Sunday Morning Coffee

This week’s Barron’s featured the final installment of the Barron’s roundtable which included Marc Faber’s picks. I find his commentary in this event to be most useful for what I’m trying to do in terms of learning about new (to me) niches or maybe learning a little more about a niche I’ve already started to study.

Faber touched on two areas of interest to me. The first was publicly traded exchanges with his pick of Oslo Børs which appears to trade in Norway with ticker OSLO and on the US pinksheets with ticker OSBHF. The reason I say appears is that Yahoo Finance which has Norwegian stock quotes on the home market doesn’t have a listing, it does for the pinksheet shares, I also could not find it on the Oslo Børs site. BigCharts does know the Norway listing and I would think Faber would know whether or not he did own shares, BTW he said it yields 10%. I was able to find a page on the company site with financial information that I will try to look at later today.

Zooming out a little bit, I’ve banged the drum a few times about an ETF devoted to global, publicly traded exchanges, such a fund would be heavy in the US exchanges I imagine–there are funds with exchange exposure but they also take in other parts of the sector like asset managers. Broad financial exposure will be unattractive on a fundamental basis, in my opinion, for a long time. Given the severity of the meltdown and the factors causing it I think it will be years before things have a shot at being healthy. I am talking US banks, European banks and even insurance companies, as I’ve been saying all along there will be trades in these along the way and that won’t change but the fundamentals seem a long way from being right.

Our financial exposure has been the same for a while with one Australian bank, a Canadian bank, a bank from Chile, one publicly traded US exchange and an index provider. These are all individual stocks, at times this has been a great grouping and at other times a fair grouping. In theory, instead of individual stocks these could all be replaced with ETFs if they existed. It might be difficult to have an Australian financial sector ETF or one just for the Canadian financials but my mix could be replaced with a commodity based economy financial sector ETF which would include those three countries and obviously our exchange could be replaced with a global exchange ETF–there are enough of those to populate an ETF.

Some of the ideas for ETFs that have come up before (cement ETF, toll road ETF, fishery ETF, airport ETF, frontier market financial ETF and whatever else) certainly might have trouble catching on but the idea behind the idea, that being specialized exposures for a diversified portfolio, is certainly not new. Many of the stocks in these little niches have been around for a very long time and have better valuations than plenty of US stocks.

Back to Faber, he also mentioned Chiang Mai Ram Medical which is a Thai hospital which could be a part of the medical tourism theme that I started writing about a year and a half ago. There does not appear to be a five letter designator for US trading but anyone so inclined could get a trade done, depending on their brokerage, and this would create a ticker symbol (again assuming there is not one already). I think this theme is important, if you look up the company on Google Finance you’ll find a little info and a list of other related companies.

If it is legitimate to build a portfolio of individual stocks, and (changing examples) if a medical tourism stock could be valid in a portfolio of individual stocks then a fund that owned a diverse selection of them would also be valid.

Plenty of people knock this thinking which is fine for them but I think the last decade provides ample evidence of the need to expand investment horizons in order to have a shot at adequate returns. It is not that difficult to realize that a theme has real demand behind it or that a particular country has a low debt load, favorable demographics and whatever else might make it a favorable destination. Being able to see this and choosing not invest seems very illogical, especially when the alternative might be to hope that what worked in the 80s and 90s will work again.

8 Comments

  1. RR,

    1. How do position IRA clients you manage with respect to dividends from countries such as Chile, Norway, France, Australia. They have a dividend tax of 15 – 35%, depending on the tax treat with the US.

    That’s non- recoverable money. Do you figure the capital gains over time will greatly exceed the dividend witholding loss?

    2. I was too impatient with MOO and missed NVO. Great themes. What do you do with new client money when these tow stocks, for example have had such a run. NVO is like p/e of 30.

    Reply
  2. Looking back at my time thus far the foreign tax paid has been a small consideration versus the result these stocks have given. Just my opinion.

    in a portfolio with 35 holdings, about what we have, there will likely always be some names that have done very well very recently and some that have not and that mix will always change. in that light if i believe a stock to be the best proxy for something then i will buy it.

    Reply
  3. Roger,

    Isn’t FFD close to meeting your requirement of a frontier market financial ETF? It’s looks like it is over 50% financials.

    Reply
  4. FFD is a closed end fund not an ETF. If you found something that says 50% financial that was as of the last reporting period. It could now be more or less–no way to know.

