How to Invest in the Blue Chips of the Eurozone

Posted by on

The simple and easy way to invest in Eurozone blue chips is with an ETF that tracks the The EURO STOXX 50® Index. This index represents the 50 largest companies in the Eurozone countries based on free-float market cap. The companies include the major sectors such as technology, banks, industrial goods, consumer good, chemicals, etc. The following chart shows the sectors and the country weighting:

Click to enlarge

Source: Stoxx

The Top 10 index constituents are shown in the graphic below:

Source: Stoxx

The long-term return of the index is shown below:

Source: Stoxx

The SPDR® EURO STOXX 50® ETF (FEZ) tracks the Euro Stoxx 50 index. Currently the fund has an asset of $1.90 Billion and a gross expense ratio of 0.29%. In line with the overall market, the fund is down 17% YTD. Over the past 5 years it has been a poor performer with a loss of 2%.

For investors interested in individual stocks, the tickers of the top 10 in the ETF are listed below:

Disclosure: No positions

Texas Instruments is a Fantastic Dividend Growth Stock

Posted by on

The tech industry is not known for many stocks paying a dividend. Accordingly, most investors would not consider the industry when hunting for dividend growth stocks. However there are exceptions. According to an article by Algy Hall at CityWire, semiconductor maker Texas Instruments(TXN) is a winner. The stock has grown its dividend by an astonishing 4,900% in the past two decades thru October 5th of this year. Below is a brief excerpt from the piece:

For semiconductor maker Texas Instruments (US:TXN), returning cash to shareholders has become a source of immense pride. It’s easy to understand why.

Over the past two decades, the company has grown its dividend by an incredible 4,853%, from 8.5 cents a share in 2002 to $4.21 last year. The payout has risen in each of the last 18 years, helped by plentiful buybacks which have nearly halved the share count over the same period.

Source: The tech stock that’s grown its dividend 4,900% in two decades, CityWire

One of the products that helps the company rack in millions of dollars each year is the good old analog calculator specifically the TI-84 graphing calculator that is used by high school students. Despite hardly any changes in its features in the past 10 years, the TI-84 was the top selling calculator according to an article at The Washington Post back in 2014. Currently the calculator sells for over $100 a pop.

Texas Instruments currently has a marker cap of $154 billion. The stock closed at $169.55 on Friday and has an annual dividend yield of 2.93%. Though the company has reduced the number of outstanding shares, its still has 907 million of shares outstanding. A $10K investment would have grown to $20,315 by Dec 10th, 2022 according to S&P.

The stock price has declined by 11% year-to-date. In the last 5 years it has increased by 63% as shown in the chart below:

Click to enlarge

Source: Google Finance

The following chart shows the long-term return of the stock:

Source: Google Finance

We are not out of the current bear market yet. So investors looking to enter the semiconductor industry may want to keep an eye out for Texan Instruments.

Disclosure: No positions

Emerging Markets Are Attractive based on Valuation

Posted by on

Emerging markets have been poor performers for the past decade or so. Many years ago the BRICS were supposed to lead the growth of these markets. However that did not work out as expected. For instance, the decline in commodity markets led to the fall of Brazilian equities which were soaring during the commodity bull run. Political changes and poor economic policies added to the woes of investors.

Similarly decline in oil prices and more recently the shutting down of foreign listings of domestic companies made Russia one of the top worst performing markets. Economic contraction followed by Covid induced further decline in growth made Chinese equities average to poor performers. Overall most emerging markets are losers for equity investors.

However according to an article by James Johnstone at Redwheel, that emerging markets have reached an inflexion point and are attractive based of valuation. From the article:

Attractive valuations versus developed markets

The demand for metals is expected to support the growth of emerging markets and widen the real GDP growth differential with western markets. This marks forward price-to-earning (P/E) ratios for the sector look attractive.

In part, this is attributable to the commitment of emerging nations to maintain tight monetary policy over the past decade. These economies have largely avoided using unconventional policies (such as quantitative easing). They also raised rates before developed economies – and remain ahead of the curve.

As developed economies struggle with soaring inflation and interest rates, monetary constraint has made emerging market economies resilient.

Emerging markets have fallen to valuation levels not seen since 2008 while earnings continue to climb.

Source: Why emerging markets have reached an inflexion point by James Johnstone via FirstLinks

From an investment perspective, it is simpler and easier to invest in an ETF than individual companies. Unlike developed market equities, stocks in developing countries can be more risky and volatile for a multitude of reasons. So in order to avoid unnecessary risk and still have exposure to these markets is to go with ETFs.

Related ETFs:

  • iShares MSCI Emerging Markets ETF (EEM)
  • Vanguard MSCI Emerging Markets ETF (VWO)
  • iShares MSCI Mexico Capped Investable Market (EWW)
  • Global X FTSE Colombia 20 ETF (GXG)
  • iShares MSCI Brazil Index (EWZ)
  • WisdomTree India Earnings (EPI)
  • The iShares MSCI India ETF  (INDA)

Disclosure: No Positions