On The Three Global Green Energy Majors

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Renewable energy companies are growing fast in the past few years while the oil companies are struggling. The pandemic dealt drove demand for oil to unheard of levels dealing another blow to the oil firms. The Wall Street Journal published an article over the weekend discussing the rise of the “green energy majors” and how they are competing against the established oil majors. Below is a short excerpt from the piece:

For now, NextEra, Enel SpA and Iberdrola SA are Wall Street darlings, after Spain’s Iberdrola and Italy’s Enel became global builders of green energy projects, while NextEra became America’s largest generator of wind and solar power.

Each of the companies has seen its share price soar in recent months as investors bet on their ability to lead the transition to a lower-carbon future with massive investments in renewable energy, battery storage and improvements to the electric grid.

That transition is expected to accelerate in the U.S. under President-elect Joe Biden, who has promised to focus on climate change, and within the European Union and China, where ambitious carbon-reduction efforts are under way.

Enel and Iberdrola have outlined plans to substantially expand their portfolios of renewable-energy projects over the next decade with about $170 billion in collective investments. NextEra, which hasn’t disclosed a long-term spending plan, expects to have invested $60 billion in renewable energy projects between 2019 and 2022.

Still, analysts caution that increased competition within the renewables industry could reduce profit margins for the most established players.

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Source: The New Green Energy Giants Challenging Exxon and BP, WSJ

Related Stocks:

  • Enel SpA (ENLAY)
  • NextEra Energy Inc (NEE)
  • Iberdrola SA (IBDRY)

The 5-year return of the above stocks are shown in the chart below:

Source: Yahoo Finance

Disclosure: Long NEE

Obesity Rates in Europe by Country: Chart

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Obesity is a big health issue in many countries around the world. In the developed world, the US takes the top rank for the most obese population. According to the latest obesity data published by the OECD, Mexico has the highest obesity rates or overweight population in the world followed by Chile and the US. In Europe, Romania is the least obese country followed by Italy and Switzerland. The country with the highest obesity rate is surprisingly Iceland. The UK ranks fourth in the ranking.

The following chart from OECD shows the obesity rates in Europe:

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Source: OECD

Some of the pharmaceutical firms in the cure for obesity include:

  • AstraZeneca PLC (AZN)
  • Novo Nordisk A/S (NVO)
  • Sanofi (SNY)
  • Fresenius Medical Care AG & Co (FMS)

Disclosure: No Positions

The World’s Top 25 Arms Producers in 2019

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The global arms industry is one of the world largest industries in the world. The industry comprises of weapons manufacturers and military service companies. Stockholm International Peace Research Institute (SIPRI) published their latest report on arms producers earlier this week. According to the study the US accounted for the largest arms sales in 2019. China overtook Russia to become the 2nd largest seller of arms. US arms giant Lockheed Martin (LMT) recorded the largest revenue growth at 11 percent or $5.1 billion in absolute figures.

Below is an excerpt from the report:

New data from SIPRI’s Arms Industry Database shows that arms sales by the world’s 25 largest arms-producing and military services companies (arms companies) totalled US$361 billion in 2019. This represents an 8.5 per cent increase in real terms over the arms sales of the top 25 arms companies in 2018.

US companies still dominate, Middle East represented in top 25 for the first time

In 2019 the top five arms companies were all based in the United States: Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics. These five together registered $166 billion in annual arms sales. In total, 12 US companies appear in the top 25 for 2019, accounting for 61 per cent of the combined arms sales of the top 25.

For the first time, a Middle Eastern firm appears in the top 25 ranking. EDGE, based in the United Arab Emirates (UAE), was created in 2019 from the merger of more than 25 smaller companies. It ranks at number 22 and accounted for 1.3 per cent of total arms sales of the top 25.

‘EDGE is a good illustration of how the combination of high national demand for military products and services with a desire to become less dependent on foreign suppliers is driving the growth of arms companies in the Middle East,’ said Pieter Wezeman, Senior Researcher with the SIPRI Arms and Military Expenditure Programme.

