Nine Canadian Basic Materials Stocks

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The S&P; ADR Index is up 30.18% YTD. As Canada is a resource-rich country, nine Canadian companies are part of the materials component of this index. The majority of these companies are gold miners.

The Nine Canadian Basic Materials sector stocks that trade in the NYSE are:

  1. Agnico Eagle Mines Ltd (AEM)
  2. Agrium Inc. (AGU)
  3. Barrick Gold Corp(ABX)
  4. Goldcorp Inc (GG)
  5. Kinross Gold Corp (IAG)
  6. IAMGOLD Corp (KGC)
  7. Potash Corp. (POT)
  8. Teck Resources Limited (TCK)
  9. Yamana Gold Inc. (AUY)

Potash and Agrium are large agricultural products producers with operations mainly in fertilizer manufacturing. Both of them had great runs in the past when food prices soared worldwide and the demand for commodities increased several fold from emerging market countries. Higher global demand for fertilizers and seeds in the future will benefit these companies. With the spot price of gold rising to a record $1,084.90 per oz yesterday some are predicting that it will go even higher.A journal article says that the next stop may be $1,100.

Could the U.S. Banking Crisis Follow Japan’s?

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Nine more banks failed in the U.S. last Friday bringing the total to 115 this year. Still many more are at risk of failure thru the end of this year and next year. Despite the talk of recovery banks are not out of the woods yet. Though the financials in the S&P 500 are up about 12% so far this year, bank stocks have long ways to go before they return to the normal that existed pre-2008.

So what holds for the U.S. banking industry in the future? Will the U.S. banking industry go thru similar phases that the Japanese banks went thru in the past?

The following chart shows the various phases in Japan’s Banking crisis:

Japan-Bank-Crisis-Phases

Source: Regional Economic Outlook: Asia and Pacific, IMF

In the first phase from 1990 thru 1996, the banking crisis unraveled in Japan and was followed a fragile recovery followed by the withdrawl of fiscal stimulus. If this were to occur in the U.S., we are now only in the second year of the phase one. Another 6 more years may have to go before phase one ends. In the next phase, renewed stress followed due to monetary tightening. Japan also attempted a second recovery in this period. So from 1990 to 2000, Japan had its lost decade during which recovery was attempted twice. Finally after the dot com crash, private demand picked up and many Japanese banks and companies were restructured which led to a sustained recovery from 2001 thru 2007. Since Japan exports heavily to the largest emerging market of China, the trade helped Japanese economy gain a solid footing after a decade of flat to sluggish growth. It is too early to tell how the US banking industry will look like in the next few years.

As more and more small community banks disappear, regional banks such as U.S. Bank (USB), Regions Financial (RF), PNC Bank (PNC), etc. will become larger by acquiring the assets of failed banks on the cheap.

New ADRs: Avia and Banco Santander Brazil

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Aviva Plc(AV) and Banco Santander Brazil SA(BSBR) are two new ADRs that started trading in the New York Stock Exchange last month.

1.Aviva Plc:

UK-based Aviva(AV) is engaged in the long-term savings, fund management and general insurance business. In the first half of this year, Aviva made £747M in profits. Lower earnings forced the company to cut its interim dividend by 31%. Last Friday, AV closed at $12.78.

Aviva’s fund management unit manages £316 billion in assets. From the corporate web site:
“Aviva is the world’s fifth-largest insurance group and the largest insurance services provider in the UK. We have premium income and investment sales of £51.4 billion and £352 billion of funds under management. We have 54,000 employees serving over 50 million customers in 28 countries around the world.” UK and Europe accounts for nearly 80% of total sales.

2.Banco Santander Brazil SA(BSBR):

The Brazilian unit of Banco Santander of Spain (STD) listed its shares on the Brazil and New York exchanges simultaneously on Oct 7th. In New York the company raised $8B. In Brazil, its IPO was the largest ever public offering in the country’s history.

“At the end of June 2009, Santander Brasil Group, which includes the Santander and Real banks, had R$ 288.8 billion in total assets, R$ 177.9 billion in total deposits, more than 21 million clients and a network of 3,612 points of sale, including branches and service centers.” BSBR’s operations are concentrated in South and Southeast of Brazil which account for about 73% of the country’s GDP. The stock closed at $11.86 on Oct 20th.

The other two Brazilian bank ADRs that trade in the NYSE are Banco Bradesco (BBD) and Itau Unibanco Banco Holding SA (ITUB).

One Year Performance of Large Canadian Bank Stocks

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With two months to go in this year, which of the five top Canadian bank stocks are leading?.

Based on 2008 earnings, Royal Bank of Canada(RY) was one of the two Canadian banks in the 25 most profitable banks of the world.

Royal Bank is the most profitable bank over the long-term as well. Royal Bank(RY) stock has performed consistently over the past years and currently the stock has a 3.79% dividend yield. RY has more than doubled from its March lows.

1-Year Performance of Top Five Canadian Bank stocks:

Canada-Banks-Performance


All the five Canadian banks have run up in a synchronized fashion over the past year.However as expected, the Royal Bank (RY) is the best performer.