The Top 100 Global Auto Parts Suppliers 2020: Chart

Posted by on

The Top 100 Auto Parts Suppliers Worldwide in 2020 ranked by sales of original equipment parts in 2020 are shown in the charts below. The world’s top supplier was Robert Bosch of Germany followed by Denso (DNZOY) of Japan. Other top European players include Continental AG(CTTAY) of Germany, Faurecia (FAURY) and Valeo of France(VLEEY) and Aptiv(APTV) of Ireland. Among the North American auto parts makers, the top firms include Magna(MGA) of Canada and Lear(LEA), Adient(ADNT), Tenneco(TEN) and BorgWarner(BWA) of the US.

Click to enlarge

Source: Automotive News

The best way to profit from the automotive industry is not by investing in the auto makers themselves but by owning the auto parts makers. So investors interested in gaining exposure to this sector can use the above list for further research.

Disclosure: Long CTTAY, VLEEY, MGA and ADNT

10 Key Facts on Natural Resources of Canada

Posted by on

Canada is a natural resources based-economy. With a GDP about $1.6 Trillion US $ in 2020 Canada is one of the largest developed economies in the world. But natural resources from oil to timber to precious metals and everything in between them form big portion of the Canadian economy. Simply digging up these resources and selling them to other countries including the US brings in billions of dollars in revenue and of course supports hundreds of thousands of jobs.

The resources sector is so important to the economy that the S&P TSX Composite Index has a 25% allocation to energy and materials. From an exports point of view, natural resources accounted for about $264 billion in value or about 48% of the value of total merchandise exports, according to Natural Resources Canada.

The following infographic shows more fascinating facts on Canada’s Natural Resources:

Click to enlarge

Source: Natural Resources Canada

On The Gap Between Investor Returns And Fund Returns

Posted by on

Multiple studies have shown that individual investors always tend to earn less than the funds they are invested in especially over the long-term. This is because many investors try to time the market and hence sell the mutual fund or ETF at the presumed peak and then buy back again at the wrong time as well. Morningstar published a research study on the investor returns earlier this year. The following chart shows the gap in investor returns and fund returns in terms of 10-year returns for various asset types:

Click to enlarge

Source: Mind the Gap 2021 – A report on investor returns in the United States. , MorningStar

From the report:

Our annual study of dollar-weighted returns (also known as investor returns) finds investors earned
about 7.7% per year on the average dollar they invested in mutual funds and ETFs over the 10 years
ended Dec. 31, 2020. This is about 1.7 percentage points less than the total returns their fund
investments generated over the same period. This shortfall, or gap, stems from inopportunely timed purchases and sales of fund shares, which cost investors nearly one sixth the return they would have earned if they had simply bought and held.

That investor-return gap is more or less in line with the gaps we found for the four previous rolling 10-year periods. The persistent gap between the returns investors actually experience and reported total returns makes cash flow timing one of the most significant factors—along with investment costs and tax efficiency—that can influence an investor’s end results.

Our research imparts a few lessons on how investors can avoid these gaps and capture more of their fund investments’ total returns. Investors can improve their results by holding a small number of widely diversified funds, automating mundane tasks like rebalancing, avoiding narrower or highly volatile funds, and embracing techniques that put investing on autopilot, such as dollar-cost averaging.

The complete report is worth a read.

Sales Tax on Grocery Items by State: Chart

Posted by on

Tax rates vary by state in the U.S. From sales tax to income tax and everything in between rates differ from one to another. A few states do not have either income or sales tax at all. For instance, there is no personal income tax  in the state of Florida. Recently I learned that not all states exempt sales tax on grocery items. For years I assumed that in all states food items were not taxes. Of course this excludes soft drinks and other non-essential items. But there are a few states that charge a reduced sales tax on groceries or the full sales tax rate. So in these states low-income people are forced to pay taxes even on basic necessities for survival such as a bread loaf or flour for example. The Southern states of Alabama and Mississippi fall in this category.

The following graphic shows the the sales tax on grocery items by state:

Click to enlarge

Source: Sales Tax on Grocery Items, TaxJar

The chart below shows tax rates on candy and soda in addition to groceries:

Click to enlarge

 

Source: How Does Your State Treat Groceries, Candy, and Soda?, Tax Foundation

 

Just 4% of US-listed Companies Created all the Wealth in 90 Years

Posted by on

Success with investing in stocks requires more than following simple concepts such as Buy and Hold, Dividend Growth Investing, Buy Low and Sell High, Momentum chasing, etc. it requires more than anything picking the rights stocks or to be more precise – picking the winners than losers. This is because if an investor picks randomly picks let’s say 25 stocks and following the buy and hold strategy holds them for 20 years it is perfectly possible that this investor may earn an average return or even have a loss – if most of the stocks do not perform well. Even worse if most of them are duds in the entire period of owning for 2 decades the investor may lost money.

With that brief intro, I came across an article recently that noted that most of the wealth created by the US-listed companies in the past 90 years came from just 4% of them. This means the other 96% of them were poor or average performers. From the article:

Long-term investors might be surprised to find that a typical stock listed in the US from 1926 to 2019 had a buy-and-hold return of -2.8% over its entire lifetime. In an international context, from 1990 to 2018 the typical buy-and-hold return of a stock was -14.9%. This means that if an investor had picked a stock randomly, the most likely outcome would have been a loss of capital.

How is it possible then that the typical stock has a negative return but the average return of the market is 8% over the last 100 years? This discrepancy exists because the distribution of equity returns is skewed. Stock market returns are positive and higher than the return of the typical stock thanks to a relatively small group of stocks producing exceptional returns.

Exactly how exceptional was recently shown in a study by Professor Hendrik Bessembinder from Arizona State University, who calculated that just 4% of companies listed in the US were responsible for all wealth creation in the past 90 years. This shows that indiscriminate stock picking has very little chance of success. Investors need to find ways to improve theirs odds of selecting those companies that are not typical and belong to the small group of winning stocks.

We believe the concept of unanticipated economic profit, embedded in a trends-focused investment process, significantly improves these odds. Markets are largely efficient and reflect the aggregate expectations of all participants in the pricing of equities. Only when reality consistently exceeds or undershoots these expectations can we expect to see extraordinary long-term equity returns. Unanticipated economic profit is therefore crucial to finding the winners.

 

Not all industries are created equal

The small group of stocks that have created the majority of the wealth includes household names such as Apple, Microsoft and Amazon. Outside the US, stocks that have produced a disproportional amount of wealth are Tencent, Nestlé and Samsung.

At the industry level, we observe that relative profitability tends to remain steady over long intervals for most industries. Prosperous industries stay prosperous and poor industries stay poor. The emergence of new trends or disruptive innovations might cause long-term tail or headwinds for industries. In technology, the rise of the internet brought tremendous success for streaming services, and sounded the knell for physical video rental stores such as Blockbuster.

Greater disparities emerge by going back further, using the timeframe of 1926-2019. The software industry created USD 4.1 trillion in wealth for investors since its birth in the 1960s until now. On the other hand, the precious metals industry destroyed USD 17 billion in wealth. The contributions made by different industries is shown in the graphic below:

Wealth Creation by Industry in US from 1926 to 2019:

Source: CRSP, Robeco. Market: US. Time period: 1926-2019

Source:  Trends investing: finding the winners among skewed equity returns, Steef Bergakker, Senior Portfolio Manager, Robeco, Insights via Investment Office