The Top 10 Foreign Stocks Trading On The OTC Markets

Posted by on

Many foreign companies trade on the OTC markets in the U.S. instead of the organized exchanges like NYSE or NASDAQ. Some of these firms fled the organized exchanges to the OTC market in the recent past to avoid higher reporting requirements due to the Sarbane-Oxley Act, higher listing fees, low trading volumes and other reasons. So US investors looking to gain exposure to foreign markets have to explore opportunities available via the OTC markets and not simply restrict themselves to the stock listed on the exchanges.

A common misconception among investors is that companies trading on the OTC markets are penny-stocks and are  prone to all types of fraud. However that is not true since many world-class foreign firms trade on the OTC markets.

The table below lists the Top 10 OTC-traded Foreign Stocks by Market Capitalization:

S.No.CompanyTickerMarket Capitalization (as of Nov 1, 2013)IndustryDividend Yield (as of Nov 1, 2013)Beta
1 Roche Holding Ltd.RHHBY $191.3B Pharmaceuticals 2.79% +0.8
2 Bayer AGBAYRY $102.1B Pharmaceuticals 2.01% +1.2
3 LVMH Moet Hennessy Louis Vuitton SALVMUY $95.6B Textiles, Apparel & Luxury Goods 1.98% +1.4
4 BASF SEBASFY $95.1B Chemicals 3.29% +1.7
5 Australia and New Zealand BankingANZBY $86.7B Commercial Banks 4.68% +1.6
6 National Australia Bank Ltd.NABZY $79.4B Commercial Banks 5.25% +1.7
7 Allianz SEAZSEY $76.0B Insurance 3.53% +2.0
8 Volkswagen AGVLKAY $72.2B Automobiles 1.86% +1.4
9 Deutsche Telekom AGDTEGY $70.3B Diversified Telecommunication Services 5.86% +0.9
10 BG Group plcBRGYY $68.9B Oil, Gas & Consumable Fuels 1.93% +0.9

 

A few observations:

  • Swiss-pharma giant tops the list with a market cap of over $191.0 billion.
  • Five of the ten companies are from Germany. Bayer (BAYRY). BASF (BASFY), Allianz (AZESY), Volkswagen (VLKAY), Deutsche Telekom (DTEGY) are also components o f the benchmark DAX index.
  • Australian banks Australia and New Zealand Banking (ANZBY) and National Australia Bank Ltd (NABZY) have dividend yields are over 4% and 5% respectively and are excellent choices for long-term investment.

Disclosure: No Positions

On The Impact of Currency Gyrations On Emerging Market Equities

Posted by on

One of the factors that investors consider when investing in emerging market equities is the stability of local currency against the US dollar. Generally currency depreciation is assumed to have an adverse impact on equities in an emerging country. However that assumption is not always correct and does not apply to all emerging markets. According to a research report published by AXA Investment Managers, the impact of currency depreciation varies based on the “openness” of the market in question and the sector composition of equity indices. In other words, some emerging markets are more domestic than others meaning that companies generate more of their revenues domestically than from foreign countries. Hence such companies are unable to leverage the fall in exchange rate to increase their market share by selling goods cheaper to their overseas customers. So companies that are more dependent on foreign revenues are sensitive to currency gyrations than the ones that are mostly domestic-oriented.

The share of revenues generated domestically is higher for the companies in the MSCI indices of China, India and Brazil than their peers. Public companies in Taiwan and South Korea for example, generate a larger share of their revenues overseas. Hence their earnings are affected by volatility of currency movements.

Incidentally when many emerging market currencies including the Indian Rupee plunged earlier this year on fears of the Fed winding down its monthly $85 billion asset purchases, the Indian equity market barely fell.

Click to enlarge

Emerging-Markets-MSCI

 

Source: FX depreciations are not necessarily good news for EM earnings, AXA Investment Managers

From the report:

In the case of Brazil and India, the large share of domestic revenues is to some extent explained by the substantial weight of financials in their respective equity indices (28% and 31% of MSCI Brazil and MSCI India’s total market capitalisation, respectively). EM financials are usually strongly domestic – 98% of the revenues of MSCI Brazil financials are domestic, while the figure is 96% for MSCI India financials. Moreover, financials are relatively immune to FX movements. Similarly, companies in the energy sector in Brazil (representing 17% of the MSCI Brazil’s market capitalisation) earn 88% of their revenues in Brazil. Given that a large part of their production is also local, they are naturally hedged against exchange rate fluctuations.

