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Denmark Starts to Trim Its Admired Safety Net
There’s money in tourism …
The automotive industry in developing countries: Ready to move up a gear?
The German economy grew sharply by 2.2% in the second quarter of this year according to data released on Friday. This figure is the highest recorded since the reunification of East and West Germany.
From an article in The Economist blog:
“The success of the euro-area’s largest economy owed a lot to a surge in exports (much of it to emerging markets) and to investment by firms at home looking to upgrade and expand their capital stock to meet that demand. Germany’s talent for bespoke engineering and sleek cars fits well with the needs of fast-industrialising countries and their new middle classes. China is a prized customer for the German firms that supply kit for power plants and other infrastructure projects. Small producers of niche capital goods have also seen a surge in orders. German cars have been selling well to affluent consumers in emerging markets. Sales of luxury Mercedes cars to China tripled in the year to July. Sales to India more than doubled. Other carmakers, such as VW and BMW, have prospered too.”
Germany’s Top Trading Partners in 2009
Germany’s Top Export Goods in 2009
Source: Federal Statistical Office
European countries are the top exports for German goods as shown in the chart above. However exports to China and other emerging countries are growing at a faster pace. Machinery, automobiles & parts and Chemicals are the top three export sectors accounting for about 40% of total exports in 2009.
In terms of investment opportunities, just five German companies currently trade on the organized US exchanges with many others on the OTC markets. The US exchange-listed German stocks are Aixtron (AIXG), Deutsche Bank(DB), Fresenius Medical Care(FMS), SAP (SAP) and Siemens(SI). Many large German firms do not trade on the US markets. For example, Germany’s largest steel maker Thyssenkrupp is not listed in the US markets. However the iShares MSCI Germany ETF (EWG) offer exposure to 51 stocks including Thyssenkrup.Financials account for 20% of the portfolio. The total net assets of the fund is $1.5B and the expense ratio is 0.55%.
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The stress test for European bank is over. The majority of the banks passed the test though some question the depth and usefulness of the exercises. Generally similar to US banks reporting better earnings, most of the large European banks are in the recovery phase and are reporting higher profits and lower provisions for losses. For example, on August 4th French banking group Societe Generale reported that profits more than tripled compared to a year ago.
Since there are thousands of banks across Europe, it is a wise strategy to go with the large banks that have better diversification of their assets across different markets. One way to identify to such banks is to select banks that are part of the DJ Euro Stoxx 50 Index. This index includes the 50 largest blue-chip companies in the Euro zone countries. Eight banks in the index account for about 19% of the total holdings.
The banks that are included in the DJ Euro Stoxx 50 Index are listed below with their current dividend yields:
1.Banco Santander (STD)
Current Dividend Yield: 5.86%
Spain
2. BNP Paribas (BNPQY)
Current Dividend Yield: 2.72%
France
3.Unicredit (UNCFF)
Current Dividend Yield: 1.46%
Italy
4.Banco Bibao Vizcaya Argentaria (BBVA)
Current Dividend Yield: 3.60%
Spain
5.Deutsche Bank (DB)
Current Dividend Yield: 1.37%
Germany
6.Societe Generale (SCGLY)
Current Dividend Yield: 0.56%
France
7.Intesa Sanpaolo (ISNPY)
Current Dividend Yield: 3.24%
Italy
8.Credit Agricole (CRARY)
Current Dividend Yield: 4.24%
France
In this post lets take a quick look at two companies from Denmark. These are the only two Danish stocks traded on the organized US exchanges.
1. Novo Nordisk (NVO)
Novo Nordisk is a healthcare company focused on the discovery, development, manufacturing and marketing of pharmaceutical products. It operates in two segments: diabetes care and biopharmaceuticals.
“The diabetes care segment covers Co.’s insulin franchise including modern insulins, human insulins, insulin-related sales and oral antidiabetic drugs as well as GLP-1 compounds in development for both the treatment of type 2 diabetes and as an anti-obesity agent. The biopharmaceuticals segment covers the therapy areas hemostasis management, growth hormone therapy, hormone replacement therapy, inflammation therapy and other therapy areas.”
NVO first started trading in the US markets in 1991. As of August 5th this year, the stock is up over 40%. Novo Nordisk announced on this week that operating profit rose by 19% in the first half of this year.Announcing the interim results, CEO Lars Rebien Sorensen noted “We are also very encouraged by the continued progress within our pipeline including both new insulins, liraglutide for obesity and haemostasis projects.” This company operates in a highly profitable niche area of the drug industry. Investors in the stock have done extremely well over the years. For example, as of July 30th a $10,000 investment in this stock five years ago would have grown to $36,114.
2. Torm A/S (TRMD)
Founded in 1889, Torm is shipping company engaged in the ownership and operation of deep sea product tankers and dry bulk carriers.”TORM consists of two business segments: the Tanker Division and the Bulk Division. The Company’s product tankers primarily carry refined products, such as naphtha, gasoline, gas oil, jet fuel and diesel oil. Its dry bulk vessels carry commodities, such as coal, iron ore and grain. As of December 31, 2009, the Company’s fleet of owned vessels consisted of 64 product tankers and four dry bulk carriers.”
Up until the global financial crisis, the Torm ADR had a great run. The high dividends paid at the time also attracted investors. However business fell drastically with the global collapse in shipping since the crisis began. As a result TRMD plunged to below $10 a share. The company also many of the management and experience workers recently. Torm posted a pre-tax profit of just US $3.0 million for the first quarter. With falling earnings the company suspended its highly dividend payments on the common stock. In May, CEO Jacob Balslev Meldgaard bought 100K shares thus showing confidence in the future of the company. At the current price of about $8 a share, Torm is a good investment for investors who are willing to hold it for at least a few years.
Out of the many Chinese stocks that are now available to US investors, two stocks that may warrant a look are chemical makers Chemspec International (CPC) and Sinopec Shanghai Petrochemical (SHI).
Just like banks are the most important part of an economy, chemical companies are critical to the growth of other industries. This is simply because most of the items we consume have some of chemicals in them. From drugs to foods to carpets, chemicals are the fundamental building block of the modern life. Hence investors looking to gain some exposure to Chinese growth, can evaluate the following chemical companies for potential long-term investment.
1. Chemspec International (CPC)
Chemspec is a China-based contract manufacturer of specialty chemicals. These chemicals are used in electronics, pharmaceuticals and agrochemicals. The company supplies fluorinated specialty chemicals to a number of international pharmaceutical companies which use them in the manufacture of various drugs.
In 1Q,2010 total sales were RMB220.2 million (US$32.3 million), an increase of 9.7% from the same quarter of last year.Chemspec is a mid-cap stock with a market cap of about $281 M. The current dividend yield is about 2.27%.
2. Sinopec Shanghai petrochemical (SHI).
Sinopec is a petrochemical company that “processes crude oil into a range of products, including synthetic fibers, resins and plastics, intermediate petrochemicals and petroleum products. It principally operates in four operating segments: synthetic fibers, resins and plastics, intermediate petrochemicals and petroleum products.” Sinopec is the largest ethylene producer by capacity in China and is also Asia’s largest oil refiner.
The current market cap is about $948M and the yield is 1.04%. JP Morgan has over 7% stake in Sinopec.
