A Note on Continental AG Stock Split

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continental_logoGermany-based Continental AG (CTTAY) is one of the world’s largest tire and auto-parts makers. Due to the strong growth of the global auto industry the ADR is up over 80% year-to-date and closed at $210.93 today.

Continental announced a stock split in the ratio 5:1 recently. The ADR Record Date is Dec 20, 2013 and the ADR Payable Date is is Dec 23, 2013. Currently 1 ADR represent 1 ordinary share. As a result of this stock split, the ratio will change to 5 ADRs representing 1 ordinary share. ADR holders will receive 4 additional shares for each ADR held.

From a recent Bloomberg article:

Continental, based in Hannover, Germany, has a price-earnings ratio of 12, even after it rallied 72 percent this year, more than five times the Stoxx 600. Europe’s second-largest auto-parts maker has beaten analyst earnings estimates the last four quarters and raised its profit forecast for 2013 on growth in China and North America.

Tricky Market

The manufacturer has sidestepped the effects of the region’s car-market contraction by adding sales to customers including Volkswagen AG and Bayerische Motoren Werke AG in growing markets such as China and the U.S. Continental gets 27 percent of its revenue from Europe outside Germany, 16 percent from North America and 14 percent from Asia, data compiled by Bloomberg show.

“They have a good balance of exposure, so in essence you’re not betting on any one company or area,”James Moffett, who oversees $10 billion in international assets at Scout Investments in Kansas City, Missouri, said in a Dec. 4 phone interview. “It’s both the earnings and the market pricing, which helps with the question of how do you try to play with what can be a tricky market next year.”

Source: Bargains Beckon Funds to Europe With S&P 500 Past Prime, Bloomberg

Some facts from the company’s website:

Today, Continental ranks among the top 5 automotive suppliers worldwide.

As a supplier of brake systems, systems and components for powertrains and chassis, instrumentation, infotainment solutions, vehicle electronics, tires and technical elastomers, Continental contributes to enhanced driving safety and global climate protection. Continental is also a competent partner in networked automobile communication.

With around 170,000 employees (Status: December 31, 2012) in 46 countries, the Continental Corporation is divided into the Automotive Group and the Rubber Group, and consists of five divisions:

  • Chassis & Safety embraces the company’s core competence in networked driving safety, brakes, driver assistance, passive safety and chassis components.
  • Powertrain represents innovative and efficient system solutions for vehicle powertrains.
  • Interior combines all activities relating to the presentation and management of information in the vehicle.
  • Tires offers the right tires for every application – from passenger cars through trucks, buses and construction site vehicles to special vehicles, bicycles and motorcycles. Continental tires stand for excellent transmission of forces, exceptionally reliable tracking in all weather conditions and high cost effectiveness.
  • ContiTech develops and produces functional parts, components, and systems for the automotive industry and for other key industries.

More information can be found on their Investor Relations site.

In 5 years CTTAY is up about 264%.

Disclosure: No Positions

On the Correlation Between S&P 500 and CRB Commodity Index

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When the S&P 500 index rises commodities usually follow. Commodities, as represented by the CRB Commodity Index and the S&P 500 run generally higher based on economic growth expectations.

From the lows of 2009, S&P’s strong rebound coincided with a run up of commodities. However after 2012 the S&p 500 and CRB commodity Index started to diverge in their performance. While the S&P 500 has continued to rise higher commodities have declined for almost two years in a row.

However CIBC is optimistic on commodities and the mining sector in particular moving forward.

 

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SP500-vs-CRB Commodity Index

Source: A Look to the Future – 2014 Edition, CIBC  World Markets

From CIBC’s “A Look to the Future – 2014 Edition” report:

The big divergence in the late 90’s saw the bursting of the Tech Bubble but the current run in the S&P could be pointing to commodities being priced too low. Alternatively, commodities, and hence mining shares may well offer a very good investment hedge against a possible pullback in the S&P. This view is further backed by very clear evidence across the mining space of sharp reductions in capital expenditure and aggressive reductions in future output growth.

Related ETFs:

  • SPDR S&P 500 (SPY)
  •  Jefferies CRB Global Commodity ETF (CRBQ)

Disclosure: No Positions

Knowledge is Power: Fed Failure, Keynes, Megaprojects Edition

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What Keynes can teach us about investing  (MarketWatch)

European equities safer than UK and US, says Mitchell (FE Trustnet)

The story behind sluggish growth (The Guardian)

Lloyds leads the way in global bank revival (CityWire)

The trouble with government ‘megaprojects’ (MoneyWeek)

Housing bubbles worldwide will test a big lesson from the financial crisis (Macleans)

Century of Fed failure (Asia Times)

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EWZ-EWW-vs-ECH

Chart showing 5-year performance of iShares MSCI Brazil Index (EWZ) against iShares MSCI Chile Capped (ECH)  and iShares MSCI Mexico Capped (EWW) ETFs.

Source: Google Finance

Disclosure: No Positions

Performance Comparison: Brazil vs. Malaysia ETF

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The economies of Brazil and Malaysia can be considered similar in some ways. For example, both are emerging countries and commodity-dependent. Brazil is a major exporter of commodities such as iron ore, lumber, etc. Malaysia on the other hand dependent on palm oil and rubber exports. Both countries have offshore oil reserves and a large manufacturing sector. Malaysia has a strong contract electronic manufacturing industry.

In terms of equity market performance, Malaysia has performed better in the past 5 years than Brazil. This could be due to investors’ declining attraction towards Brazilian equities, political issues and other factors. Unlike Brazil, Malaysian political system is stable despite the same party continuing to stay in power for many decades.

Comparison of returns of Brazil ETF vs Malaysia ETF – 5 Years:

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EWM-vs-EWZ-5-Yrs

 

Comparison of returns of Brazil ETF vs Malaysia ETF –  Long Term:

 

EWM-vs-EWZ-Long-Term

 

Source: Yahoo Finance

Related ETFs:

  • iShares MSCI Brazil Capped (EWZ)
  • iShares MSCI Malaysia (EWM)

Disclosure: No Positions

Skanska ADR Conversion To Sponsored ADR

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Sweden-based Skanska AB, the world’s leading project development and construction group,  converted its American Depositary Receipt (ADR) from an unsponsored program to Sponsored program on June 28,2013.  Previously the ADR used to trade under the ticker SKSBY. The new sponsored ADR ticker is SKBSY. The ratio of ADR to ordinary remains the same at 1:1.

Founded in 1887, Skanska operates in Europe, Americas and the Nordic region. Last year it had 57,000 employees.  The company focuses on construction of residential housing, commercial buildings, roads, and railways, as well as develops and carries out civil engineering projects or public private partnership (PPP) projects. The four major business units are: Construction, Residential Project Development, Commercial Project Development, and Infrastructure Development. The company’s single largest market is the U.S. followed by Sweden.

For more information, checkout Skanska’s Investor Relations site.

Disclosure: No Positions