Another newcomer in the top 25 in 2019 was L3Harris Technologies (ranked 10th). It was created through the merger of two US companies that were both in the top 25 in 2018: Harris Corporation and L3 Technologies.

Chinese arms companies’ sales increase, Russian companies’ sales fall

The top 25 also includes four Chinese companies. Three are in the top 10: Aviation Industry Corporation of China (AVIC; ranked 6th), China Electronics Technology Group Corporation (CETC; ranked 8th) and China North Industries Group Corporation (NORINCO; ranked 9th). The combined revenue of the four Chinese companies in the top 25—which also include China South Industries Group Corporation (CSGC; ranked 24th)—grew by 4.8 per cent between 2018 and 2019.

Reflecting on the rise in the arms sales of Chinese companies, SIPRI Senior Researcher Nan Tian said: ‘Chinese arms companies are benefiting from military modernization programmes for the People’s Liberation Army.’

The revenues of the two Russian companies in the top 25—Almaz-Antey and United Shipbuilding—both decreased between 2018 and 2019, by a combined total of $634 million. A third Russian company, United Aircraft, lost $1.3 billion in sales and dropped out of the top 25 in 2019.

Alexandra Kuimova, Researcher at SIPRI, said: ‘Domestic competition and reduced government spending on fleet modernization were two of the main challenges for United Shipbuilding in 2019.’

Source:  Global arms industry: Sales by the top 25 companies up 8.5 per cent; Big players active in Global South. SIPRI

The following infographic shows the top 25 arms producers in 2019 identified in the SIPRI report:

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Source: RFE/RL Infographics

Some of the listed firms in the above graphic include:

  • Lockheed Martin Corporation (LMT)
  • Boeing Co (BA)
  • Northrop Grumman Corporation (NOC)
  • General Dynamics Corporation (GD)
  • L3Harris Technologies, Inc. (LHX)

In 2019, Raytheon and United Technologies merged to create Raytheon Technologies Corporation (RTX). Similarly Harris Technologies, Inc and L3 Technologies merged to become L3Harris Technologies Inc.

Related Lists:

Disclosure: No positions

The Complete List of French ADRs Subject to the Financial Transactional Tax

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France was one of the first few countries that introduced a transaction tax for buying and selling of stocks. When it was launched in 2012, the French Financial Transaction Tax was 0.20% on all equity purchases of French firms with market capitalization of over over 1.0 billion Euros. In 2017 this rate was increased to 0.30%. This additional tax on top of high dividend withholding taxes make investing in French stocks unattractive for US investors. However France is still home to some world-class firms and potential investment opportunities can still be found despite the high costs of investing there. Back in 2012 I posted the list of French ADRs affected by this tax.

The following is an updated list of French ADRs subject to the Financial Transaction Tax. Before investing in French stocks investors can review this list as part of the due diligence:

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Source: TD Ameritrade

Download List:

The Complete List of French ADRs can be found here.

Why Canadian Investors Should Diversify Globally

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The Canadian equity market is highly concentrated. Just four sectors – financials, materials, industrial and energy account for about 70% of the market. As with investors in any other country it is wise for Canadian investors to not hold all their assets in the domestic stocks and instead diversify across other sectors in foreign countries. The latest data for the benchmark S&P/TSX Composite Index is dominated by Financials at just over 30%.

Jillian Richmond of PH&N Investment Services discussed the need for Canadian investors to diversify in an article a few months ago. From the article:

By investing globally, you can benefit from exposure to other sectors that are under-represented at home, including Information Technology and Health Care. Exposure to Health Care may be particularly timely as a number of COVID-19 vaccines are being developed in labs outside Canada.

97% of the world’s investment opportunities lie outside of Canada

Canadian market is focused in four sectors, while global markets are very well diversified.

Sources: S&P and MSCI Indices as of July 31, 2020.

Source: How to avoid home country bias, PH&N Investment Services

In the Info Tech sector Canadians can find plenty of opportunities just south of the border relative to the home market.