    But maybe it would be worth looking at a couple of the frontier ETFs to see their financial weight–except for the Guggenheim fund which is more like an emerging market ETF.

    Reply
  5. Completely off topic:

    Faber had some interesting comments about the U.S. and the sitting President a few days ago during a Bloomberg interview. I’m sure you can google it.

    As I write this, I am enjoying a well-seasoned Cuban Partagas (Churchill)and sipping some 12 year-old Havana Club on the porch in shirt sleeves overlooking our pond here in beautiful coastal Carolina.

    Taking time after church from the usual day to day regimen by doing nothing is my cure for dealing with life during the week. It makes one fresh to deal with civilation tomorrow.

    Who’s your Super Bowl pick?

    Reply
  6. I would prefer the Packers win to selfishly preserve more of the Patriots legacy for this period also, tough to root for Roethlisberger.

    I think the Steelers are a better team but the Packers have more momentum so i guess i’m not sure

    Reply
  7. Hummingbear, it is possible that it has been trading in Norway for years but never traded in the US on the pinks until last November. I don’t know, but it is possible.

    Reply

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Sunday Morning Coffee

This week’s Barron’s featured the final installment of the Barron’s roundtable which included Marc Faber’s picks. I find his commentary in this event to be most useful for what I’m trying to do in terms of learning about new (to me) niches or maybe learning a little more about a niche I’ve already started to study.

Faber touched on two areas of interest to me. The first was publicly traded exchanges with his pick of Oslo Børs which appears to trade in Norway with ticker OSLO and on the US pinksheets with ticker OSBHF. The reason I say appears is that Yahoo Finance which has Norwegian stock quotes on the home market doesn’t have a listing, it does for the pinksheet shares, I also could not find it on the Oslo Børs site. BigCharts does know the Norway listing and I would think Faber would know whether or not he did own shares, BTW he said it yields 10%. I was able to find a page on the company site with financial information that I will try to look at later today.

Zooming out a little bit, I’ve banged the drum a few times about an ETF devoted to global, publicly traded exchanges, such a fund would be heavy in the US exchanges I imagine–there are funds with exchange exposure but they also take in other parts of the sector like asset managers. Broad financial exposure will be unattractive on a fundamental basis, in my opinion, for a long time. Given the severity of the meltdown and the factors causing it I think it will be years before things have a shot at being healthy. I am talking US banks, European banks and even insurance companies, as I’ve been saying all along there will be trades in these along the way and that won’t change but the fundamentals seem a long way from being right.

Our financial exposure has been the same for a while with one Australian bank, a Canadian bank, a bank from Chile, one publicly traded US exchange and an index provider. These are all individual stocks, at times this has been a great grouping and at other times a fair grouping. In theory, instead of individual stocks these could all be replaced with ETFs if they existed. It might be difficult to have an Australian financial sector ETF or one just for the Canadian financials but my mix could be replaced with a commodity based economy financial sector ETF which would include those three countries and obviously our exchange could be replaced with a global exchange ETF–there are enough of those to populate an ETF.

Some of the ideas for ETFs that have come up before (cement ETF, toll road ETF, fishery ETF, airport ETF, frontier market financial ETF and whatever else) certainly might have trouble catching on but the idea behind the idea, that being specialized exposures for a diversified portfolio, is certainly not new. Many of the stocks in these little niches have been around for a very long time and have better valuations than plenty of US stocks.

Back to Faber, he also mentioned Chiang Mai Ram Medical which is a Thai hospital which could be a part of the medical tourism theme that I started writing about a year and a half ago. There does not appear to be a five letter designator for US trading but anyone so inclined could get a trade done, depending on their brokerage, and this would create a ticker symbol (again assuming there is not one already). I think this theme is important, if you look up the company on Google Finance you’ll find a little info and a list of other related companies.

If it is legitimate to build a portfolio of individual stocks, and (changing examples) if a medical tourism stock could be valid in a portfolio of individual stocks then a fund that owned a diverse selection of them would also be valid.

Plenty of people knock this thinking which is fine for them but I think the last decade provides ample evidence of the need to expand investment horizons in order to have a shot at adequate returns. It is not that difficult to realize that a theme has real demand behind it or that a particular country has a low debt load, favorable demographics and whatever else might make it a favorable destination. Being able to see this and choosing not invest seems very illogical, especially when the alternative might be to hope that what worked in the 80s and 90s will work again.

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