Hence from an investment standpoint, Brazilian and Indian financials will mirror the performance of the domestic economy and may not be highly impacted by outside factors such as currency rate fluctuations, the policies of the US Federal Reserve, the state of developed world economies, war in Syria, etc. Brazilian and Indian banks trading on the US exchanges are listed below with their current dividend yields for further research:

1.Company: Itau Unibanco Holding SA (ITUB)
Current Dividend Yield:  2.96%
Sector: Banking
Country: Brazil

2.Company: Banco Bradesco SA (BBD)
Current Dividend Yield: 0.90%
Sector: Banking
Country: Brazil

3.Company: Banco do Brasil S.A. (BDORY)
Current Dividend Yield: 8.72%
Sector: Banking
Country: Brazil

4.Company: Banco Santander (Brasil) S.A. (BSBR)
Current Dividend Yield: 3.62%
Sector: Banking
Country: Brazil

5.Company: ICICI Bank Ltd. (IBN)
Current Dividend Yield: 1.80%
Sector: Banking
Country: India

6.Company: HDFC Bank Ltd. (HDB)
Current Dividend Yield: 0.73%
Sector: Banking
Country: India

Note: Dividend yields noted are as of Nov 1, 2013. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: Long ITUB and BBD

The Top Potash Producing Countries

Posted by on

Potash is one of the type of fertilizers used to grow various types of crops, fruits and vegetables. According to an article in IMF’s Finance & Development magazine the demand for this natural resource may increase with rising population and less arable land. From the article:

Potash is the common name for naturally occurring water-soluble potassium salts, the most common of which is potassium chloride.

Potash is used in many countries as a fertilizer to grow rice, wheat, sugar, corn, soybeans, and various fruits and vegetables. In India, for example, 70 percent of soils have low to medium potassium content, and potash must be added so crops will produce enough food to feed the growing population.

With the world’s population expected to reach 9.5 billion by 2050, arable land per person will decrease, and more crops will need to be grown on less land—and, at the same time, feed more people.

The Top Producers of Potash are shown in the chart below:

Click to enlarge

Top-Potash-Producers

Source: Finance & Development, September 2013,IMF

One way to profit from the increase in demand for Potash is to invest in Potash producers. Potash stocks are especially attractive now for long-term investment after the industry was shaken dramatically earlier this year due to OAO Uralkali, the Russian producer broke up the cartel-type arrangement with Belorussian company Belaruskali that kept prices stable and planned to increase production to the maximum which will lead to price declines.  As a result of the Uralkali announcement potash stocks plunged.

Some of the Potash stocks that investors may want to consider are Agrium Inc. (AGU), Potash Corp. of Saskatchewan(POT), Intrepid Potash, Inc. (IPI) , The Mosaic Company (MOS) and Chemical & Mining Co. of Chile Inc. (SQM).

Disclosure: No Positions

Doral Financial Corporation’s Second Reverse Stock Split

Posted by on

Puerto Rico-based Doral Financial (DRL) used to be a hi-flyer primarily due to sub-prime mortgage lending before the financial crisis. As the stock continued to plunge and headed towards $0.00 the bank implemented a reverse split on August 20, 2007 in the ratio of 1:20 when the stock reached a low of $0.54 a share.

The 2007 reverse split did not help stabilize the stock and it continued its downward decent soon after. In February of this year Doral reached a low of $0.53 a share again. The management instituted a second reverse split in the same ratio of 1:20 in July bringing back the share price above $17.00. Today Doral closed at $17.26. It will be interesting to see how long it takes Doral to go below $1.00 per share again.

The following ten-year returns chart shows the disaster that is Doral Financial Corporation:

Click to enlarge

\Doral

Source: Google Finance

Disclosure: No Positions

Safran SA Stock Split

Posted by on

Safran SA(SAFRY), the French aerospace, defense and security firm has announced a stock split in the rate of 300%. The ADR Record Date is Nov 6, 2013 and the Payable Date is Nov 7, 2013.

Currently the ADR to Ordinary ratio is 1: 1. As a result of the split, the ratio will change as 1 Ordinary to 4 ADRs.  Hence ADR shareholders will receive 3 additional shares for each ADR held as of Nov 6, 2013 per a release by Citibank, the depository for this ADR program.

Here are some key facts from Safran’s Website:

SAFRAN AT A GLANCE (2012)
62,500 employees worldwide
€13,560 billion in sales
€1.6 billion in R&D expenditures

MARKET POSITIONS
No. 1 worldwide in engines for mainline commercial jets (partnership with GE)
No. 1 worldwide in landing gear, wheels and carbon brakes
No. 1 worldwide in helicopter flight controls
No. 1 worldwide in multi-biometric technology

Eric Forterre / Safran

The stock has more than doubled in the past 5 years as shown in the chart below:

Click to enlarge

Safran-5-years

Source: Yahoo Finance

Currently SAFRY has a 1.96% dividend yield.

Disclosure: No Positions