Indices
Ten Components of the S&P/TSX Capped Energy Index
The S&P/TSX Capped Energy Index consists of Canadian energy sector stocks that are listed on the TSX. The iShares S&P/TSX Capped Energy ETF (XEG.TO) tracks the performance of this index. The top 10 components of this fund are listed below together with their ticker in the US markets and the current dividend yield:
1 .Suncor Energy Inc (SU)
Current Dividend Yield: 1.26%
2. Canadian National Resources (CNQ)
Current Dividend Yield: 0.92%
3. Encana Corp (ECA)
Current Dividend Yield: 3.01%
4. Cenovus Energy Inc (CVE)
Current Dividend Yield: 3.04%
5. Talisman Energy Inc (TLM)
Current Dividend Yield: 1.50%
6. Canadian Oil Sands Trust (OTC: COSWF)
Current Dividend Yield: 8.16%
7. Nexen Inc (NXY)
Current Dividend Yield: 1.07%
8. Imperial Oil (IMO)
Current Dividend Yield: 1.15%
9. Penn West Energy Trust (PWE)
Current Dividend Yield: 8.85%
10. Crescent Point Energy Corp
Current Dividend Yield: N/A
Top 10 Components of the S&P Global Agribusiness Index
The S&P Global Agribusiness Index is composed of 24 of the largest publicly-traded global agribusiness companies. The companies in this index include a diversified mix of Producers, Distributors & Processors and Equipment & Materials Suppliers in this sector.
The Top 10 Constituents of this index are:
1. Archer-Daniels-Midland Co (ADM )
Current Dividend Yield: 2.21%
USA
2. Potash Corp. (POT)
Current Dividend Yield: 0.41%
Canada
3. Wilmar International(OTC: WILMY)
Current Dividend Yield: 1.63%
Singapore
4. Monsanto Co(MON)
Current Dividend Yield: 2.12%
USA
5. Associated British Foods (OTC: ASBFY)
Current Dividend Yield: 3.03%
U.K.
6. BRF - Brasil Foods SA (BRFS)
Current Dividend Yield: N/A
Brazil
7. Deere & Co(DE)
Current Dividend Yield: 1.99%
USA
8. Syngenta AG(SYT)
Current Dividend Yield: 2.27%
Switzerland
9. Mosaic Co(MOS)
Current Dividend Yield: 0.46%
USA
10. Bunge Ltd(BG)
Current Dividend Yield: 1.59%
USA
Is the U.S. Stock Market Undervalued?
According to David Rosenberg of money manager Gluskin Sheff the U.S. stocks market is overvalued by 35% based on Shiller P/E ratios.
The S&P 500 is up 9% YTD and most stocks have recovered strongly since the March lows of last year.The current P/E of S&P 500 is 21. However is this the time to invest in U.S. stocks?
According to an article in MoneyWeek, the current P/E of U.S. stocks is about 22. Historically when the P/E ratio exceeds 20, stock investments have lost money over the next five years. Investor Jeremy Grantham predicts a yearly return of just 0.40% for the next seven years. When inflation is taken into account investors will loose money if they invested in the markets now.
The above chart shows that stocks traded above 20 times earnings before the big crashes of 1929, the late 1960s and 2000.
Another chart from Societe Generale below shows that the cyclically-adjusted P/E of S&P 500 is over 20 now. This ratio is adjusted for economic cycles by taking an average of earnings over the past ten years.
Source: US equity bulls are pricing in Nirvana, MoneyWeek
The above charts confirm that U.S. stocks are not undervalued based on the factors noted. Further rise in equity prices have to accompanied by rise in earnings.
P/E ratios have been expanding in other markets as well though earnings have not grown significantly. For example, among the emerging markets, the P/E of BSE 500 stocks in India has shot up from 11.7 times (12-month trailing earnings) in March 2009 to over 20 last month. In 2009, when the total net profits of the BSE 500 companies grew by 30%, their market capitalization increased by 130% showing the irrational exuberance of investors.
Correlation Between South African and Australian Equity Markets
Global diversification is an integral strategy of a well-built portfolio.It is even more important to make sure that diversification is done right.
Australia is classified as a developed economy and its main stock market index the Australian All Ordinaries Index is part of the MSCI World Index. In contrast South Africa is considered as an emerging market and its main index the All Share Index is included in the MSCI Emerging Market Index.
