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Five Foreign Airline Stocks With Strong Growth Potential
On December 29, 2009 The Wall Street Journal carried an article titled “Brazilian Airline TAM Banks on Growth From New Fliers” that discussed the growth potential of TAM and the airline industry in Brazil.
TAM SA, the leading Brazilian airline expects the domestic market to grow by 12% next year due to the continued growth of the Brazilian economy. The airline is implementing an innovative solution to attract first time-fliers by partnering with banks where customers can put down a low down payment and buy a ticket. The balance of the ticket cost is to be paid in monthly installments at the bank. This strategy of convenient payment option for purchasing tickets was originally developed by TAM’s competitor GOL four years ago. Since the majority of Brazilians still travel long distances by bus, TAM’s latest strategy may increase its market share and earnings in the coming years. Gol’s easy payment option has so far attracted some 1.8 million members.
TAM has also formed a new partnership agreement with Chile’s LAN airline to cross-sell tickets in each other’s domestic flights. Due to the strong performance of the Chilean economy and other Latin American countries, the LAN also may have higher growth in the future.
Latin American and China’s airline stocks have performed well this year. Next year may be another profitable year for airlines in emerging markets if the overall economy continues to grow. Current estimates for 2010 project that the economic growth in emerging markets will be higher than developed markets.
Five Emerging Market Airline Stocks with YTD performance as of Dec 31,2009 noon ET:
1. TAM (TAM)
Brazil
YTD Change: 172%
2.Gol Linhas Aereas Inteligentes (GOL)
Brazil
YTD Change: 255%
3. Lan Airlines (LFL)
Chile
YTD Change: 109%
4.China Southern Airlines (ZNH)
China
YTD Change: 82%
5.China Eastern Airlines (CEA)
China
YTD Change: 132%
10 Global Large Cap Steel Stocks
China is the world’s largest importer and consumer of iron ore in the world. Iron ore is used to make steel. Hence China is also the largest producer of steel. As emerging market economies like China, India, Brazil and others invest heavily in their infrastructure the demand for steel would increase.
From a Bloomberg report yesterday: “The cash price for iron ore delivered to China, the world’s biggest buyer, rose to the highest this year after India raised taxes on its exports.
The price of 62 percent iron-content ore delivered to Tianjin port increased 2.9 percent to $112.10 a metric ton yesterday, according to e-mailed prices from The Steel Index. The price has more than doubled from its 2009 low on March 27.”
The ETFX Russell Global Steel Large Cap Fund from ETFSecurities tracks the performance of the Russell Global Steel Large Cap Index. This index includes 59 companies from 21 countries.
The Top 10 Holdings in the ETFX Russell Global Steel Large Cap Fund are:
1. POSCO (PKX)
South Korea
2. ArcelorMittal(MT)
Luxemourg
3.Nucor Steel (NUE)
USA
4.Nippon Steel Ltd
Japan
5. JFE Holdings Ltd
Japan
6. Companhia Siderurgica Nacional SA (SID)
Brazil
7.China Steel Corp
China
8.Gerdau (GGB)
Brazil
9.Sumitomo Metal Industries Ltd
Japan
10. US Steel Corp
USA
The Top 50 Financial Trans-National Companies by Geographical Spread Index
The United Nations Conference on Trade And Development (UNCTAD) publishes the World Investment Report each year. This year’s report contains the top 50 multi-national financial companies based on the Geographical Spread Index (GSI). The GSI is “calculated as the square root of the Internationalization Index multiplied by the number of host countries. Theâ€Internationalization Indexâ€, is calculated as the number of foreign affiliates divided by the number of all affiliates.”
The Top 50 Financial Multi-National Companies Ranked by Geographical Spread Index:
Click to Expand
Note: Assets are in US $ millions
Source: World Investment Report, 2009
The ranking is based on 2008 data. So in the recent months some of these companies have disappeared due to mergers or acquisitions. ABN Amro of The Netherlands was acquired by a consortium of Royal Bank of Scotland(RBS), Fortis, and Banco Santander(STD) in 2007. It is not clear why ABN Amro is still in the above list. It could be that when this ranking was done ABN Amro still operated as a separate entity in many countries. Last year BNP Paribas of France acquired a majority stake in Fortis of Belgium making the Belgium and Luxembourg governments minority shareholders. During the credit crisis, Merrill Lynch of USA was taken over by Bank of America (BAC), which itself was bailed out by the U.S. The German lender Hypo Real Estate Holding AG was nationalized by Germany this year.
The global financial landscape has changed dramatically after the crisis last year with many banks writing down billions of dollars of bad assets while others simply do not exist anymore. 2010 may also prove to be another interesting year for the financial sector as many still struggle with further deterioration in the quality of their assets. So it is hoped that investors can use the above list to identify financial companies with global reach.
Ten Emerging Markets Metals & Mining Sector Stocks
The Dow Jones Emerging Markets Metals & Mining Titans 30 Index represents “30 of the largest emerging-market companies in the Industrial Metals & Mining and Mining Sectors.Stocks are selected to the index based on rankings by float-adjusted market capitalization, revenue and net profit.”
The index is up about 135% as of November 30, 2009. Brazilian stocks account for about 28% of the index.
The Top 10 Components of this index are:
Vale (VALE)
Brazil
China Shenhua Energy Co. Ltd.
China
AngloGold Ashanti Ltd. (AU)
South Africa
Norilsk Nickel Mining & Metallurgical Co. (OTC: NILSY)
Russia
Companhia Siderurgica Nacional (SID)
Brazil
Impala Platinum Holdings Ltd. (OTC: IMPUY)
South Africa
Jindal Steel & Power Ltd.
India
Gerdau (GGB)
Brazil
Gold Fields Ltd.(GFI)
South Africa
Grupo Mexico S.A.B. de C.V. (OTC: GMBXF)
Mexico