Equity Tier 1 Ratios of Asian Banks
In the journal article “Sins of Past Guide Asian Banks“, Peter Stein notes that Asian banks are well capitalized than their U.K. and European peers. Singapore banks have higher equity Tier 1 ratios based on the proposed Basel 3 standards than Chinese and Indian banks. Australian banks are just a notch above European and British banks.
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Related:
The Complete List of Foreign Bank ADRs Trading on the OTC Markets
The Complete List of Foreign Bank Stocks (includes Canadian Banks)
Are Coal Stocks a Good Buy Now?
Coal is the main source of electricity generation in many countries. In addition, coal is used in industrial and other sectors. The global consumption of coal is projected to increase each year by over 1.5% annually.
Yesterday Australia signed a $60B deal to supply coal to China for the next 20 years. As part of the contract each year Australia will ship 30 million tonnes of coal to energy-hungry China. It must be noted that China is the largest consumer of coal in the world and relies on coal to meet 70% of its energy needs.The deal is the largest single export deal ever signed by Australia. Thousands of jobs are expected to be created as a result of this contract.
In the U.S., coal-fired plants accounted for 44.4% of the country’s power generation thru October last year.
From the U.S. Energy Information Administration site:
“Coal use in the United States totaled 22.5 quadrillion Btu in 2006—92 percent of total coal use in North America and 48 percent of the OECD total. U.S. coal demand rises to 26.6 quadrillion Btu in 2030 in the IEO2009 reference case. The United States has substantial coal reserves and relies heavily on coal for electricity generation, a position that continues in the projections. Coal’s share of total U.S. electricity generation (including electricity produced at combined heat and power plants in the industrial and commercial sectors) declines from 49 percent in 2006 to 47 percent in 2030.”
14 Coal stocks that trade on the New York Stock Exchange are listed below:
| S. No. | Company | Ticker |
|---|---|---|
| 1 | Arch Coal, Inc. | ACI |
| 2 | Alpha Natural Resources, Inc. | ANR |
| 3 | Peabody Energy Corporation | BTU |
| 4 | CONSOL Energy Inc. | CNX |
| 5 | Evergreen Energy Inc. | EEE |
| 6 | Massey Energy Company | MEE |
| 7 | Natural Resource Partners LP | NRP |
| 8 | Penn Virginia Resources | PVR |
| 9 | Walter Energy, Inc. | WLT |
| 10 | Yanzhou coal mining Co. (ADR) | YZC |
| 11 | International Coal Group, Inc. | ICO |
| 12 | Penn Virginia GP Holdings, L.P. | PVG |
| 13 | Patriot Coal Corporation | PCX |
| 14 | Cloud Peak Energy Inc. | CLD |
One of the stocks shown above is the ADR Yanzhou Coal Mining Co(YZC) of China. Yanzhou is engaged in the mining, processing, transportation of coal and generation of electricity. As for the answer to my title question, investors may want to consider coal stocks for the reasons mentioned above.
Why Diversification Still Matters
I posted The Importance of Diversification chart last year in an article on Callan charts. In 2008, diversification across countries did not work well for investors as the majority of stock markets fell. However that does not mean diversification is dead. Diversification still matters. One can diversify by not only investing in different countries but can also diversify picking various sectors within a country. The following charts show the importance of diversification:
Click to enlarge
1. Periodic Table of Style Rotation — Why Diversification Matters
2. Periodic Table of Sector Rotation — Why Diversification Matters
3.Annual Returns for Key Indices - 20 Years (1989-2008)
The IFA Periodic Table of Investment Returns
For the pdf versions, click here and here.
Consumer Staple Stocks May Provide Shelter
The S&P 500 is down 4.25% YTD. The consumer staples sector in the S&P 500 index is down only 2.11% YTD. In 2008 when the global credit crisis ravaged markets worldwide, consumer staples was the best performing sector with a decline of 16.61%. For example the financials were down about 50% that year.(Source: Periodic Table of Style Rotation — Why Diversification Matters, American Century Investments).
Generally consumer staple companies that make basic necessities of every day life such as dish washing liquids, soaps, toothpaste, etc. tend to offer stable growth and offer downside protection in adverse market conditions. People rarely cut down on consumer staples even when the economy is in recession. Items such as toothpaste, deodorant, soaps, etc. are cheap to afford. Companies in this sector make profits using economies of scale and product differentiation strategies. Investors looking for shelter in the coming storm this year may want to check out some of the stocks in this sector.
