Apple and Nestle Among China’s Top Companies List

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The Global Finance magazine has published “The Stars of China” list in the latest issue. These firms are the top ranked companies in their respective industries.

The Stars of China for 2011:

[TABLE=1047]

Source: Global Finance

It is interesting to note that Apple(AAPL) and Nestle(NSRGY) are the two foreign firms in this ranking. Switzerland based Nestle has a strong presence in emerging markets and operates 23 factories in China. Apple is succeeding in China due to its strong brand name and high quality products.

Disclosure: No Positions

French and German Equity Markets Are Cheap Based On Valuation

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The CAC-40 and DAX indices are down 17.9% and 13.7% as of Nov 4, 2011. Both these indices were off much higher in early October but have since recovered some of the losses as some clarity has began to emerge on the solution to the Euro crisis.

Click to enlarge

Source: Yahoo Finance

French and German markets are cheap based on the Shiller P/E ratio according to a report published last month by Niels C. Jensen of the UK-based Absolute Return Partners. These two markets  are trading at the same level during the credit crisis of 2008 and levels back in 1982.

Note: Also known as the cyclically adjusted P/E, the Shiller P/E smooths the impact from economic cycles by calculating the P/E as a 10 year average and adjusting for inflation.

Via: PSG Angle: Why investing in stocks, makes sense!, PSG Asset Management

According to Neels van Schaik of PSG Asset Management, many of the European stock prices are already reflecting the probability of a recession in Europe or the U.S. Hence at current price levels European companies may offer sound returns to investors willing to hold five years or more.

Ten randomly selected non-financial French and German stocks are listed below with their current prices and dividend yields for further review:

a) French ADRs:

1.Company: AXA SA (AXAHY)
Current Price: $14.47
Current Dividend Yield: $7.10%
Sector: Life Insurance

2.Company: Danone (DANOY)
Current Price: $13.45
Current Dividend Yield: 2.74%
Sector: Food Producers

3.Company: Sanofi (SNY)
Current Price: $34.12
Current Dividend Yield: 5.16%
Sector: Pharmaceuticals

4.Company: Valeo (VLEEY)
Current Price: $23.90
Current Dividend Yield: 3.44%
Sector: Automobile Parts

5.Company: France Telecom (FTE)
Current Price: $17.47
Current Dividend Yield: 11.21%
Sector: Telecom

6.Company: LaFarge (LFRGY)
Current Price: $10.09
Current Dividend Yield: N/A
Sector: Cement

7.Company: Air Liquide (AIQUY)
Current Price: $24.86
Current Dividend Yield: 2.65%
Sector: Chemicals

8.Company: Electricite de France  (ECIFY)
Current Price: $5.70
Current Dividend Yield: 5.54%
Sector: Electric Utility

9.Company: TOTAL (TOT)
Current Price: $51.28
Current Dividend Yield: 6.32%
Sector: Integrated Oil & Gas

10.Company:CGG Veritas (CGV)
Current Price: $21.92
Current Dividend Yield: N/A
Sector: Oil Equipment Services and Distributors

b) German ADRs:

1.Company: BASF (BASFY)
Current Price: $70.65
Current Dividend Yield: 4.46%
Sector: Chemicals

2.Company: Continental AG (CTTAY)
Current Price: $74.15
Current Dividend Yield: N/A
Sector: Tire Manufacturing

3.Company:Fresenius Medical Care (FMS)
Current Price: $70.61
Current Dividend Yield: 1.32%
Sector: HealthCare Equipment & Services

4.Company: Henkel AG (HENKY)
Current Price: $49.63
Current Dividend Yield: 2.04%
Sector: Household Goods

5.Company: Siemens (SI)
Current Price: $102.20
Current Dividend Yield: 3.62%
Sector: General Industrials

6.Company: RWE AG (RWEOY)
Current Price: $39.90
Current Dividend Yield: 11.90%
Sector: Multi-Utility

7.Company: Deutsche Telekom (DTEGY)
Current Price: $12.43
Current Dividend Yield: N/A
Sector: Telecom

8.Company: Bayer AG (BAYRY)
Current Price: $65.25
Current Dividend Yield: 3.57%
Sector: Chemicals

9.Company: Adidas  (ADDYY)
Current Price: $35.05
Current Dividend Yield: 1.62%
Sector: Personal Goods

10.Company: Hannover Rueckversicherung (HVRRY)
Current Price: $25.01
Current Dividend Yield: 6.57%
Sector: Reinsurance

Note: Prices and Dividend Yields noted are as of market close Nov 4, 2011.

