Stocks of The Best British Brands

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London

London, UK

In April of this year, the marketing research firm Millward Brown, released the third annual Top 100 Brandz list. According to the report, companies that own the brands in this top 100 list “have significantly outperformed the stock market when compared to the S&P 500”. The rankings are based on analysis of financial data of the companies studies from Jan 2,2007 to Dec 31,2007 and interviews conducted with customers worldwide.

The top global brand name in this list is Google (GOOG) with a brand value of $86.0B. Coca-Cola (KO) is listed as fourth with a brand value of $58.0B. Other companies in the top 10 are General Electric (GE), Microsoft(MSFT), China Mobile, IBM (IBM), Apple(APPL), McDonald’s (MCD), Nokia (NOK) and Marlbaro. In this article we will review “The Top 10 British Brands” and the companies that own them.

The The Top 10 British Brands in the order of “Brand Value”are:

1. Vodafone (VOD)
2. Tesco (TSCDY)
3. HSBC (HBC)
4. Marks & Spencer
5. Barclays (BCS)
6. Standard Chartered Bank
7. BP (BP)
8. Royal Bank of Scotland (RBS)
9. Asda
10. Natwest

Some of the companies that own the above brands trade in the US. A brief overview of these stocks follows:

1. Vodafone (VOD) is a mobile telecom service provider with a customer base of 269 million in Asia, Europe, USA, the Middle East and Africa. VOD has a dividend yield of 8.57%. The PE ratio is 10.15 and the company has a market cap of $125.0B. The annual dividend growth rate is 31.6% for the past 5 years.

2. Tesco (TSCDY) is a retailer (grocery) with operations in the UK, Europe and Asia. Tesco’s ADR stock trades on the OTC market. Total revenue has been rising over the past 5 years due in part to the rise in global food prices. The current dividend yield is 4.44%.

3. HSBC (HBC) is a money center bank that serves 128 million customers worldwide. The dividend yield is 4.42% and the earnings growth in the past 5 years is about 25%. HBC is one of the few British banks to have limited impact from the current credit crisis.

4. Marks & Spencer – This famous retailer trades on the London Stock Exchange with ticker MKS.L.

5. Another global bank based in the UK is Barclays (BCS) . The stock pays a 5.72% dividend yield and is down about 40% in 52 weeks due to the global meltdown in financials. Barclays owns iShares, the world’s largest and best known ETF provider.

6. Standard Chartered Bank – StanChart does not have an ADR but is listed on the LSE with ticker STAN.L

7. BP (BP) is one of the world’s largest integrated oil and gas producers. The dividends for EPS have increased at an annual rate of 24.5% and 12% in the past 5 years. BP pays a great 6.07% dividend.

8. The holding company Royal Bank of Scotland Group Plc (RBS) owns the Royal Bank of Scotland and National Westminster Bank Plc which is number ten in the list above. Last year RBS together with Banco Santander (STD) and Fortis acquired ABN AMRO of the Netherlands.

9. Asda is UK’s second largest supermarket chain and owned by Wal-Mart(WMT). Asda competes against Tesco and other retailers.

10. Natwest, a short name for National Westminster Bank Plc is now part of the Royal Bank of Scotland Group plc (RBS).

Get on board the Canadian Railroad Stocks

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Railroad stocks have held up well in this volatile market. Major US railroads like Burlington Northern Santa Fe Corp (BNI), Norfolk Southern(NSC), CSX Corp (CSX), Union Pacific Corp (UNP) reported strong second quarter numbers and they seem to have provided shelter to investors fleeing the battered financial stocks. While fuel prices increased for many months, the railroads have been able to pass on the increased costs to customers in the form of fuel surcharges. This stable performance of the US railroads triggered the following question in my mind: How are the two Canadian railroads – Canadian Pacific (CP) and Canadian National (CNI) performing in this market?.

Overview of Canadian Pacific and Canadian National

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Note: Data used here is thought to be accurate.Do your own research before making any investment decisions.

CN Logo

Canadian National is the largest railroad in Canada. It operates a total of 20,400 route miles and has significant operations in the US as well with about 5,000 of its workforce. Domestic US operations accounted for about 19% of total revenue in 2007.It is the only Canadian railroad that connects the Pacific Coast, Atlantic Coast and the Gulf Coast in the US.Memphis, TN is one of the major hubs for CN.

Cp Logo

Canadian Pacific was the first railroad in North America to connect coast-to-coast in 1885. Besides Canada, this Calgary, Alberta based railroad operator has operations in the US NorthEast and the MidWest. CP generates most of its revenue from operations in the western Canada.Today the company has 13,200 route miles and is a major force in the movement of natural resources and goods from the western provinces of Canada to the US and other world markets.

Comparison of CN Vs.CP
Canadian National’s market cap. is about three times that of Canadian Pacific. The dividend yield of 1.73% is comparable to CP and US peers. In the past 5-years average annual dividend growth and EPS growth has been 24% and 26% respectively.

Last year forest products and automotive accounted for 26% of total revenue. For the second quarter of 2008, these two groups were down 14% and 13% respectively due to the slowdown in the US housing sector and the auto industry. CN transports large number cars assembled in Ontario factories to the US. Groups that had revenue increase int he last quarters were inter-modal,coal and other commodity related items. With the highly anticipated Prince Rupert container terminal in the Pacific Coast providing great access to the Asian markets it will be interesting to watch the impact of this investment in future quarters as inter-modal group revenue continues to remain strong. Even if the US economy continues to be in recession mode, CN should have stable revenues coming in from the movement of grains, oil, coal, chemicals etc. CN is probably a better play than CP because it has a larger US presence and is well diversified in terms of various commodity items transported.