The table below lists 18 stocks in the Consumer Staple stocks traded on the NYSE:
| S. No. | Company | Ticker |
|---|---|---|
| 1 | Alberto-Culver Company | ACV |
| 2 | Avon Products, Inc. | AVP |
| 3 | Blyth, Inc. | BTH |
| 4 | Church & Dwight Co., Inc. | CHD |
| 5 | Colgate-Palmolive Company | CL |
| 6 | The Clorox Company | CLX |
| 7 | Ecolab Inc. | ECL |
| 8 | The Estee Lauder Companies Inc. | EL |
| 9 | Herbalife Ltd. | HLF |
| 10 | Nu Skin Enterprises, Inc. | NUS |
| 11 | Newell Rubbermaid Inc. | NWL |
| 12 | Oil-Dri Corporation of America | ODC |
| 13 | The Procter & Gamble Company | PG |
| 14 | Revlon, Inc. | REV |
| 15 | Tupperware Brands Corporation | TUP |
| 16 | Owens Corning | OC |
| 17 | Zep, Inc. | ZEP |
| 18 | Chemspec International Ltd | CPC |
Some of the companies in the list have strong international presence. For example,Colgate-Palmolive (CL) makes a multitude of products such as Colgate Toothpaste, Palmolive dish-washing liquids, Irish Spring bath soaps, etc. Some of Colgate’s brands like Colgate toothpaste are highly popular in emerging countries. Colgate-Palmolive stock has been a long-term winner for investors. In the past 25 years (12/31/83 to 12/31/2009), the total return on a CL stock is a cool 4619% compared to 2989% for peer companies and just 1123% for the S&P 500.(Source: Colgate’s Investor Relations site). Similarly Cincinnati,OH -based Proctor & Gamble (PG) is a Fortune 500 company with operations in many countries. P&G is the owner of many global brands such as Gillette, Iams, Scope, Pampers, Bounty, Olay, etc.
Review: The Callan Periodic Table of Investment Returns 2009
Callan Associates has published The Callan Periodic Table of Investment Returns for 2009.
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Click to Enlarge
Some of the key observations from this chart include:
- Global stocks rallied about 32% in 2009 while US S&P 500 climbed 26.5%
- Small caps outperformed large caps for the ninth year out of the past 11 years
- Fixed Income generated a 5.9% return
You can download the complete pdf version of “The Callan Periodic Table of Investment Returns (Key Indices: 1990-2009)” by clicking here.
The Best and Worst Banks in the U.S.
Sixteen banks have failed so far this year. 1st American State Bank of Minnesota of Hancock, Minnesota was the latest bank to be shut down yesterday. In the past few years investing in bank stocks have gotten tricky as many of them have been battered by the credit crisis. However there are some high quality banks which continue to remain strong and pay dividends.
The Forbes magazine published a list of America’s best and worst 100 banks last month.
These banks were ranked on the following factors:
- Return on average equity
- Net interest margin
- NPLs as a percentage of loans
- NPAs as percentage of assets
- Reserves as a percentage of NPLs
- Two capital ratios (Tier 1 and risk-based)
- Leverage ratio
The size of the banks selected ranged with assets of $5.2B to $2.3T. Investors can use the Forbes list as a starting point to identify potential candidates for investment opportunities.
The Five Best Banks are:
Bank of Hawaii(BOH)
Current Dividend Yield: 4.13%
UMB Financial (UMBF)
Current Dividend Yield: 1.97%
Commerce Bancshares (CBSH)
Current Dividend Yield: 2.45%
Prosperity Bancshares(PRSP)
Current Dividend Yield: 1.59%
SVB Financial(SIVB)
Current Dividend Yield: N/A
The Five Worst Banks are:
Capitol Bancorp (CBC)
Sterling Financial (STSA)
R & G Financial
W Holding (WHI)
Flagstar Bancorp (FBC)
The highest ranked bank in this list was Bank of Hawaii(BOH). This conservative bank had a non-performing loan ratio of just 1.2% of total loans in the last quarter. Bank of Hawaii also declined TARP funds from the Federal government. Many of the banks that declined TARP funding actually increased lending. Another bank that is noted in the article is Capital Bancorp (CBC) of Michigan.”The bank has a presence in 17 states, but has been badly hurt by the severe economic problems of its home state. Its capital ratios of 8.4% (Tier 1) and 11.2% (risk-based) are both sixth worst among the 100 largest banks. The bank is divesting businesses in six states, including problem areas like California and Ohio to boost its capital ratios and improve its balance sheet.”