HSBC: 43 High-Yielding European Stocks Likely To Outperform the Market

Posted by on

European equity markets have fallen heavily this year due to the ongoing debt crisis there. While most investors are avoiding European stocks some are wondering if the current opportunities are too good to pass up.

Yesterday strategists at HSBC published a research report stating that investors have a rare opportunity to invest in high-yielding European stocks. They identified the following 43 stocks that are likely to outperform the current market even if they cut dividends:

  1. A2A – Utilities
  2. Abertis Infraestructuras – Transport
  3. Acs Activ.Constr.Y Serv. – Capital Goods
  4. Admiral Group – Insurance
  5. Aviva Insurance (AV) – Overweight
  6. Banco Comr.Portugues – Banks
  7. Banco Espirito Santo – Banks
  8. Banco Santander (SAN) – Banks
  9. Bank Of Cyprus (Ath) – Banks
  10. Caixabank – Banks
  11. Credit Agricole – Banks
  12. Delta Lloyd Group – Insurance
  13. Elisa – Telecoms
  14. Enel (ENLAY) – Utilities
  15. Finmeccanica – Capital Goods
  16. Fomento Constr.Y Cntr. – Capital Goods
  17. Fonciere Des Regions – Real Estate
  18. France Telecom (FTE)– Telecoms
  19. Icade – Real Estate
  20. Intesa Sanpaolo Rsp (ISNPY) – Banks
  21. KPN – Telecoms
  22. M6-Metropole Tv – Media
  23. Man Group Div – Financials
  24. Mediaset – Media
  25. Nokia Tech – Hardware
  26. OPAP – Cons Svs
  27. Orkla – Capital Goods
  28. Pandora Cons – Durables
  29. Peugeot (PEUGY) – Autos
  30. Portugal Telecom (PT) – Telecoms
  31. PostNL – Transport
  32. Prosieben Sat 1 Pf. – Media
  33. Public Power – Utilities
  34. RSA Insurance Group – Insurance
  35. RWE (RWEOY) – Utilities
  36. Sanoma – Media
  37. Seadrill (SDRL) – Energy
  38. Telecom Italia Rsp (TI)– Telecoms
  39. Telefonica (TEF) – Telecoms
  40. Telekom Austria (TKAGY) – Telecoms
  41. Veolia Environnement – Utilities
  42. Vivendi – Telecoms
  43. Zurich Financial Svs.(ZFSVY) – Insurance

Source: CityWire UK

From the CityWire article:

‘The classic dilemma for investors is to decide whether these high yields represent a value opportunity or whether it is a sign of distress,’ they wrote. ‘It turns out that there is an element of truth in both views.’

Citing an analysis of 430 stocks in the MSCI Europe index in the period since 1994 to date, they said 77% of the companies cut their dividends at some point in the two years after their yields broke above the 8% level.

But the strategists added that they also found that the majority of the stocks had still beaten the market, even though they had cut their payouts to investors.

Utilities Enel (ENLAY) and RWE(RWEOY) have dividend yields of 6.76% and 13.51% currently based on their ADR prices. Telecom companies such as France Telecom(FTE) and Telefonica(TEF) are also excellent choices at current levels.

Disclosure: Long RWE, STD and VE

The Role of US and UK Central Banks in Creating Housing Bubbles and Rising Income Inequality

Posted by on

The US and UK Central Banks were complicit in inflating the housing bubble by keeping the interest rates too low for a long time. While this theory has been discussed by many, Albert Edwards of Société Générale takes a different angle on why the Central Bankers kept encouraging the housing bubble.

A post in FT Alphaville quotes Albert with his following argument:

The US and UK have seen a huge rise in inequality over the last two decades, as growth in national income has been diverted almost exclusively to the top income earners (see chart below). The middle classes have seen median real incomes stagnate over that period and, as a consequence, corporate margins and profits have boomed.

Some recent reading has got me thinking as to whether the US and UK central banks were actively complicit in an aggressive re-distributive policy benefiting the very rich. Indeed, it has been amazing how little political backlash there has been against the stagnation of ordinary people’s earnings in the US and UK. Did central banks, in creating housing bubbles, help distract middle class attention from this re-distributive policy by allowing them to keep consuming via equity extraction?

Click to enlarge

 

Source: FT Alphaville

I believe that the central bankers did not help encourage the housing bubble to divert attention from the growing inequality. However they failed to perform their duties leading the financial system to almost collapse a couple of years ago.

