P/E Ratios of Emerging Markets

Posted by on

The Price to Earnings(P/E) ratio is one measure to determine if a market or a stock is cheap of expensive. P/E ratios alone cannot be used as a deciding factor in investment selections. However it can be used in conjunction with other factors to identify potential investment opportunities and markets or stocks to avoid.

The following chart shows the P/E ratios of the constituents of the MSCI Emerging Markets Index as of January 31, 2013. A few other emerging markets are also included for comparison purposes:

Click to enlarge

Emerging-Market-PERatios

 

Source: Chart of the week: EM shares – the cheap and the expensive, FT beyondbrics blog

Chile is the most expensive market now while Russian stocks are cheap based on the P/E ratio. The Latin American markets of Colombia and Mexico are also richly priced now. It is interesting to see that Brazil is neither expensive nor cheap at current levels.

Related ETFs:

iShares MSCI Mexico Investable Market Index (EWW)
iShares MSCI Brazil Index (EWZ)
Market Vectors® Russia ETF (RSX)
iShares MSCI Chile Index Fund (ECH)

Disclosure: No Positions

Two Top Regional Banks To Consider

Posted by on

Investing in bank stocks is back in fashion as the industry recovers from the brutal effects of the global financial crisis of 2008-09. Slowly many of the banks are increasing dividends and are reporting higher lending. With hundreds of regional and community banks trading on the markets, selecting individual banks for investment is a complex process.

In this post let me discuss two regional banks which are good for long-term investment:

1. Cullen/Frost Bankers Inc (CFR)

Texas-based Cullen/Frost is a well-run conservative bank. Currently the bank has a market cap of about $3.8 billion and the dividend yield on the stock is 3.14%. The long-term and 5-year return of the stock is impressive.

5-Year return:

Click to enlarge
xx

2. Bank of the Ozarks (OZRK)

Bank of Ozarks is a southern regional banks with 111 offices, including 66 offices in Arkansas, 27 in Georgia, 10 in Texas, four in Florida, two in North Carolina, and one each in South Carolina and Alabama. Currently the company has market cap of $1.4 billion and the stock has a dividend yield of 1.57%.

5-Year return:

xxxx

Note: Dividend yields noted are as of Feb 15, 2013

Disclosure: No Positions

The Leading Countries in Merchandise Trade

Posted by on

The U.S. remains the world’s largest trader in Merchandise. In 2011, imports of exports totaled about $3.7 Trillion and the trade deficit stood at $785 billion according to trade data from World Trade Organization (WTO).China and Germany were the 2nd and 3rd in merchandise trade followed by Japan.

Unlike the U.S.,  both China and Germany ran trade surplus in 2011. This is because these countries are export-oriented and not consumption-oriented economies. The U.S. imports more goods from other countries especially China than it exports resulting in trade deficit year after year. At $219 billion, Germany’s trade surplus was 40% more than China’s as per the WTO global trade report.

The Leading Countries in Merchandise Trade  in 2011:

Click to enlarge

Leading-Merchandise-Trading-Countries-2011

Source: International Trade Statistics 2012, WTO

The Top Five Coal Producing States

Posted by on

Coal is a major key source of electricity production in the U.S. In 2011, about 42% of power produced came from coal. In that year, coal mines produced 1,094.3 million short tons of coal.

Where we get coal?

Coal is mined in 25 states in the country. The top state in coal production is Wyoming followed by West Virginia, Kentucky, Pennsylvania, and Texas.

The following map shows the major coal mining regions:

 

Coal_production_regions_map

 

Source: U.S. EIA

More than 1/3rd of coal comes from the Appalachian region with West Virginia mining the most if it. Wyoming is the largest producer in the Western region.Nine of the top ten producing coal mines in the country are in Wyoming.

Monopoly Madness in the U.S. Airline Industry

Posted by on

 “Competition is a sin.” – John D. Rockefeller, American industrialist and philanthropist

In January 2012, I posted an article on the monopoly madness in the U.S. railroad industry where a handful of Class I carriers dominate the industry today.

Last week two of the large U.S. airlines, American Airlines and US Airways announced to merge their operations to create the country’s largest airline. The merged airline would also be the world’s largest airline. With this merger, the airline industry also will be dominated by just four carriers – American/US Airways, United Continental Airlines(UAL), Delta Airlines (DAL) and SouthWest Airlines(LUV). These four carriers will hold more than 80% of the US market share. While this merger is great for investors in American and US Airways, it is disastrous for consumers as airfares and a myriad of other fees are bound to soar with reduced competition. In addition, the already pathetic customer service offered by US airlines with the exception of SouthWest will get even worse. As is customary, toothless regulators and crooked politicians will not raise a finger to this deal.

Click to enlarge

US-Airline-Monopoly-Madness

Source: Fewer Airlines, More Profits, The Wall Street Journal

As David Rockefeller correctly stated in the 19th century, competition is a word capitalists hate. Capitalism and competition do not go well together in most cases. It is not just the airline and railroad industries that are oligopolies  most of the other industries in the U.S. are also oligopolies as well. For example, the U.S. wireless market is dominated by just three carriers – AT&T(T), Verizon (VZ) and Sprint Nextel(S). The auto market is dominated by Ford(F), General Motors (GM), Chrysler and some foreign companies. WellsFargo (WFC), Bank of America(BAC), Citigroup (C) and JPMorgan Chase(JPM) share the majority of the U.S. banking industry. While hundreds of railroads used to operate in the 19th and early 20th centuries, today one railroad company (Amtrak) operates long-distance passenger train service in the country making it a monopoly. Similarly one can take any industry and see how a handful companies hold the market share by crushing the competition in any way possible.

Contrary to popular myths, competition is non-existent in most of the industries regardless of what politicians of both parties preach to the unsuspecting public. As a result of the state-supported monopolies and oligopolies in every major industry Americans are forced to use inferior products and services relative to most other developed countries on a daily basis. Cell phone service, internet speeds, quick and easy money transfer from one person to another person with an account in a different bank, underground laying of power lines, etc. are simple examples of services which are inferior compared to even some third-world countries.

Update:

From Europe’s Telcos Press Deals in WSJ, Feb 28, 2013:

In Europe, more than 100 operators owned by some 40 companies are slugging it out over a population of 505 million. The competitive environment strikes a sharp contrast with the U.S., where Verizon Wireless and AT&T Inc.T -0.77% control most of the industry’s valuable contract customers and profits.

Verizon Wireless declined to comment. An AT&T spokesman said the U.S. wireless market is competitive, leading to faster rollout of advanced networks, and that fragmentation like that in Europe would hurt investment.

The price wars in Europe have benefitted consumers. Europe today boasts the cheapest rates for mobile data, as a share of income, of any region of the world, according to a new estimate from the International Telecommunication Union.

In Italy, for instance, Hutchison Whampoa Ltd. 0013.HK -1.83% operator 3 Italia offers a plan for new customers with 400 minutes of talk time and two gigabytes of data for EUR10 per month, or just over $13. A similar plan from Sprint Nextel Corp. S +1.03%unit Virgin Mobile costs $35 a month, according to prices quoted on the companies’ websites.

In general, mobile service can be 50% to 75% less expensive in Europe than in the U.S. for comparable plans, according to Vincent Brunet, head of the consumer mobile business at France Télécom. “This is not a sustainable model,” Mr. Brunet said. “I don’t see how it can go on forever, because you will have operators who cannot invest in the network.”

Disclosure: No Positions

Update (4/30/16):

Click to enlarge

US Airline Industry

Source: US Funds