Some observations:

I have included AXA and Hannover Re in the above list though are considered to be part of the financial industry. They are in fact insurance companies and unlike banks they are highly regulated and do not have high exposures to sovereign debt or derivatives. In addition, in countries like France people save a significant portion of retirement savings with insurance companies. Hence from an investment perspective it is wrong to paint insurance firms with the same brush as banks.

Germany-based BASF (BASFY) is the world’s largest chemical manufacturer and holds the leadership position for many years now. Food producer Danone (DANOY) has a strong brand name in developed countries including the U.S. and continues to expand in emerging markets with innovative products.

Disclosure: Long HENKY, RWEOY, LFRGY, VLEEY, AXAHY

One More Proof That Investors Should Not Time The Market

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I wrote a post back in September about why ordinary investors should not time the market. This post adds another angle to the same topic.

The first decade of the 21st century has been called as “The Lost Decade” for U.S. stocks as they were flat to down. In addition, the S&P 500 lost 23% for the period from Dec 31, 1999 thru Dec 14, 2009.

Over the period from the start of 2000 to the end of 2009, a person who had invested a lump sum of  $50,000 would have had an annualised return over the period of -1.25%, or a cumulative return of -11.85% as shown in the chart below:

Click to enlarge

However over the same period, a person who invested $50,000 in quarterly installments of $1,250 would have had an annualised return over the period of 1.16%, with a total cumulative return of 12.26%.

Source: GenXFinance.com

The difference in returns between the two strategies is incredible. The charts also confirm that timing the market does not work. Hence investors saving for retirement (or) other long-term goals should invest periodically even if it is in small amounts. Investors with a large amount to invest should also spread out the investments over a period of time instead of dumping all the funds at one time. This strategy is especially important to adhere to during extreme volatile market conditions like the one global equity markets are going through.

Source: PSG Angle: Control the Controllables and Make Peace with the Rest,  PSG Asset Management

Related ETFs:

iShares MSCI Emerging Markets Indx (EEM)
Vanguard Emerging Markets ETF (VWO)
SPDR S&P 500 ETF (SPY)
SPDR STOXX Europe 50 ETF (FEU)

Disclosure: No Positions

The 29 Global Too-Big-To-Fail Banks

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The Financial Stability Board (FSB) has published the list of global banks that are too-big-to-fail. These banks are required to hold as much as 2.5% more capital than other banks by the end of 2012.

The 29 global systemtacially important banks are:

Bank of America Corp.(BAC)
Bank of China Ltd. (BACHY)
Bank of New York Mellon Corp.(BK)
Groupe Banque Populaire
Barclays Plc (BCS)
BNP Paribas SA (BNPQY)
Citigroup Inc. (C)
Commerzbank AG (CRZBY)
Credit Suisse Group AG (CS)
Deutsche Bank AG (DB)
Dexia SA
Goldman Sachs Group Inc.(GS)
Credit Agricole SA
HSBC Holdings Plc (HBC)
ING Groep NV (ING)
JPMorgan Chase & Co.(JPM)
Lloyds Banking Group Plc (LYG)
Mitsubishi UFJ Financial Group Inc.(MTU)
Mizuho Financial Group Inc. (MFG)
Morgan Stanley (MS)
Nordea Bank AB (NRBAY)
Royal Bank of Scotland Group Plc (RBS)
Banco Santander SA (SAN)
Societe Generale SA (SCGLY)
State Street Corp (STT)
Sumitomo Mitsui Financial Group Inc. (SMFG)
UBS AG (UBS)
Unicredit SpA
Wells Fargo & Co. (WFC)

Via: Financial Post

Disclosure: Long many banks in this list

Some Interesting Facts About Investing in the 1800s

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I

Wall Street in the 1800s

I came across a paper on total returns of bonds, stocks and bills by Dr. Bryan Taylor of Global Financial Data, Inc. The following are some interesting facts from the paper about investing in financial assets during the 1800s in the U.S. :

  • “Most people invested in bonds, not stocks
  • Virtually all of an equity investor’s returns came in the form of dividends, not capital gains
  • There was little difference in the returns to stocks and bonds
  • Since the government did not issue treasury bills and deposits were not federally insured, there was no “risk free” investment available to investors
  • Bond and dividend yields declined over the course of the century as the risk to investors and inflation declined.
  • Although prices rose and fell in any given year, from 1815 to 1914, there was no overall inflation in the US and in most countries on the Gold Standard.”

By the end of the 20th century, most investors were investing in stocks and not bonds and were dependent more on capital gains rather than dividends. In addition, they had risk-free alternatives, saw the interest rates during most of the 20th century and endured one of the worst inflation in human history. It will be interesting to see how the investment world changes in the next century.

Source: GFD Guide to Total Returns on Stocks, Bonds and Bills, Dr. Bryan Taylor, Global Financial Data, Inc.

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