Performance Review
The Five Best and Worst Performing Latin American ADRs YTD
With two months over for the equity markets lets take a quick look at the leading and lagging Latin American ADRs from a performance perspective.
The five best performing Latin American ADRs YTD as of 2/26/10:
1. Banco De Chile (BCH)
Country: Chile
Sector: Banking
YTD Change: 15.01%
2. GRUMA (GMK)
Country: Mexico
Sector: Food Producers
YTD Change: 13.34%
3. Nortel Invesora (NTL)
Country: Argentina
Sector: Fixed Line Telecom
YTD Change: 13.13%
4. Vina Concha y Toro (VCO)
Country: Chile
Sector: Beverages
YTD Change: 12.44%
5. Ecopetrol (EC)
Country: Colombia
Sector: Integrated Oil & Gas
YTD Change: 10.92%
The five worst performing Latin American ADRs YTD as of 2/26/10::
1. Cemex (CX)
Country: Mexico
Sector: Construction & Materials
YTD Change: -19.12%
2. Fibria Celulose S.A. (FBR)
Country: Brazil
Sector: Forestry & Paper
YTD Change: -19.66%
3. Grupo TMM (TMM)
Country: Mexico
Sector: Industrial Transportation
YTD Change: -20.21%
4. Brasil Telecom (BTM)
Country:Brazil
Sector: Fixed Line Telecom
YTD Change: -33.33%
5. Centrais Eletricas Brasileiras-Eletrobras (EBR)
Country: Brazil
Sector: Electricity
YTD Change: -38.36%
Banco De Chile (BCH) is the top performer with a return of 15% YTD. BCH is consistent high dividend payer and the current yield is 6.57%. The next dividend payment is $3.90 with a record date of March 19th and a pay date of April 6, 2010. Ecopetrol (EC) of Colombia has a dividend yield of 5.62%. For the full year 2009, the company increased production of crude oil and natural gas by 17% from 2008 and sales volume rose by about 19% compared to 2008. Cement and construction materials maker Cemex(CX) announced disappointing quarterly results in January.
Stocks Outperform Bonds in the Long Run
The 2010 edition of the Credit Suisse Global Investment Returns Year Book confirms that equities outperform bonds over the long term. The chart below shows the performance of U.S. stocks, bonds and T-bills from 1900 thru 2009:
A $1,000 invested in U.S. equities in 1900 would be worth $727,000 now. This number is adjusted for inflation. The real rate of return equals to 6.2% which is very good. However it must be noted that the majority of the returns came from dividend reinvestment and not capital appreciation. Capital gains accounted for just 1.8% per year.This study proves again the importance of investing in dividend paying stocks and dividend reinvestment. When compared to stocks, the rate of return on bonds and T-bills is very low.
The following graphic shows the rate of return for equities over different time periods:
Source: Credit Suisse Global Investment Returns Year Book 2010
2009 Performance Review of Large US Bank Stocks
The 2009 performance of thirteen large US bank stocks is listed below:
| Bank | Ticker | 2009 Returns |
|---|---|---|
| US Bank | USB | -9.20% |
| BB&T | BBT | -3.10% |
| Bank Of America | BAC | 2.10% |
| Citibank | C | -50.50% |
| JPMorgan Chase | JPM | 19.70% |
| PNC Bank | PNC | 9.70% |
| Suntrust | STI | -30.60% |
| Regions Financial | RF | -31.90% |
| Fifth Third Bank | FITB | 18.50% |
| Bank of New York Mellon | BK | 0.50% |
| State Street | STT | 10.80% |
| KeyCorp | KEY | -33.80% |
| Wells Fargo | WFC | -6.80% |
The worst performer is Citibank(C) which lost 50%. Despite bailed out by the tax payers with billions of dollars Citi could not recover like its peers. Citibank stock is now cheaper than the cost of a McDonald’s value meal.The best performing bank in the above list is JPMorgan Chase (JPM) which returned about 20% to investors. Regional giants such as Regions Financial (RF),US Bank(USB) and BB&T (BBT) ended in the negative territory for the year. While National City of Cleveland,Ohio was sacrificed by the Feds to PNC(PNC) , city rival Key Bank (KEY) survived the crisis but still the stock lost one third of its value.
Compared to the performance of the US banks above, many large cap foreign bank stocks yielded higher returns to investors. Of course there were also some foreign banks such as Lloyds and RBS of UK that were worse than above banks, but most of the other foreign banks recovered strongly from their March lows.
Market Performance: NYSE vs. St.Petersburg Stock Exchange from 1865 to 1917
The graph below shows the performance of New York and St.Petersburg Stock Exchange of Russia for the 50-year period from 1865 thru 1917:
Source: Capital-Flow-Analysis.com
“By 1910, stocks on the St. Petersburg Exchange had increased fourfold in value since 1865, compared to a mere doubling on the NYSE .”
