Knowledge is Power: Going Global, Diversification, Preferred Stocks Edition

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Old Articles for Reference:

View From Cable Car, Wales

View From Cable Car, Wales

The Ten Most Liquid ADRs Mid-Year, 2016

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Citi recently published the Citi Depositary Receipt Services 2016 Midyear Report. The report has many interesting facts on depository programs. For instance, the number of unsponsored ADRs trading on the US market increased to over 1,640 due to strong investor demand.

The Ten Most Liquid ADRs as of Mid-Year 2016 based on Trading Volume are:

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Top 10 DR Programs-By Trading Volume

Note: LSE denotes the London Stock Exchange. So the two stocks noted are not American Depository Receipts.

The Ten Most Liquid ADRs as of Mid-Year 2016 based on Trading Value are:

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Top 10 DR Programs-By Trading Value

Note: Data as of June 30, 2016

Source:  Citi Depositary Receipt Services 2016 Midyear Report, Citi

Brazilian stocks top the ranking based on trading volume since global investors are returning to Brazil this year and also most the Brazilian ADRs’ prices have plummeted to $10 or less. So trading volume goes higher when prices are low. Once top-ranked firms such as Value(VALE), Petróleo Brasileiro S.A (PBR), etc. are trading for less than $10 a share.

Among the top 10 ADRs by trading value, just three are from the developed markets. Alibaba Group Holding Limited (BABA) of China tops this list. Currently the Amazon(AMZN) of China has a market cap of over $242 billion.

Disclosure: Long PBR

Chart: Gold Prices Since 1920

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Gold prices closed at $1,357.70 on Friday, August 5th. After the Global Financial Crisis of 2008-09 prices peaked at about $1,800 an ounce and there were forecasts for prices to cross $2,000. But gold has declined substantially since that peak to close under $1,400 now.

As a commodity similar to oil, the price of gold is highly unpredictable and is subject to a gazillion factors. The very long-term price of gold shows how the price reacts to critical political and economic events. The chart below shows the price of gold since 1920:

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Gold Price Since 1920

Source: Unknown

Related ETF:

  • SPDR Gold Shares  ETF (GLD)

Disclosure: No positions

Six Investment Opportunities South of the Border

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US equity investors looking for growth stocks can consider opportunities south of the border, Though Mexico is usually avoided by the investment community due to political risk, violence, etc. there are many factors that favor investment in the country’s equity markets. For example, unlike other Latin American economies such as Brazil or Chile, Mexico’s economy is not dependent on commodities and is highly related to the US economy.So when the US economy grows Mexican economy also expands. Due to a strong manufacturing sector and a growing middle class Mexico is on par with other fast growing economies.

The benchmark IPC All-Share Index is ahead of the S&P 500 with a gain of over 9% year-to-date.

Listed below are six Mexican stocks trading on the US markets:

1.Company: Coca-Cola Femsa SAB de CV (KOF)
Current Dividend Yield: 3.86%
Sector: Beverages

2.Company: Grupo Aeroportuario del Centro Norte SAB de CV (OMAB)
Current Dividend Yield: 10.30%
Sector: Airport Operator

3.Company: Grupo Aeroportuario del Pacifico SAB de CV  (PAC)
Current Dividend Yield: 2.82%
Sector: Airport Operator

4.Company: Grupo Aeroportuario del Sureste SAB de CV  (ASR)
Current Dividend Yield: 1.94%
Sector: Airport Operator

5.Company: Fomento Economico Mexicano SAB de CV (FMX)
Current Dividend Yield: 1.52%
Sector: Beverages

6.Company: Kimberly-Clark de Mexico SAB de CV (KCDMY)
Current Dividend Yield: 3.78%
Sector: Household Goods

The three airport operators have excellent growth potential due to the high tourist traffic flowing to Mexico’s beach destinations. Unlike airlines airport operators have high profit margins and have a variety of revenues sources such as car parking lots, shops, restaurants, advertisements, etc.

Note: Dividend yields noted above are as of Aug 4, 2016. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: No positions

Click to enlarge

Cancun-Beach in Mexico

A beach in Cancun, Mexico

Deutsche Bank and Credit Suisse Kicked Out of BlueChip Stoxx Europe 50 Index

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Deutsche Bank(DB) and Credit Suisse(CS) are getting kicked out of the prestigious Stoxx Europe 50 Index. The changes will come into effect at the market open on August 8, 2016 according to the index provider STOXX. These two components will be replaced by French construction ginat Vinci (VCISY) and chipmaker ASML Holding(ASML) of The Netherlands.

The five-year price return (in Euros) of the Stoxx Europe 60 Index is shown below:

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Stoxx Europe 50 Index 5 Years

Source: STOXX

The change is the index components has a big impact on all the products such as ETFs that track this index.

DB and CS have lost nearly half of their value this year based on stock prices. For Deutsche Bank this is the first time since 1998 that it is not part of the bluechip index.

The stocks of most of the major European banks have declined heavily so far this year. So from an investment perspective, investors can avoid British banks and others including DB,.

Disclosure: No Positions