Analysis: The New Germany Fund (GF)

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Photo: Brandenburg Gate
Courtesy:www.globusjourneys.com

The New Germany Fund – GF is a closed-end fund. The fund was up 25.14% last year based on the share price. The fund’s benchmark is the MDAX which is the mid-cap Stocks Index in Germany. MDAX is composed of 50 mid-caps tocks whereas the DAX (Germany’s main stock market Index) is made up of 30 blue chips.

Past Performance – Total Returns (based on market value):
Year 2007: 25.14%
Year 2006: 44.13%
Year 2005: 18.94%
Year 2004: 30.50%
Year 2003: 102.42%

In all these years, the fund beat the benchmark. Total Returns means stock price appreciation + dividends reinvested.

Stats (as of Dec 31,2007):
Ticker: GF
Net Assets = $480 M
Shares Out = 24.8 M
NAV per share = $19.38
Expense Ratio: 1.00%
Managed by: Subsidiaries of the Deutsche Bank group

Portfolio Composition (as of Dec 31,2007):
Industrials – 40.1%
Financials – 9.5%
Consumer Discretionary – 9.8%
Materials – 14.5%
Other – Remaining %

So industrials comprise a major portion in the portfolio which is very good considering that German companies are global leaders in the industrial field. The fund has some Great companies Puma (shoes, apparels), Hannover(Insurance), Rheinmetall (Industrials)

Pros of the fund:

  1. Provides easy access to mid-cap German firms
  2. Past performance has been very good
  3. Expense ratio has come down a lot in the past few years
  4. Management seems to good since the fund gained some $97M in investment operations in 2007
  5. With unemployment rate under 9% in December 2007, the strong labor market may help the economy which in turn might benefit mid and small cap stocks.

Cons of the fund:

  1. High Expense Ratio of 1%
  2. Fund always seem to trade a discount to NAV
  3. Net Assets under $1B
  4. High Portfolio turnover ratio of about 45% yearly
  5. Mid-cap companies may suffer more during times of economic uncertainties

The Net Assets of the fund increased from $397M in 2006 to $480M by year-end 2007.The NAV was $8.72 back in 2003. Five years later by 2007 it stood at $19.38. The fund has accumulated gains of $198M and losses of $56M.

Germany had a GDP growth 2.5% in 2007 and the labor market is strengthening. Demand for industrial goods in the emerging markets is expected to grow this year. These factors may benefit the mid-cap companies. If you believe in the resilience of the Germany economy, the strength of German companies, technological leadership in many fields and want some exposure to German mid-cap stocks that are not available in the US, then GF may be a good buy at these levels.

Related links:

www.newgermanyfund.com

New Germany Fund Delivers +40% in Annual Gains

ADR stocks for a bear market – Part II

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Today was another brutal day in the markets. Bear Stearns (BSC) got sold out at a fire-sale price and effectively the common shareholders were screwed royally. An astonishing but sad story in the history of the financial markets. Now folks are trying to rat out other such companies that are in deep trouble. They killed a regional bank called National City (NCC) by over 40% today.

It seems like everywhere we look there is doom and gloom.The Feds’ actions seem useless and people are starting to talk about words like “Bank Runs”, “Depression” etc. Around the world in many countries such as India, Japan, etc. the markets crashed bigtime.

So in the midst of all this mayhem, the following question may come to mind:

Is there any place to hide in this brutal market ?

Yes. There are places to hide and take refuge until this market stabilizes.

Consumer staples stocks like food stocks tend to perform ok during such hard times since people gotta eat no matter what. I have also added a couple stocks from personal goods sector and the automobile components sector to add some diversity to the “Take-Refuge” stocks list.

The following are some stocks worth looking into. Many of them are world class companies with powerful brand names:

Note: Most of them are traded in the OTC market (Pink Sheets). So they may have thin volumes and hence liquity may become an issue in adverse market conditions.

1. Tesco – TSCDY
Country : UK
Industry: Food Retail Chain

Tesco is the Wal-Mart of UK. The stock is down over 20% YTD. Yield is about 1.66% and the company has an annual revenue of over $90B. Tesco is expanding into other countries in Europe, China, Japan and I believe coming soon in the US.

2. Koninklijke Ahold – AHONY
Country : Holland
Industry: Supermarket & Food Retail Chain

The stock is almost flat YTD. The company has over 3,400 stores in the US and Europe. One of the famous brand is the “Stop & Shop” stores.The stock has a dividend yield of 3%+.

3. Groupe Danone – GDNNY
Country : France
Industry: Food Producer

An innovative company from France. Recently BusinessWeek had an article on how they convert bacteria into $ by inventing new uses for bacteria in dairy products like yogurt. Their famous brand is the the Danone Activia yogurt. Highly popular with women.

Other stocks:

4. Adidas – ADDNY
Country : Germany
Industry: Personal Goods

Famous for shoes.

5. Puma – PMMAY
Country : Germany
Industry: Personal Goods

Famous for shoes & sport related items

6. Valeo – VLEEY
Country : France
Industry: Auto Parts supplier

The Teachers Retirement System of Texas has an investment in this company.

7. Continental – CTTAY
Country : Germany
Industry: Tires

Multibaggers – The Wealth Creators !!!

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A Multibagger is a stock that multiplies many times over in a given period of time. One or two multibaggers in a diversified portfolio will make the returns incredibly better.

Picking a mutibagger is not easy and one must take risks investing in places that may not be within one’s risk appetite. For eg – one may have to invest a solid amount of a say $10K in a growing country like Brazil to reap huge returns. While the risk is high investing in Brazil in one stock the returns are even higher if ones gets lucky selecting the right stock.

The following shows the 5 year returns from investing $10K in one stock:

Top Foreign (ADR) Stocks List

S.No.

Company Name

Ticker

  

Cost

Current Value

Return


Note: The returns were calculated by S&P; and was published last year around May-June time frame.Still the data gives us some starting point to analyze and identify such multibaggers.

ABB(a) ABB(a) !!!

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The title is a twist on the Swiss Industrial giant ABB LTD.The company was found in 1883 and is a major player in the infrastructure space.

ABB is doing well in the emerging countries like Brazil, India, China etc. due to high demand for power and other industrial needs. Recently the stock went down due to the CEO Fred Kindle leaving the company abruptly.

Source:
http://biz.yahoo.com/ap/080213/switzerland_abb.html?.v=3

I believe this change in management will not have any long-term effect on ABB since the company is built on solid foundation in some specialized fields and extends its presence in many countries. So ABB at this price of $25.73 today may be a solid buy. The stock has had a great run over the past 52 weeks growing over 50%.