Sometimes exogenous variables play an important role in determining the value of a security than any other measures. These variables are usually beyond investors’ control. So in addition to using many factors such as P/E ratio, Dividends,Book Value, etc. we must take into account the effect of exogenous variables on a security. In current times, these would include things like geo-political risks (war), weather (tsunami, drought),credit crisis, effects of globalization, etc.
Going back to our chart, the reason stocks on the St.Petersburg Exchange rose much higher than the ones on the NYSE due to the influence of Rasputin.
“The position of Rasputin in the power structure of the last Tsarist regime, was far more important to the long-term outlook of the St. Petersburg Stock Exchange than the price-earnings ratios of listed shares. ”
More fascinating stuff can be found here.
2009 Performance Review: Foreign Bank Stocks
The 2009 performance numbers of foreign bank stocks traded in the US markets are listed below in three sections.
a. Foreign Bank ADRs
| Company | Ticker | Country | Return in 2009 |
|---|---|---|---|
| Allied Irish Banks | AIB | Ireland | -25.16% |
| Banco Bilbao Vizcaya Argentaria | BBVA | Spain | 46.79% |
| Banco Bradesco | BBD | Brazil | 121.58% |
| Banco de Chile | BCH | Chile | 69.98% |
| Banco Macro | BMA | Argentina | 175.05% |
| Banco Santander Brasil | BSBR | Brazil | N/A |
| Banco Santander Chile | SAN | Chile | 84.93% |
| Banco Santander S.A | STD | Spain | 73.23% |
| Bancolombia | CIB | Colombia | 94.90% |
| Bank of Ireland | IRE | Ireland | 60.59% |
| Barclays Bank | BCS | United Kingdom | 79.59% |
| BBVA Banco Frances | BFR | Argentina | 109.67% |
| Corpbanca | BCA | Chile | 112.00% |
| Credit Suisse | CS | Switzerland | 73.96% |
| Deutsche Bank | DB | Germany | 74.27% |
| Grupo Financiero Galicia | GGAL | Argentina | 154.87% |
| HDFC Bank | HDB | India | 82.24% |
| HSBC | HBC | United Kingdom | 17.30% |
| ICICI Bank | IBN | India | 95.90% |
| Itau Unibanco Holding | ITUB | Brazil | 116.49% |
| KB Financial | KB | Korea | 94.08% |
| Lloyds Banking Group | LYG | United Kingdom | -56.46% |
| Mitsubishi UFJ Financial | MTU | Japan | -20.77% |
| Mizuho Financial | MFG | Japan | -38.30% |
| National Bank of Greece | NBG | Greece | 36.75% |
| Royal Bank of Scotland | RBS | United Kingdom | -38.10% |
| Shinhan Financial | SHG | Korea | 57.51% |
| UBS | UBS | Switzerland | 8.46% |
| Westpac Banking | WBK | Australia | 87.59% |
| Woori Finance | WF | Korea | 151.93% |
The best foreign bank ADR was Banco Macro of Argentina with a return of 175%. The worst performer was Llyods Bank of UK which lost 56%. Another British bank Royal Bank of Scotland also was a poor performer with a loss of 38%. Brazilian banks Itau Unibanco and Banco Bradesco more than doubled last year.
b. Canadian Inter-Listed Banks
| Company | Ticker | Country | Returns in 2009 |
|---|---|---|---|
| Bank of Novo Scotia | BNS | Canada | 78.00% |
| Bank of Montreal | BMO | Canada | 116.20% |
| Canadian Imperial Bank of Commerce | CM | Canada | 62.20% |
| Royal Bank of Canada | RY | Canada | 86.40% |
| TD Bank | TD | Canada | 80.70% |
Among the five Canadian banks, Bank of Montreal was the top performing stock with a return of 116%. Canada’s most profitable bank Royal Bank of Canada returned 86%. Overall all the Canadian bank stocks rebounded nicely in 2009.
c. Select Foreign Bank ADRs Traded on the OTC
| Company | Ticker | Country | Returns in 2009 |
|---|---|---|---|
| Australia and New Zealand Banking | ANZBY | Australia | 99.50% |
| BNP Paribas | BNPQY | France | 94.90% |
| Commerzbank | CRZBY | Germany | -13.00% |
| DBS Holdings | DBSDY | Singapore | 69.60% |
| Erste Group Bank | EBKDY | Austria | 68.60% |
| National Australia Bank | NABZY | Australia | 74.20% |
| Societe Generale | SCGLY | France | 49.20% |
| Swedbank | SWDBY | Sweden | 117.80% |
| United Overseas Bank | UOVEY | Singapore | 59.60% |
Commerzbank of Germany was the performing stock with a loss of 13%. Societe Generale of France beat BNP Paribas easily. All the three Australian banks - Westpac, National Australia Bank and Australia and New Zealand Banking Group - had great runs last year. Erste Bank received one of the most favorable bailouts from the Austrian government.DBS and United Overseas Bank of Singapore jumped over 50%.
