Mexico vs. China – Top 10 Reasons To Nearshore Manufacturing: Infographic

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Mexico and China compete to attract foreign direct investment especially from US multinationals. While labor in China is much cheaper than in Mexico, Mexico has many advantages over China. For example, China’s labor practices are much to be desired to say least. A few years ago a spate suicides by workers at Foxconn, a contract manufacturer of Apple(AAPL) in China led to the installation of anti-jumping nets in factories. Incidents such as this are the known cases. Nobody knows what other slavery-like conditions exist there and hidden from the outside world. Another factor that ethical investors would consider is that China is a communist state with a one-party rule. So by having factories in China some multinationals indirectly support the single party regime. Mexico on the other hand is a democracy despite having its own issues such as the violence of the drug cartels and corruption.

While researching the advantages of Mexico over China for manufacturing I had saved the following infographic. Though it is a bit old many of the reasons noted still applies.

Click to enlarge

 

Source: Co-Production International

Disclosure: No positions

India’s Sensex Sets Yet Another Record

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The Indian equity market has performed very well this year. The benchmark Sensex has shot up over 21% year-to-date. In the past five years the index has more than doubled. Today the index reached a new high of  58,459.70 before retreating.

Sensex year-to-date return:

Sensex 5-year return:

Source: Google Finance

Disclosure: No positions

Fact of the Day: Number of Job Applications Received by IBM

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IBM(IBM) used to be a great company to work for decades ago. That is no longer the case. These days the company is a yet another average tech shop that runs on its former glory. IBM had a total employee count of about 346,000 worldwide in 2020. The number of employees in the US remains a secret per Statista. As early as 2017, a NY Times article noted that the company had more employees in India than in the US.

Despite all this, IBM received 3 million applications in 2020 according to a recent WSJ piece.

It is indeed shocking that 3 million people want to work for a company that is a former shell of itself. Unlike the past when it was a pioneer in innovation, today it is mostly a “body shop” in tech parlance.

Disclosure: No Positions

The Newest UNESCO World Heritage Sites: Infographic

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UNESCO World Heritage Sites are sites of historic, cultural, scientific or other form of significance and are considered to be outstanding value to humanity according to Wikipedia. To be designated a world heritage site not only brings prestige but also gives a boost to tourism. at 58, Italy has the most number sites in the world with 58 sites. The US has 24 sites. The following shows the latest list of 34 sites that were added to the list.

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Source: Radio Free Europe/Radio Liberty

The Power of Reinvested Dividends: McDonald’s Example

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Investing in dividend-paying stocks is an important strategy for success with investment in equities. Stocks that not only pay dividends but also increase them consistently over time are even better for long-term investment. Picking and holding dividend growers and reinvesting dividends automatically can generate excellent total returns if held over a decade or more. I have written many times before this strategy before as you can see here and here and here. Recently I came an article that showed the power of dividends using the example of the fast food giant McDonald’s(MCD). From the article by Joyce Gordon at Capital Group:

Supersize me: The power of reinvested dividends

One company that has consistently grown its dividends is McDonald’s. To get a sense of how regularly reinvesting dividend payments can compound over time, consider a hypothetical $100,000 investment in the company for the 20 years from December 31, 2000, through December 31, 2020, with all dividends reinvested.

Big Macs were probably not what Albert Einstein imagined when he called compound interest the “Eighth Wonder of the World.” But the power of compounding can be a wonder to behold.

In this hypothetical example, the total return of the investment would have been impressive — from $100,000 to $1,057,057, a 957% gain.

Reinvested dividends: Better than breakfast all day

Sources: Capital Group, FactSet. Growth rate calculations for value of shares from reinvested dividends and dividends paid use the first year’s dividends payment ($676) as a starting value. This information should not be considered a recommendation to purchase or sell a particular security and is provided for illustrative purposes only.

Take a look at what happened with the dividends. The value of shares from reinvested dividends would have grown from $676 in 2001 to $425,940 in 2020, or enough to purchase more than 106,000 Big Macs last year.

The special sauce of compounding in this example lies in the growth in share count from reinvested dividends. The number of shares purchased with the original investment would have been 2,941. By the end of the 20 years, the share count would have increased to 4,926, a 67% increase. For the length of the investment, dividend payments would have represented 40% of the total return.

Source: Dividend growth: The special sauce of long-term investing, Joyce Gordon, Capital Group

The author uses $100K as the original investment in a single stocks. Most retail investors are unlikely to have this amount to invest in one stock. However we can use this case study with a smaller at $10K and the final return of over $100K is great as well.

Who knew that an average fast food company can yield such spectacular returns !

The complete article linked above is worth a read.

Disclosure: No Positions