Knowledge is Power: Burqua ETF, US Dividends, Chaebol Edition

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Singapore

Singapore Skyline

The Top 10 Swedish Companies

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Sweden is home to some world-class companies. As a Scandinavian country outside of the Eurozone, investors can explore the Swedish market for potential investment opportunities.

The following are ten of the large Swedish firms that appear in the FT Global 500 list:

  1. Hennes & Mauritz
  2. Nordea Bank
  3. Ericsson
  4. Atlas Copco
  5. Investor
  6. Svenska Handelsbanken
  7. TeliaSonera
  8. Swedbank
  9. Volvo
  10. SEB

Source; FT Global 500

These companies can be used as a starting point for Swedish stocks.

Svenska Handelsbanken(SVNLY), Nordea Bank(NRBAY) and Swedbank (SWDBY) are excellent options in the banking sector. Handelsbanken is the world’s best performer in terms of long-term stock returns – even beating Buffet’s Berkshire Hathway. SEB is another bank worth looking into.

Disclosure; Long SWDBY

Investment Opportunities In The South African Equity Market

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South Africa is an interesting case among emerging markets. Though many investors may think of South Africa as just another another country that should be avoided at all costs, there are excellent opportunities available in the equity market.

South Africa has the most well developed economy in the continent and many domestic companies are global multinationals with big operations in countries outside of South Africa. Most of these South African large firms earn substantial revenues from their presence in other countries of Africa. For example, South Africa-based Standard Bank Group Limited (SGBLY) is major player in the regional market. In fact, South African equities have held up well relative to other emerging markets so far this year.

Here is an excerpt from a report from PSG Asset Management:

Equity markets have been very kind to investors over the past six years. In the graph below, we can see that, until two months ago, investors in the FTSE/JSE All Share Index (ALSI) had not experienced negative returns over a rolling twelve-month period since October 2009. There was a 10% drawdown during August and one-year returns briefly dropped into negative territory, but prices have subsequently recovered. It is worth pointing out that the strong performance of a handful of heavyweights (like Naspers and SABMiller) and rand weakness have supported the ALSI.

Click to enlarge

South Africa FTSE-JSE All Share Index Returns

Source: ANGLES & PERSPECTIVES THIRD QUARTER 2015, PSG Asset Management

The simple and easy way to gain exposure to South African stocks is via the iShares MSCI South Africa ETF (EZA). The fund has over $361.0 million in assets and the Distribution Yield is 1.79%.

Some of the South African ADRs investors can consider are: Standard Bank Group Limited (SGBLY), Nedbank Group Limited (NDBKY), MTN Group (MTNOY) and Santam(STAMY).

Disclosure: No Positions

Credit Suisse: Consider Buying Canadian Bank Stocks

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Canadian stocks are nor performing well this year. As the global commodities market crashed in the past year or so the Canadian economy has suffered. As natural resources such as crude oil account for a significant portion of the economy, declines in the price of oil has had a substantial effect on Canada.

The benchmark S&P/TSX Composite Index is down 10.5% year-to-date. But the top five Canadian banks have fallen even more with losses ranging from 18% to 29% based on price alone for the inter-listed stock trading on the NYSE. Though global investors are bearish on Canadian banks Credit Suisse analysts suggest in a newsletter that investors consider buying the banks instead of selling them short.

From the Selling Canadian Banks Short article:

Investors are worried about low oil prices and an overheated housing market. The energy sector accounts for 9 percent of Canadian GDP, and the price of West Texas Intermediate crude has fallen 41 percent over the past 12 months. Canadian unemployment also rose from 6.6 percent in July to 7.1 percent in September, which has put a damper on the housing market. Still, Credit Suisse says fears about Canadian banks are overdone. For one, a tailwind from abroad may help blunt the impact of the domestic energy headwind. The U.S., which buys 76 percent of Canada’s exports, is in a continuing economic recovery and consumer spending is rising. Canada’s mortgage underwriters also maintained relatively high credit standards as the country’s housing market heated up, and banks look well-positioned to weather a downturn in the credit cycle. A 25-year shift away from credit and toward wealth management and capital markets businesses has also resulted in a dramatic decline in credit losses as a percentage of operating income for the industry. That’s contributing to bank stocks’ outperformance during the downward leg of three of the last four credit cycles. Meanwhile, bank earnings have grown 6 percent year to date, while dividend payouts have increased 8 percent, with an average yield of 4.3 percent. With valuations near a 20-year low, Credit Suisse analysts think it’s time to consider buying the banks, rather than selling them short.

Source: Selling Canadian Banks Short, Credit Suisse, Nov 6, 2015

Financials constitute the largest sector by weightage in the TSX Composite Index. The sector accounts for about 38% of the index as shown below:

Click to enlarge

SP TSX Composite Index Breakdown

Source; S&P 

Energy & Materials together represent about 29% which is high as well but understandable.

Long-term investors can add Canadian bank stocks at current levels. With strong and consistent track records of dividend payouts and decent share price appreciation in the past, the banks have the capacity to weather the current storm. TD Bank for example has a large presence in the US and is able to benefit from the growing US economy.

The table below shows the year-to-date price changes and the current dividend yields of the top five banks:

S.No.Bank NameTickerPrice end of 2014Price as of Nov 13, 2015Year-to-date ChangeDividend Yield as of Nov 13, 2015
1Bank of MontrealBMO$70.73$55.74-27%4.47%
2Bank of Nova ScotiaBNS$57.08$44.30-29%4.81%
3Canadian Imperial Bank of CommerceCM$85.95$73.07-18%4.61%
4Royal Bank of CanadaRY$69.07$55.50-24%4.35%
5Toronto-Dominion BankTD$47.78$40.05-19%3.87%

Data Source: Yahoo Finance and others

Note: Dividend yields noted above are as of Nov 13, 2015. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

The banks shown above have declined by double digit percentages year-to-date since the prices are in US dollars and the Canadian dollar has plunged sharply in the recent past against the US dollar. From having a parity with the US dollar in 2011, the loonie now gets only 0.75 USD.

Since Canada does not charge dividend withholding taxes for stocks held in qualified retirement accounts by US investors, Canadian bank stocks are excellent choices for retirement account types like IRA, 401-K , etc.

Disclosure: Long all five banks