Why European Stocks Look Attractive at Current Levels

Posted by David Hunkar on 29 September 2012, 4:16 pm

Many major European indices have lagged the performance of the S&P 500 this year. Due to the ongoing fiscal crisis in Spain, Greece, Italy and other countries investors are apprehensive of investing in European stocks. Similar to U.S. companies, European companies are also in strong financial health as earnings reached record-high levels though they have slightly moderated in the recent quarters. This is not surprising since though many of these firms are based in Europe they have a strong presence in other countries especially in emerging countries. Hence their earnings are highly dependent on overseas markets than their domestic markets.

In addition to strong balance sheets, European companies are also attractive now based on P/E ratios according to an article in Citywire. European stocks are trading well below their historical P/E ratios as shown in the chart below. Based on the 12 month forward P/E ratio also Europe is the cheapest compared to the major developed markets. Once the macroeconomic concerns die down there is significant room for growth in multiples.

Despite fear-mongering by the media, the Euro is unlikely to collapse and European companies will continue to remain strong. Mark Mobius, head of emerging markets at Templeton Investments was quoted in an article this week regarding this subject. From the article:

Mobius, who manages the £1.9bn Templeton Emerging Markets fund and has in recent years launched frontier markets and Africa funds – investing in the riskiest economies in the world – says that investors are shooting themselves in the foot with their risk-averse nature.

“The popular press is biased towards Europe and towards the world economy but the numbers don’t warrant that,” he explained.

“We are facing a long process of reform in Europe, but it will take place and Europe will emerge much stronger than it is now.”

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Source: 10 reasons to consider investing in Europe: a special report, Citywire, UK

Ten European companies with exposure to countries outside of the continent are listed below together with their current dividend yields:

1. Company: Nestle SA (NSRGY)
Current Dividend Yield: 3.34%
Sector: Beverages (Nonalcoholic)
Country: Switzerland

2. Company: Unilever NV (UN)
Current Dividend Yield: 3.43%
Sector: Food Processing
Country: The Netherlands

3. Company:Danone SA (DANOY)
Current Dividend Yield: 2.93%
Sector: Food Processing
Country: France

4. Company: Diageo PLC (DEO)
Current Dividend Yield: 2.45%
Sector: Beverages (Alcoholic)
Country: The UK

5. Company: Tesco PLC (TSCDY)
Current Dividend Yield: 4.26%
Sector: Retail (Grocery)
Country: The UK

6. Company: Siemens AG (SI)
Current Dividend Yield: 3.89%
Sector: Electronic Instruments & Controls
Country: Germany

7. Company: Novo Nordisk A/S (NVO)
Current Dividend Yield: 1.59%
Sector: Biotechnology & Drugs
Country: Denmark

8. Company: Fresenius Medical Care AG (FMS)
Current Dividend Yield: 1.20%
Sector: Healthcare Facilities
Country: Germany

9. Company: ABB Ltd (ABB)
Current Dividend Yield: N/A
Sector: Electronic Instruments & Controls
Country: Switzerland

10. Company: BASF SE (BASFY)
Current Dividend Yield: 3.91%
Sector: Chemical manufacturing
Country: Germany

Note: Dividend yields noted are as of September 28, 2012

Disclosure: Long ABB

Bank Director: America’s Top Banks for 2012 with Assets Under $1 Billion

Posted by David Hunkar on 29 September 2012, 5:01 am

The Bank Director magazine published their annual Bank Performance Scorecard for 2012 in July. The following are the top 10 banks with assets under $1 Billion:

[TABLE=1122]

Source: Going For Gold: 2012 Bank Performance Scorecard, Bank Director

For the full list of 178 banks in the ranking click here.

The mean Non-Performing Assets (NPAs)/Loans & Other Real-Estate Owned (OREO) is 5.76%.

Disclosure: No Positions

Knowledge is Power: College Tuition, Doomsday Cycle and China Edition

Posted by David Hunkar on 28 September 2012, 6:42 pm

Stocks and Bonds: Comparing the Range of Potential Outcomes

Microfinance in evolution: An industry between crisis and advancement

Asking the right questions about China

The doomsday cycle turns: Who’s next?

Dividend Yield vs. Dividend Growth

Just how much trouble are Spain’s banks in?

The sorry truth about military drones

Roubini: France is on the cusp of becoming a periphery country

Click to enlarge

Cost of College Education

Source: Bloomberg BusinessWeek

Bank Director: America’s Top Banks for 2012 with Assets of $50 Billion and Above

Posted by David Hunkar on 28 September 2012, 12:00 pm

The Bank Director magazine recently published the 2012 Bank Performance Scorecard which ranks America’s top listed banks.From the report:

As in previous years, the 2012 Bank Performance Scorecard used five key metrics that measure profitability (core return on average assets and core return on average equity); capital strength (ratio of tangible common equity to tangible assets); and asset quality (ratio of nonperforming assets to loans and real estate owned, and the ratio of net charge offs to average loans). For scoring purposes, the ROAA, ROAE and TCE scores were given a full weighting, and the two asset quality metrics were given a half-weighting. The five category scores were then added across and the sum equaled each bank’s final score.

Because the Scorecard ranks banks based on the combination of profitability, capitalization and asset quality, institutions that do well often have good marks on all five metrics rather than place first in any one category. The relationship between return on average equity (ROAE) and tangible capital is particularly telling. A bank that has a high ROAE in part because it has less capital than other institutions in its size category might have a lower final score than those banks that have somewhat lower ROAEs but higher tangible capital ratios. The key to doing well on the Scorecard is to be highly profitable and well capitalized, instead of being more highly leveraged.

Unlike the previous years, this year the magazine grouped the ranking in four different asset categories:

$50 Billion and Above
$5 billion to $50 Billion
$1 Billion to $5 Billion and
Below $1 Billion

The table below lists the top banks in the asset base of $50 billion and above category:

[TABLE=1121]

Source: Bank Director

Some observations:

VA-based Capital One was the top bank this year with assets of over $206 billion.
The report notes that Columbus,OH-based Huntington Bancshares rebounded strongly in 2011 after stumbling during the financial crisis.
The four super-banks (Citigroup, Wells Fargo, Bank of America and JP Morgan Chase) are also present among these 19 banks.

The pdf version of the report is listed below:

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