Tuesday, February 07, 2006

My Target Price for REDF and SIFY in 1 year, 3 years and 5 years

I don't have a target price for these stocks.

REDF and SIFY are good companies, but I have no idea where their stocks will be in a couple of years. What I do know is that the Indian Internet Sector is a great place to invest-and REDF and SIFY are the top dogs in that space right now. Other players will come, and I will happily switch some of my REDF and SIFY stock with a new player's stock, once it becomes public.

Does that mean REDF and SIFY are not bluechip stocks? Yes, it does. Blue chips are established players in mature industries-and calling even Yahoo or Amazon a bluechip would be a mistake; definitely REDF and SIFY are not bluechips.

Investing in high growth sectors like the Internets has it's risks-companies often fall apart when the growth slows down, and also because new competitors come in pretty quickly in high growth markets (hey, who doesn't want a share of that pie!). We saw that in the rise and fall of Networking stocks in 1998-2003. The investing challenge is to own a basket of high growth stocks, targeted in a sector, and sit tight-not all will be winners, in fact, most will be losers, but one winner can pay off so well that you end up with spectacular returns for your portfolio. Think market cap, not of the stock, but of the industry as a whole. If you see the industry market cap going up, the sector is a great place to invest.

REDF and SIFY today together are about $1.1B in Market cap. The closest comparison I have to these stocks in the US market is YHOO for REDF, and AOL for SIFY. YHOO is a $45B company, and AOL is $20B (based on what Google paid for 5% of it). The two together are $65B. And these big fellas in the US are growing still-so REDF and SIFY are good buys. The Street is underestimating the revenue and profit growth of these small companies from India.

I think the Indian Internet Sector will be worth $5B in the next 3-5 years. If REDF and SIFY are the only major players in that sector, I believe they together will be worth $5B in 3-5 years.

REDF and SIFY have their own risks, just like any other public company. We don't know how truthful the management is-we hope they are. No one can avoid or predict an Enron or Worldcom-greedy executives with little care for principles of honesty and integrity have caused many people to lose a lot of money. That's why diversification is important-to make sure you are participating in the sector without taking company specific risk (dishonest management, bad execution, etc.).

Sanjay John G.


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1 Comments:

phil said...

good prediction.sify is already touched 14.40 today.sunjay yor site is terrific.i am from kerala and based in boston.are you from kerala.i would like to contact you and my e mail id is lenyphilip@gmail.com.
thanks
lp

9:20 AM  

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