The average annual dividend and EPS growth rate in the past 5 years for Canadian Pacific is 14% and 12% respectively. Canadian Pacific should continue to benefit from the demand for coal and oil from Alberta’s tar sands.

Last quarter CP reported flat revenue growth when compared to 2Q,2007. Recession in the US and the higher price of fuel forced CP to revise its 2008 guidance downward to $4.00 to $.20 diluted EPS from $4.40 to $4.60 announced earlier. Like CN, CP also experienced a decrease in revenue for the forest products group and growth in industrial, chemical,coal transportation.

Summary
Canadian Railroad stocks have had pullbacks in the past couple of months due to the crash in commodity markets and North American economic conditions. However these two stocks have solid fundamentals and are good picks for long-term growth. An investor looking to add some Canadian stocks to their well diversified portfolio may consider these two stocks. They are a proxy for the industrial sector and indirect plays of the Canadian natural resource story.

Disclosure: Long CNI,NSC,CSX

10 Highly Traded European ADR Stocks

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The following table lists the most traded ten European ADRs in the US exchanges based on the daily trading volume:

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ING and UBS are the two financials in this group.UBS suspended its dividend few months ago after heavy write-downs due to losses in the credit mess.So its not surprising that the stock is down nearly 60%.

Nokia was named as one of “The top 100 brands in the world” in the latest edition of BusinessWeek.

Total Fina (TOT), ING, NOK and ABB may good long-term stocks that
are attractive at these levels.

Long: ING,ABB

Three Australian Stocks with > 6% Dividend Yields

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A review about 3 Australian bank stocks that pay great dividends and have above average dividend growth rates.In the current market conditions nobody knows exactly where financials and in general the markets are heading. A simple and effective strategy now maybe to nibble a few foreign stocks that pay high dividends. One group that fits this idea are the Australian bank stocks.

All these 3 banks trade as ADRs in the US but only one (WBK) is listed in the New York Stock Exchange. The other 2 trade in the OTC markets. Here is a brief overview of these bank stocks:

1.Company Name: Westpac Banking Corp
Ticker: WBK
Country: Australia
Dividend Yield : 6.85%
Annual Dividend Growth for past 5-years: 13.35%

2.Company Name: National Australia Bank Ltd
Ticker: NABZY
Country: Australia
Dividend Yield : 11.32%
Annual Dividend Growth for past 5-years: 4.35%

3.Company Name: Australia & New Zealand Banking Grp Ltd
Ticker: ANZBY
Country: Australia
Dividend Yield : 9.08%
Annual Dividend Growth for past 5-years: 11.36%

Just like Canada,Brazil,Russia,etc. Australia is also a commodity-driven economy. So any volatility in that sector will affect Aussie stocks heavily. However compared to mining stocks, banks may not be battered that much. Besides Aussie banks have high exposure to New Zealand and many other Asian markets and nearby Pacific islands.

The Two Most Traded Brazilian ADRs

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Companhia Vale do Rio Doce (RIO) and Petroleo Brasileiro(PBR) are the two most traded Brazilian ADR stocks in New York.

Until recently RIO always used to be in the most active list in NYSE. But recently PBR seems to be joining this list as well. For example, today RIO had a volume of 40M and 35M shares of PBR changed hands. PBR is becoming an attractive stock for many investors including institutional funds as it is an oil play. Many emerging market and Latin America focussed funds hold PBR by default. Similarly RIO has been a long-time favorite of investors since it is in the mining sector and one cannot ignore natural resource stocks when investing in Brazil. Below is a quick review of the these two stocks.

1. Company Name: Companhia Vale do Rio Doce (Vale)
Ticker: RIO
Country: Brazil
Sector: Mining
Dividend Yield : 1.14%
P/E Ratio: 9.33

Beyond Brazil, RIO has operations in Canada, Australia, China, Indonesia,etc.The market cap. is $114 B and there are about 4.8B shares outstanding. The stock had a great run but cratered badly after the commodity boom crashed in emerging markets. From a high of $44 a few months ago, the stock has fallen to $23+ today.

RIO’s revenue has increased each year for the past 5 years and it has raised dividend at an average annual rate of about 22%. RIO is a great stock to play the commodity boom. But it is a risky sector to invest in as well since commodity prices will crash rapidly within a short time. The recent crash in oil and other commodities is proof of that. One should not invest in this stock unless they have a well diversified portfolio involving many sectors and spread over different countries and asset classes.

2. Company Name: Petroleo Brasileiro SA – Petrobras (Petrobras)
Ticker: PBR
Country: Brazil
Sector: Oil
Dividend Yield : 0.08%
P/E Ratio: 11.96

PBR is a perennial favorite of many Latin American investors. Its market cap. of $207B is bigger than Chevron, TotalFina, Eni Spa etc. PBR is up about 34% in 52 weeks. The company has great long-term growth as well with the 5-year revenue and earnings growth in the 40% range. The P/E is a bit higher than its peers but thats because PBR has better growth potential. After reaching a high of over $70 PBR goes for about $48 today.