A Review of the Invesco Perpetual High Income Fund

Posted by on

The Invesco Perpetual High Income Fund is one of the largest unit trusts (or mutual fund) in UK with an asset base of about £11.0 billion . The fund aims to achieve a level of high income together with capital growth. The fund invests most of the assets in UK-listed companies with the remaining in other countries. Veteran fund manager Mr.Neil Woodford has run the fund since its inception in October 1988 and the S&P Fund Management Rating is ‘AAA’. The dividend yield of the fund is 3.90% based on the local currency.

Unlike other mutual funds, Invesco Perpetual High Income Fund is light on financials with just over 6% of the portfolio allocated to this sector. About 69% of the fund’s assets are invested in health care, consumer goods and industrials.

Investors looking to add equities for income can consider some of the holdings held by the fund. The top 10 holdings of the fund are listed below with their US market tickers and dividend yields:

1.Company: AstraZeneca PLC (AZN)
Current Dividend Yield: 6.00%
Sector: Biotechnology & Drugs

2.Company: GlaxoSmithKline PLC (GSK)
Current Dividend Yield: 5.10%
Sector:Major Drugs

3.Company: Reynolds American Inc (RAI)
Current Dividend Yield: 5.58%
Sector: Tobacco

4.Company: British American Tobacco PLC (BTI)
Current Dividend Yield: 4.20%
Sector: Tobacco

5.Company: BG Group PLC (OTC:BRGYY)
Current Dividend Yield: 1.09%
Sector: Oil & Gas Operations

6.Company:Vodafone Group PLC (VOD)
Current Dividend Yield: 5.46%
Sector: Telecom

7.Company: Roche Holding AG (OTC:RHHBY)
Current Dividend Yield: 4.58%
Sector: Major Drugs

8.Company: BT Group PLC (BT)
Current Dividend Yield: 4.14%
Sector: Telecom

9.Company: Imperial Tobacco Group PLC (OTC:ITYBY)
Current Dividend Yield: 4.31%
Sector: Tobacco

10.Company: Reckitt Benckiser Group PLC (OTC:RBGPY)
Current Dividend Yield: 3.82%
Sector:Personal & Household Products

Note: Dividend yields noted are as of Nov 18th, 2011

Disclosure: No Positions

Which Countries Have the Highest Subsidies for Fossil Fuels?

Posted by on

Most developing and resource-rich countries offer high subsidies for fossil-fuel consumption. Subsidies for oil, natural gas, electricity and coal vary among countries depending on the natural resources present in the respective country in addition to other factors.

In the developed world, subsidies for oil is mostly non-existent despite some of the countries blessed with large reserves of oil. For example, the U.S. produces millions of gallons from places like Alaska, Texas, etc. and offshore fields. However the price of gasoline at the pump is not subsidized by the state and is determined by the market. Hence gas prices vary widely on a daily basis. The following chart shows the U.S. retail gas prices and the price of crude oil for the past five years:

Click to enlarge

Source: www.gasbuddy.com

The average retail price plunged to the lowest in the end of 2008 at the height of the credit crisis but has recovered to reach well above $3.00 per gallon now. For the most part, gas prices track the global crude oil prices.

Compared to the market-based pricing in the developed countries, emerging and oil-rich countries offer heavy subsidies for consumption of fossil-fuels primarily to simulate economic growth, alleviate poverty, etc.

The following chart shows the subsidies offered by select countries for different types of fossil fuel consumption:

Source: World Energy Outlook 2010, IEA

Oil-rich countries such as Saudi Arabia, Iran, Iraq, Malaysia, Venezuela, Mexico, etc. have high subsidies for oil consumption.

Related ETFs:

The United States Oil Fund (USO)
United States Gasoline Fund (UGA)
PowerShares DB Energy Fund (DBE)

Disclosure: No Positions

The Global Wealth Pyramid

Posted by on

The world population crossed the 7 billion mark this year. The majority of this population lives in the developing world. According to The Global Wealth Report published last by Credit Suisse last year, about 92% of the world’s population can be classified as part of the middle, the upper middle and the lower classes. The 334 million in the upper middle class presents a large group for significant earnings growth potential for the banking industry. The Occupy protest movement in the US and other the developed countries is a manifestation of the class struggle between those at the bottom of the pyramid (the 99%) vs. those at the top of the pyramid (1%).

The Global Wealth Pyramid

Click to enlarge

 

Source: The Global Wealth Report, The Credit Suisse Research Institute