. Of course, the results generated are not always perfect and users are strongly encouraged to perform their own due diligence on these names. Note that overbought and oversold conditions are based upon proprietary algorithms and quantitative models instead of conventional technical analysis indicators. As a supplement to this report, please refer to our Market Condition Summary to determine if market direction trends support a bullish or bearish investment bias over short-term, intermediate, and long-term timeframes.)

I received a question from a subscriber earlier this week that resonated with another question I received from a subscriber shortly after I sold one-half of our position in Indian mining company Sterlite Industries (SLT) for a gain of 95.12% a couple of months ago. Both these questions were related to the trading axiom "Let your winners run but cut your losses quickly". In the eyes of both these subscribers I had violated this axiom.

The subscriber who wrote to me about Sterlite Industries and Tata Motors (TTM), wanted to know if I felt any seller's remorse after selling 100% of my position in Tata Motors and 50% of my position in Sterlite right before a rally in Indian stocks that saw Sterlite's stock move up to $11.57 just days after I sold it for $9.19. He was quite clearly referring to the "Let your winners run.." part of the trading rule of thumb I mentioned above.

Back a few weeks ago, we posted some names that had "gaps" to fill in their charts [Jun 22: Gaps Filling and To Be Filled?] - James River Coal (JRCC) has filled its gaps, and we also listed Research in Motion (RIMM) and A-Power Energy (APWR) - here are updates on their progress; both of these of course would require a swan dive.

I found a few more as I scan charts - some in much more reasonable ranges; frankly there are quite a few out there, since we had so many pre-market "futures happy" purchase programs in April especially. If you have any, please let me know in comments and I'll add it to this chart (no penny stocks or sub $5 type of stuff) I actually want to be long some of these names at the bottom of their "gaps," if and when they get filled.

It's been a wild and volatile first half of 2009. We followed one of the worst periods in history (Jan-Feb) with one of the best (Mar-Apr), and topped it off with a stagnant market (May-Jun) to finish off the quarter. For all this, the S&P is up a staggering 1.5% for the year to date.

But if you bought some of the stocks below on Dec 31st, 2008 - went off on the long planned tripped to Tahiti (hence, not panicking in the dark days of February through early March) and just showed up today - congrats! I've pulled a group of stocks with the following criteria:

I don't currently own Sterlite Industries (SLT), but wanted to reintroduce the name to readers since I have not talked about it since we sold it July 2008. Ironically, it is right back at the same price we sold it almost a year ago...

Sterlite is a company that is in the intersection of 2 very crowded, but working trades - India and base metals. With the market potentially about to break out north of this heady resistance line of the 200 day exponential moving average after fighting it for 9 days, I wanted to bring it to readers attention....

From time to time we like to look at what's been working (or not) in the market over various periods of time. When the market was not moving +20% in 7 weeks, or -20% in 7 weeks on an alternating basis (student body left trading) I used to find a lot of interesting data in these sort of scans in terms of where the relative strength is. Nowadays, I think the overall market is dominant and stock picking is secondary. I've had this thesis since last summer; once the commodities trade blew up there was no place to hide and most asset classes seemed to simply trade in a monolithic nature. To that point Mike Santoli wrote in this week's Barron's a confirmation of my "gut" feel in "Not a Stockpicker's Market"

• Still, even as overall volatility and fear levels have ebbed, the market isn't yet making as many fine discernments among stocks as most would hope. On a three-month basis, the correlation among all stocks has been running above 0.8% (suggesting 80% of a stock's direction is market-determined).
• Robin Carpenter, a quantitative investment consultant at www.CarpenterAnalytix.com, finds evidence of emerging stock-by-stock variance lacking in recent market statistics. He does see some hints that stocks within industries are beginning to go their separate ways, but in general the market's overall direction retains sway.
• This is perhaps not a surprise in the present climate, in which short-term ETF rentals pass for investing in many quarters. But it adds to the list of challenges facing performance-pressed investors -- a list that includes a tendency for large day-to-day direction changes even in a range-trapped tape.

With that said, I wanted to take a look at what's been working the past "month" (which in my world is roughly 4 weeks) - obviously with commodities flying [May 30, 2009: Commodities Set for Best Month Since 1974] I expected this list to look very similar to what was working in latter 2007 or first half 2008. I was not disappointed - this list is chock full of old holdings of ours from that time frame...

"Stay with precious metals, urges RBS, but ensure also that you have industrial metal exposure. April heading to be the best month for prices in 40 years. Zinc is expected to slip into deficit next year and copper in 2011, but aluminium is carrying heavy inventories that may yet increase further."

That's how Rhona O'Connell from Mineweb.com summed up the latest report from RBS and gave some details that bodes well for precious metals.

At the end of each week, our market direction radar scans the Hillbent 3000 universe (minimum average daily volume of 100k and largest 3000 market capitalization stocks) for the top 3 and bottom 3 sectors based upon aggregate performance and analyzes their winners and losers.

Using this weekly sector report on a regular basis allows Hillbent.com’s readers to efficiently monitor sector rotations and investor sentiment biases.

Did you know that the Federal Reserve Bank owns gold certificates? Mounting evidence suggests the Fed intervenes in and participates in the gold and silver markets on a regular basis.

Interviewed Monday last week on the "Trading Day" program of Business News Network in Canada, former Federal Reserve Governor Lyle Gramley hinted that a big upward revaluation of gold may figure heavily in the Fed's attempt to rescue the U.S. economy.

Many foreign stocks that trade as ADRs in the US have fallen heavily in-line with their home country’s market performance. In order to identify the ADRs that are down more than 80% year-to-date, I ran the screener and ended up with the 38 stocks listed below.

Foreign ADR Stocks Down > 80%

As discussed in our previous blog entry What Next?, taking advantage of the general market weakness over the last two days and a nearly 15% drop in Indian mining giant Sterlite Industries (SLT) yesterday, I am starting a position in the company both in the model portfolio and my personal portfolio. I will use the closing price of the day to purchase 2,000 shares of Sterlite for the model portfolio. We added Sterlite to our watch list in January 2008 and I have been patiently waiting since then for an opportunity to get into this company.

As a subscriber pointed out yesterday morning, the company has a market cap of $3.34 billion and is trading below the value of cash and short-term investments it holds even after taking out short-term and long-term debt. This is based on the March 2008 balance sheet available on Yahoo Finance.