A Note on US Oil Consumption

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The U.S. is the world’d largest consumer of petroleum products primarily oil. Though the total population is about 330 million, every day millions of barrels of oil are used due to the high dependence on automobile for transportation. In fact, the country  consumed 18.8 million barrels per day (MMbd) of petroleum products during 2011 according to the U.S. EIA.

Here is a graph showing the US consumption of petroleum products from 1980 thru 2011:

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US_petcop_img

Source: US EIA

Oil consumption has declined since the peak of the global financial crisis as the economy slid into the great recession. Currently the US consumes about about 19 million barrels per day but produces only about 1/4th of that amount. Hence the rest of the oil is imported from other countries making the country highly dependent on foreign oil.

Related stocks:

The Complete List of Integrated Oil Companies Stocks Trading on the NYSE can be found here.

Five European Chemical Stocks To Consider

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The EURO STOXX® Chemicals Index is composed of some of the largest chemical firms in Europe. Currently there are 16 components in this index.

The long-term return of the index is shown below:

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Euro-Stoxx-Chemical-Index

Source: Euro Stoxx Indices

For investors looking to gain exposure to the European chemical industry the companies in the index offer excellent choices.In five years the index is up about 39% in US $ terms.

Five components from the EURO STOXX® Chemicals Index is listed below with their ticker and current dividend yield for further research:

1.Company:Air Liquide (AIQUY)
Current Dividend Yield: 2.35%
Country: France

2.Company: Akzo Nobel NV (AKZOY)
Current Dividend Yield:
Country: The Netherlands

3.Company: Arkema SA(ARKAY)
Current Dividend Yield:
Country: France

4.Company: BASFY AG (BASFY)
Current Dividend Yield:
Country: Germany

5.Company: bayer AG (BAYRY)
Current Dividend Yield:
Country: Germany

Note: Dividend yields noted are as of Feb 11, 2013

Disclosure: No Positions

Proof That Chasing Performance Does Not Work

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One of the reasons most retail investors perform so poorly in stock investing is that they tend to chase performance. Investors always go with the hottest theme or stock that driving the markets at any given time. During the late 1990s it was tech stocks, energy and security stocks after the 9/11 attacks, banking and other financial stocks leading up to the global credit crisis,  etc. When more investors chase the same stock or fund or a theme prices go up to unsustainable levels and at some time the mania ends and the bubble bursts.

Investing in markets is about buying low and selling high. Many investors end up doing the opposite by chasing performance. The disastrous effect of chasing performance is shown in the chart below:

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Chasing-Performance-Bad-Idea

Source: Desparately Seeking Safety, Seth J Masters, Alliance Bernstein

The average stock investor earned less than half of the annualized total returns generated by the S&P 500 from 1992 thru 2011. The average bond investor performed even worse earning less than 1% compared to the U.S. bonds return of 6.5%.

The main reason for the poor performance of the average investor is that they sold stocks and bonds that performed poorly to buy stocks and bonds that performed well. This led them to sell low and buy high.

So the key takeaway from this post is that investors should always stay clear of the hottest trend in the market and instead focus on buying low and selling high.

Related ETFs:

SPDR S&P 500 ETF (SPY)
SPDR Gold Trust ETF (GLD)
iShares Silver Trust ETF (SLV)
United States Natural Gas Fund (UNG)
United States Oil Fund (USO)

Disclosure: No Positions

The Top 10 African Banks by Profit

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The January edition of The Banker magazine has published the list top ranked banks in Africa under many categories. The Top 10 African banks by Profit in the full year of 2011 are shown in the table below:

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Top-10-African-Banks-by-Profit

Source: The Banker

South African banks dominate the list taking 6 of the 10 spots. Standard Bank Group (SGBLY) made the most profits. It is worth noting that the five biggest banks in the continent are also from South Africa. However banks from other countries are trying to catch up. Egyptian banks with the second biggest banking market in Africa hold only less than 1/3rd of the total assets held by South African banks.

Three of the above five South African trading on the US OTC markets are listed below with their current dividend yields:

1.Company: Absa Group Limited (AGRPY)
Current Dividend Yield: 4.74%

2.Company: Nedbank Group Ltd. (NDBKY)
Current Dividend Yield: 3.87%

3.Company: Standard Bank Group Limited (SGBLY)
Current Dividend Yield: 9.19%

Note: Dividend yields noted are as of Feb 8, 2013

Disclosure: Long NDBKY

Why Invest in Mid-Cap Stocks via ETFs

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Thousands of mid-cap companies trade on the US markets. These companies generally tend to have small market caps of $1 billion to $5 billion. Though the actual definition of mid-cap companies varies,  they can be considered as firms that are neither huge such as the giants with multi-billion market caps or very small with a few million dollar market caps or start-up companies. Investing in these middle of the range companies is extremely tricky and investors are better off investing in them via ETFs.

Some of the reasons to invest in mid-cap stocks using ETFs are listed below:

  • Mid-cap stocks are extremely volatile and investing in ETFs reduces the volatility risk.
  • It is very difficult to follow and keep track of all the news and earnings releases from these firms.
  • Individual mid-cap stocks are very risky to invest since picking the winners from so many choices is not easy.
  • Some of these companies have low trading volumes which makes them volatile and difficult to trade.
  • Many of these mid-caps do not pay dividends or have very low dividend yields making them unattractive for dividend reinvestment for higher returns.
  • As the dividend yields are tiny or zero, they are not income producing investments. Hence they are not preferred by income investors.
  • Diversification benefits offered by an ETF are simply impossible to replicate for retail investors.
  • Investing in mid-caps through mutual funds is an expensive proposition as mutual fund companies charge higher fees for these funds.

Some of the ETFs to invest in the mid-cap space include:

  1. S&P MidCap 400 SPDR ETF (MDY)
  2. iShares Russell Midcap Index Fund (IWR)
  3. iShares S&P MidCap 400 Index Fund (IJH)
  4. iShares Russell Midcap Growth Index Fund (IWP)
  5. Powershares Dynamic Mid Cap Growth Portfolio Fund (PWJ)
  6. Powershares Dynamic Mid Cap Portfolio Fund (PJG)
  7. Schwab U.S. Mid-Cap ETF (SCHM)
  8. SPDR Dow Jones Wilshire Mid Cap ETF (EMM)
  9. SPDR S&P 400 Mid Cap Growth ETF (MDYG)
  10. Vanguard Mid-Cap ETF (VO)
  11. Vanguard Mid-Cap Growth ETF (VOT)
  12. Vanguard S&P Mid-Cap 400 ETF (IVOO)
  13. Vanguard S&P Mid-Cap 400 Growth ETF (IVOG)

Disclosure: No Positions