One of the few sectors that are worth looking into during this bear market is the utility sector.This is because just like food, utilities are a necessity even during a bear market.

While its possible that people might use less energy these days, still most will use the normal energy needs on a day-to-day basis. This provides a constant flow of revenue for the utilities. Besides many governments provide help to those who cannot afford to pay their utility bills based on many eligibility rules. Once utilities used to stable long-term value stocks that provided decent growing dividend. Nowadays that is not the case. These stocks are as volatile as any other stock. The sense of stability and consistency that came with this sector is gone. This year utilities seem to fall in synch with the overall market. I believe that the S&P; 500 utilities are down over 30% year-to-date. This is very unique since utilities usually stay strong in any market.

However for investors that are willing to nibble in this market there are couple of European stocks that pay high dividends now. Stock price may erode thru the rest of the year if the overall markets fall further.

1.Company Name: National Grid PLC
Ticker: NGG
Country: UK
Dividend Yield : 7.62%

2.Company Name: Veolia Environnement
Ticker:VE
Country: France
Dividend Yield : 7.72%

Veolia used to trade in the 90s. Now it goes for just above $24. Same caution is warranted with this stock. NGG seems to be holding better compared to VE. But both these stocks offer excellent dividends as mentioned above.

I do not believe that the global diversification strategy is dead for some of the reasons discussed at the end of this article. However this year it hasn’t helped investors.Many foreign markets have fallen more than the US markets.

In the US, the S&P 500 Index is down 40.53% year-to-date(YTD) as of November 14,2008.Within the index,the financials are the worst performers. They are down 56.76% YTD – much higher than the SP500 Index. Consumer Staples components are down only 19.24% YTD. Healthcare, the second best performing group is down 27.29%. The interesting fact about this bear market is that even utilities in the index are down 32.6%.

SP500 Index Returns

[TABLE=123]

Source: Standard & Poors

To analyze how foreign markets have performed this year, I used the Bank of New York Mellon ADR Indices. These indices are capitalization-weighted. Though the bank publishes a composite ADR Index and 3 regional indices used the individual country indices for this study.

Bank of New York Mellon ADR Indices

[TABLE=122]

Source: Bank of New York Mellon

Analysis:
Compared to the SP500 Index performance of about -41%, the markets of the developed world have been worse.The ADR Indices of France, Australia, Germany, UK, The Netherlands,Italy,etc. are down more than the S&P 500 Index.

Since the ADR Indices include only the Depository Receipts listed in the USA, it is possible that the main market index of the respective countries might have fared a little
better of worse.To solve this issue, I reviewed the performance of the base index used for the country-specific ETFs issued by iShares. Even with this logic, the above six developed countries are down more than the S&P 500.

As for the emerging countries,no research is needed as their markets have fallen heavily in recent months.The ADR indices of the BRIC countries are worse off than the S&P Index by more than 10%.Russia is the worst performer in this group due to the crash in crude oil and other commodity prices.

The Chile ADR Index is down only about 17% YTD.This is interesting since Chile is also an emerging market with heavy dependence on commodities export especially copper.

Some of the reasons why global diversification is an integral part of any investment strategy:

1.Foreign stocks have higher yields than US stocks. For example,New Zealand stocks yield on an average 4X the yield of US stocks. Similarly other countries such as Sweden,UK, Peru, Australia, etc. have higher yields.(Source: Bloomberg).

2.The declining dollar will be favorable to investors investing in overseas markets.

3.By investing only in US stocks, an investor will miss out on many high quality overseas stocks that offer great yields and stable long-term growth.

4.In the past 25 years,the US markets was not the best performing market even once among the developed markets in the world as per “The Callan Periodic Table of Investment Returns”.

The Callan Periodic Table of Investment Returns

(Click on chart to enlarge )

Source: Callan Associates

It must be noted that foreign exchange, transaction costs, taxes etc. have not been included in the above analysis. When those are taken into consideration it is possible
that the returns of foreign markets may be lower.

Many foreign stocks that trade as ADRs in the US have fallen heavily in-line with their home country’s market performance. In order to identify the ADRs that are down more than 80% year-to-date I ran the screener and ended up with the 38 stocks listed below.

Foreign ADR Stocks Down > 80%

[TABLE=121]

Analysis:
1.The worst loser among the British banks is the Royal Bank of Scotland(RBS) which is down 91.20%. The stock recently reached a low of $0.95. On November 7, the management did a reverse split in the ratio of 20:1. More details on this split can be found here.

2.It is not surprising to see 15 China stocks in this group since the Shanghai Index is down over 60% year-to-date.

3.Two food producers (GMK,WBD) made it to this list though the cost of food has increased considerably worldwide in the last few months.

4.Only two Brazilian stocks are down over 80% year-to-date.

5.Some of the stocks that are under $1 and close to being under $1 might have reverse splits in the future to satisfy listing requirements.

Note: Please note that the data used for calculation is thought to be accurate but not guaranteed. Do your own research before making any investment decisions.

Disclosure: Long RBS

Last month Platts(A Division of The McGraw-Hill Companies) released the “Platts’ 2008 Top 250 Global Energy Companies” list.In this post lets look at the top 10 companies from this list.

The rankings are based on the following four key metrics:

• Asset
• Revenues
• Profits
• Return on Invested Capital

The list comprised of companies in nine subcategories such as Gas Utility, Electric Utility,
Coal and Consumable Fuels, etc. However the top 10 rankings were occupied by Integrated Oil and Gas companies which have global operations.

Platts’ 2008 Top 250 Global Energy Companies:

[TABLE=120]

The western oil companies occupy the top 5 positions.But the two Russian companies(Gazprom and Rosneft Oil) have moved up from last year
to be in the top 10.

As the price of crude oil continues to go down it will be interesting to watch the above stocks.