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Archive for the ‘Sector’ Category

Highest Rated Sectors: Did Analyst Get It Right ?

Posted by rantaboutit on March 13, 2007

What are we looking at here ?
The most popular S&P 1500 groups. The table is self explanatory, so i will just point out few interesting things. The first column is the list of sectors most recommended by the Wall Street Analyst. The sixth column gives the overall percentage of buy recommendation. The last column is the stock that is most favored in that particular sector. As you can see Contruction Materials topped the table with 61.1% buy recommendation. Analyst are most bullish on Vulcan Materials Company VMC.

Construction Material Sector
Vulcan Materials Company VMC is currently trading at $116.01

  • P/E = 24.76 (ranked #2 in the construction materials sector)
  • EPS = 4.69
  • PEG =2.31 (ranked #2)
  • Dividend = 1.50% (ranked #9)
  • Market Capital = $11.02 billion (ranked #2)
  • Analyst recommendation of 1.4/5.0

All in all, pretty impressive record. Add to that their 1-year return was whooping +49.75%. No wonder analyst love it. Construction Raw Materials sector performance ? Last one year returns was +25%. Pretty neat…Analyst got it right.

Consumer Finance Sector
Second best is Consumer Finance according to all the analyst. Highest rated in that group is American Express Company AXP which is priced at $54.75.

  • P/E = 18.29 (ranked #11 in the consumer finance sector)
  • EPS = 2.99
  • PEG =1.28 (ranked #9)
  • Dividend = 1.00% (ranked #14)
  • Market Capital = $65.28 billion (ranked #1)
  • Analyst recommendation of 2.0/5.0

AXP has a huge market capital and ranked #1 in their sector. P/E and PEG all look good. But what matters the most for the investors is returns. Their 1-year return was a lousy +0.96%.
Consumer Finance sector performance ?
Last one year returns was -1.65%. Pretty lousy…Analyst got it wrong.

What did we prove here ? Analyst do not get it right all the time. However at times they do not get the credit they deserve. Predicting stock markets is no easy task, especially with multiple factors affecting the stock movement. I checked out 1-year returns for all the listed sectors in the table above. 8 out of 10 were positive. Noteworthy were Water Utility with +25.94% returns, Aero & Defense with +23.01% and Energy Services with +15.21% returns.

Conclusion: Bashing the analyst for getting is wrong is always one of the favorite things to do for all kinds of investors. You and me need to understand that analyst do not get it right all the time. Obviously they wont. Otherwise they would have made billions and billions of dollars at the stock market. Analyst opinions & recommendations can be a good guide for investors to dig deep into the company stock. But it should not be used as an indicator to trade stocks. That brings us to the million dollar question. Are you going to trust the analysts and buy the stock/sector they are most bullish on ?

Recommended Books:

(Source: TickerSense)

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Posted in Construction Material, Consumer Finance, Energy, Health Care, Oil, Sector, Water | Leave a Comment »

Foreign Investment in United States

Posted by rantaboutit on March 7, 2007

In 2004, the total foreign direct investment (FDI) in the United States (U.S.) stood at $1.5 trillion, equivalent to $2.7 trillion in today’s market value which represents approximately 10% of the total current market value of all publicly traded companies in U.S.

