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.

Investing by Proxy

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The idea behind the title is that sometimes we don’t have to invest directly in order to invest in some specific sector/investment. It is kinda like investing indirectly in the sector you want. In this post lets review a few such strategies.

1.Commodity

Instead of investing directly in commodity stocks like oil,mining, etc. it may be a better and easy way to pick up some commodity rich countries. Countries like Canada,Australia, Brazil, Russia match this scenario since they are so commodity driven economies.

To invest in them pick up the following ETFs:

Australia – EWA

Canada – EWC

Russia – RSX

Brazil – EWZ

2.Growth in Central Europe

To take advantage of growth in central European countries like Romania, one can pick up some ishares Austria shares EWO. This will give indirect exposure to Central Europe. Erste Bank, a large Austrian bank is expanding heavily in neighboring countries.

Is the Economy in Recession ?

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When you look at whats happening all around us it feels like we are in a recession here in the US. William Engdahl of Asia Times has an written article today titled “Henry Paulson has lost control“. In this piece he writes about the current state of the economy and ridicules Henry’s assertion that “our banking system is a safe and sound one”. BTW, Henry Paulson is the Secretary of the US Treasury.

Towards the end of the article, he notes the following retail store closures:

“Ann Taylor – 117 stores nationwide.
Eddie Bauer to close more stores after closing 27 stores in the first quarter.
Cache, a women’s retailer – 20 to 23 stores this year.
Lane Bryant, Fashion Bug, Catherines -150 stores.
Talbots, J Jill – Talbots will close all 78 of its kids and men’s stores plus 22 that are a mix of Talbots women’s and J Jill.
Gap Inc – 85 stores.
Foot Locker – 140 stores.
Wickes Furniture is closing all of its stores after filing for bankruptcy protection.
Levitz, a furniture retailer – 76 in December.
Zales, Piercing Pagoda – 82 stores by July 31 followed by another 23.
Disney Store owner has the right to close 98 stores.
Home Depot – 15 outlets, affecting 1,300 employees. It is the first time the world’s largest home improvement store chain has closed a flagship store.
CompUSA – company closed.
Macy’s – 9.
Movie Gallery, a video rental company – to close 400 of 3,500 Movie Gallery and Hollywood Video stores in addition to 520 closed last autumn.
Pacific Sunwear – 153 Demo stores closing.
Pep Boys, an auto parts supplier – 33.
Sprint Nextel – 125, with 4,000 employees affected, following 5,000 layoffs last year.
J C Penney, Lowe’s and Office Depot – scaling back.
Ethan Allen Interiors – 12 of 300 stores.
Wilsons the Leather Experts – 158.
Bombay Company – all 384 of its US-based stores.
KB Toys – 356 stores as part of its bankruptcy reorganization.
Dillard’s – another six stores this year. “

This list does not include the famous Starbucks stores. In our area, 1 Pep-Boys,few restaurants, 1 Macy’s closed.

Readers – How about in your area? Do you see any store closings?. Do you see signs of recession?

Cheers !!

Foreign Mutual Fund Picks

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Mutual funds are one easy way to get some exposure to foreign markets.They offer diversification and the fund manager deals with all the issues related to investing in overseas stocks.There are thousands of mutual funds out there.So it is not easy to pick the right ones.

The two mutual funds listed below can be a starting point for investors looking to invest in foreign stocks.

1.Fund Name:Fidelity Nordic Fund
Ticker: FNORX
Fund Intro: “The fund seeks long-term growth of capital. The fund normally invests at least 80% of assets in securities of Danish, Finnish, Norwegian, and Swedish issuers. It may invest the balance, however, in securities of other European issuers.”

2.Fund Name:Aberdeen Global Utilities
Ticker: GGUAX
Fund Intro:”The investment seeks long-term capital growth. The fund invests at least 80% of assets in equity securities issued by U.S. and foreign companies with business operations in the utilities sector.

BTW photo is a fjord in Norway.

Pretty in Pink ADRs

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pink-dress

Many investors ignore the Pink Sheet market in the US because pink sheet stocks have had a bad reputation for many years. However times have changed and there are plenty of great opportunities in the Over-The-Counter (OTC) markets.One such example is Nestle (NSRGY), one of the top food company in the world.

In fact some of the world’s leading companies can be found in this market where they trade as American Depository Recipts(ADRs). Some of the foreign companies moved their stock to the pink sheets in the past few months since they do not want to deal with the regulations of Sarbane-Oxley law.Some even left the NYSE since their trading volume was too low and the listing fees is high.

The short summary of some 10 large multi-billion $ foreign company stocks that trade in the pink sheets are listed below.One can invest these stocks without worrying that they are some worthless pink sheet stocks promoted by the mafia.:-)

1.Company:Benetton Group SPA
Ticker: BNGPY
Country: Italy

2.Company:Heineken N.V.
Ticker: HINKY
Country: The Netherlands

3.Company:Centrica Plc
Ticker: CPYYY
Country: UK

4.Company:DBS Group Holdings Ltd.
Ticker: DBSDY
Country: Singapore

5.Company:E.ON AG
Ticker: EONGY
Country: Germany

6.Company:Groupe Danone
Ticker: GDNNY
Country: France

7.Company:Norsk Hydro ASA
Ticker: NHYDY
Country: Norway

8.Company:TNT N.V.
Ticker: TNTTY
Country: The Netherlands

9.Company:Tullow Oil Plc.
Ticker: TUWLY
Country: UK

10.Company:BASF SE
Ticker: BASFY
Country: Germany