Country ETFs – Heavy in Financials

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Some of the ETFs for individual countries have high allocations to financial stocks. While this has been good for performance until 2006, it has become a drag on many of these ETFs as financials have been crushed during this bear market. Many bank stocks such as ING, LYG are well off their 52 week highs.

Investing in country specific ETFs makes sense in one way since you get exposure to basket of stocks in that country. On the other hand some of these ETFs are built in such a way that they have heavy concentration in one sector or another. For eg. – ishares’ many country ETFs have over 20% of their assets in financial stocks. Some of them such is the ishares Belgium ETF – EWK have over 50% of their assets in financials. This kind of heavy concentration in financial is extremely risky in times like this. It is possible that if banks take off then these ETFs might sky rocket. But if banks continue to falter, then these ETFs might face even more downward pressure. So an investor has to review the portfolio allocation carefully before jumping into these ETFs.

The weightage for financials for ishare’s country ETFs as of 6/30/08 is listed below:

ishares MSCI Austria Investable Market Index Fund (EWO)
Financials = 36.28%

ishares MSCI Belgium Investable Market Index Fund (EWK)
Financials = 55.77%

ishares MSCI Italy Index Fund (EWI)
Financials = 45.44%

ishares MSCI Netherlands Investable Market Index Fund (EWN)
Financials = 25.71%

ishares MSCI Spain Index Fund (EWP)
Financials = 40.79%

ishares MSCI Sweden Index Fund (EWD)
Financials = 24.34%

ishares MSCI Switzerland Index Fund (EWL)
Financials = 21.96%

ishares MSCI United Kingdom Index Fund (EWU)
Financials = 20.76%

The ETFs for France (EWQ) and Germany (EWG) have less than 20% of assets in financials.
[tags]Technorati,Financials,ETF,Banks[/tags]

New Foreign Stocks listed in NYSE

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Even in bear markets some good companies list their stocks in the stock exchanges.So its a worth a look to keep an eye on them.

The following are some of the new foreign stocks (ADRs) that were listed in the New York Stock Exchange:

1. Safe Bulkers, Inc. (SB) is in the shipping industry.Transports grain,ore and other goods in the drybulk transportation sector of the shipping world. The company has 11 ships and is based in Athens, Greece.

2.Britannia Bulk Holdings Inc (DWT) is another drybulk shipping company like the above, DWT operates in the Baltic region and is based in London,UK. It owns 22 ships.

3.General Steel Holdings, Inc. (GSI) is a Beijing, China based steel sector. It makes hot-rolled carbon and silicon steel sheets which are used in many items like shipping containers, heavy equipment vehicles,etc.

4.ReneSola Ltd (SOL)  is a China based solar wafer manufacturer which is used in making solar cells.

E ON ADR Ratio Change and Stock Split

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From August 4, 2008 E.ON’s ordinary stock listed in Germany started trading at a split adjusted basis of 3:1. This was done by the EON board since earlier it was trading for 100 EUR in Germany. In addition EON changed the ratio of the ADR share (EONGY) from 3 ADR shares to 1 to the new ratio of 1 ADR share to 1 ordinary share.

How does this affect EONGY ADR?

The stock split and the ratio change will NOT EONGY shares. This was just a ratio change for the ADR.So no new additional shares will be distributed .

EONGY Details:
Company Name: E.ON AG
Ticker: EONGY
Country: Germany
Sector: Utility
Current PPS: $59.00
Yield: 3.56%
$10K invested 5 years ago would be worth: $45,121 as of Aug 2,2008

Related Link:
E.ON share made more attractive by share split and conversion to registered shares

Pay Attention to Payout Ratio

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Photo: Barcelona Palace, Spain

When looking at stocks for good dividend yields,”Payout Ratio” is one of the many factors that have to evaluated. Payout ratio simply means the amount a company is paying
out to investors in the form dividends from its earnings.

High pay out ratio shows that the company wants to hand out more of the profits to shareholders as opposed to retaining it for growth purposes.Typically mature banks and utilities have high payout ratio.

The following list shows three stocks with high payout ratio for 5 years average:

1.Company:Bank of Novo Scotia – BNS
Dividend Payout Ratio 5 year Avg: 40.0%

2.Banco De Chile – BCH
Dividend Payout Ratio 5 year Avg: 57.0%

3.Banco Bilbao Vizcaya – BBV
Dividend Payout Ratio 5 year Avg: 38.0%

Related Posts:
1.High Dividend Growth Rate ADRs

2. How do you Analyze a Bank Stock? – Part II

3. How do you Analyze a Bank Stock?

Go South Young Man !

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Photo: Petrohue Falls and Mt. Osorno, Chile 

In this bear market, it is not easy to make money.One has to look outside of the box for opportunities. This means going to emerging markets. Many centuries ago, young men in Europe would go to East because thats where the riches were there.

Nowadays its not necessarily the East that shines. While countries like China and India are growing they face many “hiccups” and other countries like Japan are in a funk for many years. So these days one has to go down south – meaning south of US like Mexico, Brazil, Chile, etc. to make some decent profits.

There are hundreds of stocks from South and Latin America that trade as ADRs in the US.The trick is to identify profitable and growing companies. The following are four stocks that have grown over 25% YTD (Year-To-Date).

1.Company: Sociedad De Chile – SQM
Country: Chile
YTD Growth: 105.88%

2.Company: Telenorte Celular – TCN
Country: Brazil
YTD Growth: 41.10%

3.Company: Fomento Economico Mexicano – FMX
Country: Mexico
YTD Growth: 29.39%

4.Company: Gerdau – GGB
Country: Brazil
YTD Growth: 40.66%

Majority of the emerging markets are commodity based economies. So caution is needed when jumping into any of the stocks like above.

When commodities fall, emerging markets can fall harder.In article titled ”
The End Of The Road?” Roger over at Random Roger blog writes that “iShares Brazil (EWZ) is down 25% from its high a couple of months ago.”

Similarly in 2007,2006 and 2004 EWZ fell over 20% in about a month.So careful analysis of individual stocks and a strong stomach is required for investing in these markets.