Tobacco Giant Imperial Brands’ Upcoming Stock Split

Posted by David Hunkar on 23 June 2016, 3:25 am

Bristol,UK-based tobacco company Imperial Brands PLC(IMBBY) used to be called Imperial Tobacco Group PLC until recently. The company was founded in 1901 and is one of the largest tobacco makers in the UK and the world.

The stock trades on the OTC market in the US and like its peers Imperial Brands has had a great run since 2009. The ADR closed at $106.88 yesterday.

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Source: BNY Mellon

Imperial has announced a 2 for 1 stock split for holders as of July 7, 2016. Details of the split announcement are below:

Imperial Brands PLC has informed Citibank that it will change the ratio it will change its ADR to share from one (1) ADR representing two (2) ordinary share to one (1) ADR representing one (1) ordinary share. effective July 22, 2016. As a result of this ratio change, ADR holders will receive 1 additional ADR for every ADR held as of July 14, 2016..

The cusip will remain the same. No action on the part of Holders or Beneficial Owners is required.

Ratio Change Information:

Old Ratio: 2 Ordinary Shares : 1 ADS

New Ratio: 1 Ordinary Share : 1 ADR

The Effective Date for this ratio change is July 22, 2016

Source: Citi Depository Services

As of yesterday the stock has a dividend yield of 1.26%. Investors with a long-term horizon can consider adding Imperial at current or lower prices.

Competitor British American Tobacco PLC (BTI) trades at around $125 and has a 3.63% dividend yield.

Disclosure: No Positions

Revenue Growth and Timeline of Amazon

Posted by David Hunkar on 22 June 2016, 3:11 am

Amazon(AMZN) is one of the survivors of the dot-com era and has recovered strongly in the past few years as one of the major online retailers. The stock price has appreciated substantially over differ periods:

5-year return: 267%
10-year return: 2526%
Since IPO return: 46993%

Note: Returns shown above are as of June 17, 2016

AMZN closed at $706 a share on Friday. At this price, the stock is incredibly expensive with a P/E ratio of 296. Despite this, analysts and investors have high expectations for further growth on many lines of its business units including the Amazon Web Services. Hence investors are bidding up the share price.

The chart below shows the 10-year return:

Source: Yahoo Finance

Amazon has come a long way since its inception and its IPO in 1997. The following cool graphic from the Journal shows how diversified the online retailer is today:

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Source: How Amazon Has Diversified, WSJ, June 1, 2016

Also see:

Will Amazon Kill FedEx?, Bloomberg BusinessWeek, Aug, 2016

Disclosure: No Positions

China’s Stock Market Landscape: Infographic

Posted by David Hunkar on 21 June 2016, 3:11 am

The Chinese equity market is the second largest in the world in terms of market capitalization. Despite the size and breadth of the market, the index provider MSCI recently decided to not add China’s domestic stocks (“A” stocks) to the MSCI Emerging Markets Index. From a recent journal article:

“International institutional investors clearly indicated that they would like to see further improvements in the accessibility of the China A shares market before its inclusion in the MSCI Emerging Markets Index,” said Remy Briand, global head of research at MSCI.

MSCI’s decision is a blow to Chinese authorities who have been eager to attract more foreign capital to their stock market. To win over MSCI, Chinese regulators recently stepped up their reform efforts, such as creating new rules that limit how long companies could suspend trading in their shares, and allowing foreign money management funds to take bigger stakes in the market.

The index provider welcomed those moves but said investors “stressed the need for a period of observation to assess the effectiveness” of these changes. Some investors raised concern that Beijing could impose new controls during the next market selloff.

MSCI said its decision to hold off also reflected continuing issues for foreign investors, such as provisions that prevented them from taking out more than 20% of their investment each month.

Source: MSCI Delays Adding China’s Local Currency shares to Emerging-Market Index, WSJ, June 14, 2016

Chinese stocks listed on the domestic market are known as A stocks. These are not accessible to international investors unlike the ones traded on Hong Kong and US markets. A stocks are denominated in yuan and only local investors are allowed to invest in them. Since the Chinese equity market is vast, investors can feel overwhelmed on where to start. The following infographic gives an overview of China’s equity market:

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Source: INFOGRAPHIC: Scoping China’s Equity Landscape, Context, TheAB Blog on Investing

US investors can access many Chinese companies easily as their stocks trade on the US market. Currently about 112 firms are listed on the organized exchanges and 199 trade on the OTC markets.

Investors Still Have Unrealistic Income Expectations And Shorter Holding Periods: Infographic

Posted by David Hunkar on 20 June 2016, 3:11 am

Many investors expect high income from their investments but hold their investments for shorter periods according to a study by Schroders. For example, investors want to generate an income of 9.1% while the average equity market yield is just 3.1%. Similarly in terms of holding periods, the average holding period is just 3.2 years much less than the period recommended by asset managers.

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Source: GLOBAL INVESTOR STUDY: Investment outcomes – Infographic, Schroders

Generally though investors want high returns (both income and capital gains) from equities, their patience for holding them for many years is too low. For example, in the US the average turnover of stocks was an astonishing 307% last year and an investor held stocks for just 17 weeks.