However the developed market of Australia is highly correlated with emerging market of South Africa. This is because the economy of both these countries are natural-resources based. So investing in these two markets at the same time would not offer the diversification desired by an investor.The following charts proves this point.
Returns of Australia’s All Ordinaries Index Vs. South Africa’s All Share Index:
The graph shows that both the markets track each other almost consistently. Australia has been more volatile but offered better returns especially during the commodity boom from 2003 and 2007.
Correlation between South Africa and Australia:
Source: http://www.equinox.co.za
The table above shows that the Australian All Ordinaries and the South African All Share Index are quite highly correlated to one another.The Australian index has a higher correlation to the MSCI World index than the All Share Index. However both the indices have the same correlation to the MSCI Emerging Market index, which is interesting.
ETFs Performance:
The chart below shows the 5-year performance of the iShares MSCI Australia Index fund (EWA) and the iShares MSCI South Africa Index fund (EZA).
Based on the above analysis it is clear that when choosing different markets for diversification purposes one must choose the right countries.
10 Leading Swiss Companies
The Dow Jones Switzerland Titans 30 Index tracks the performance of 30 leading stocks in traded in Switzerland. The stocks in this index are selected based on float-adjusted market capitalization and average trading volume.
The Top 10 components in the Dow Jones Switzerland Titans 30 Index are:
1. Company: Novartis AG (NVS)
Sector: Health Care
Current Dividend Yield: 3.66%
2. Company: Nestle S.A. (OTC: NSRGY)
Sector: Consumer Goods
Current Dividend Yield: 2.45%
3. Company: Roche Holding AG (OTC: RHHBY)
Sector: Health Care
Current Dividend Yield: 3.24%
4. Company: ABB Ltd (ABB)
Sector: Industrials
Current Dividend Yield: 2.10%
5. Company: Credit Suisse Group (CS)
Sector: Financials
Current Dividend Yield: 0.20%
6. Company: UBS AG (UBS)
Sector: Financials
Current Dividend Yield: N/A
7. Company: Zurich Financial Services AG (OTC: ZFSVY)
Sector: Financials
Current Dividend Yield: 3.99%
8. Company: Syngenta AG (SYT)
Sector: Basic Materials
Current Dividend Yield: 1.95%
9. Company: Compagnie Financiere Richemont S.A.
Sector: Consumer Goods
Current Dividend Yield: N/A
10. Company: Holcim Ltd (OTC: HCLMY)
Sector: Industrials
Current Dividend Yield: N/A
Nestle(ABB) is the world’s largest food company with a strong presence in many emerging markets. Nestle is also the owner of some of the most popular brands in the world like Nescafe, Nesquik, Milo, etc. For 2009, the company earned $9.58B. Last month Nestle announced plans to increase its dividend by 14.3% and buy back shares worth 10 billion Swiss francs this year.ABB (ABB) is a global provider of power and automation equipments and services to utilities and other industrial customers. It is a major player in countries like India, China, Brazil, etc where there is a strong buildup in infrastructure. In the fourth quarter of 2009, revenues fell to $8.76B but profit more than doubled to $540M.
Ten Emerging Markets Metals & Mining Sector Stocks
The Dow Jones Emerging Markets Metals & Mining Titans 30 Index represents “30 of the largest emerging-market companies in the Industrial Metals & Mining and Mining Sectors.Stocks are selected to the index based on rankings by float-adjusted market capitalization, revenue and net profit.”
The index is up about 135% as of November 30, 2009. Brazilian stocks account for about 28% of the index.
The Top 10 Components of this index are:
Vale (VALE)
Brazil
China Shenhua Energy Co. Ltd.
China
AngloGold Ashanti Ltd. (AU)
South Africa
Norilsk Nickel Mining & Metallurgical Co. (OTC: NILSY)
Russia
Companhia Siderurgica Nacional (SID)
Brazil
Impala Platinum Holdings Ltd. (OTC: IMPUY)
South Africa
Jindal Steel & Power Ltd.
India
Gerdau (GGB)
Brazil
Gold Fields Ltd.(GFI)
South Africa
Grupo Mexico S.A.B. de C.V. (OTC: GMBXF)
Mexico