Geographic Breakdown

  • European companies made up 65-70% of direct investment in the U.S., with United Kingdom (UK) leading the way. 1/3rd of the total investment from Europe came from UK, with $250 billion invested in 2004. UK, Germany, Netherlands and France were the top four investors in U.S. in that particular order.
  • Asian and the Pacific firms had the next highest level of investment in the U.S., at approximately $219 billion in 2004. Japan accounted for 75% of the investment. Chinese & Indian investments in 2004 were minimal. However that is bound to change with a number of acquistions by Chinese and Indian firms.
  • Canada finished in the third spot.
  • Direct investment from Latin American investors totals $86 billion. The biggest presence from South American firms came from Panama due to it financial hub status. Brazil ranked #4 behind Mexico and Venezuela respectively.
  • Investment from Africa and the Middle East were less than $10 billion, only 1-2% of the total foreign investment. Israel was the largest investor from the Middle East, with some $4.1 billion in investments. Kuwait follows with $1.2 billion.
Sectoral Facts
  • 1/3rd of FDI in the U.S. is held in the manufacturing sector.
  • 14% of FDI is invested in the financial services sector.
  • Asian and Pacific FDI holdings in the U.S. manufacturing sector amounted to 12.3% in 2004.
Quick Review on Benefits of Foreign Investment
  • Creates New Jobs: U.S. affiliates of foreign companies employ 5.3 million U.S. workers.
  • Boosts Wages: U.S. affiliates of foreign companies tend to pay higher wages than U.S. companies. Foreign companies support an annual U.S. payroll of $318 billion. Some studies have found that foreign companies have paid wages in the past that were as much as 15% higher on average than wages paid by U.S. companies.
  • Strengthens U.S. Manufacturing: 41% of the jobs related to U.S. affiliates of foreign companies are in the manufacturing sector.
  • Brings in New Research, Technology, and Skills: Affiliates of foreign companies spent $30 billion on research and development in 2003 and $109 billion on plants and equipment.
  • Contributes to Rising U.S. Productivity: The increased investment and competition from FDI leads to higher productivity growth, a key ingredient that increases U.S. competitiveness abroad and raises living standards at home.
  • Contributes to U.S. Tax Revenues: In 2002, foreign affiliates paid $17.8 billion in taxes, which represented 12% of U.S. corporate tax revenues.
  • Increase U.S. Exports: U.S. companies can use multinationals’ distribution networks and knowledge about foreign tastes to export into new markets. Approximately 21% of all U.S. exports come from U.S. subsidiaries of foreign companies.
  • Helps Keep U.S. Interest Rates Low: The inflow of foreign capital also decreases the cost of borrowing money for domestic entrepreneurs, especially in the small- to medium-sized enterprise sector.
Some Major Acquisition In Recent Years
  • Acquisition by Lenovo, the largest personal computer company in China, of IBM’s personal computer and laptop unit.
  • State-owned China National Offshore Oil Corporation’s attempted acquisition of UNOCAL.
  • State-owned Dubai Ports World’s planned acquisition of P&O, the operator of many US ports.

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(Source: US Dept of State, Bureau of Economic Analysis, TickerSense)

Posted in Asia, Middle East, Sector, South America | Leave a Comment »

ETF: Something for those Lazy Investors

Posted by rantaboutit on February 19, 2007

Lets face it. Stocks is not for everyone. Alot of research has to be done before you indulge yourself into buying a stock. You need to go over the fundamental and the technical analysis. What is the EPS, P/E, PEG, Market Cap, Dividend, ROC, MACD…the list is end. Obviously you dont have to be a rocket scientist to buy stocks, but without the research it would be pure gambling.

What if i told you, there is another option for those investors who would love to make some money in the stock market but at the same time do not want to spend time analyzing stocks ? If you are that person, Exchange-traded funds (ETFs) may be right for you. ETFs also hold an advantage over mutual funds. Interesting isnt it. Read on…

What Is an ETF?
Think of an ETF as a mutual fund that trades like a stock thus experiencing price changes throughout the day as it is bought and sold. You can short sell them or buy them on margin as well. ETF tracks an index, a commodity or an index fund.

ETFs offer diversification, high trading flexibility, low expense ratio and tax efficiency in a flexible investment. An ETF does not have its net asset value (NAV) calculated every day like a mutual fund does. When buying and selling ETFs, you have to pay the same commission to your broker that you’d pay on any regular order.

Varieties of ETFs
The first exchange-traded fund was the S&P 500 index fund. There are hundreds of ETFs trading on the open market ranging from sector-specific, country-specific and broad-market indexes. You can pretty much find an ETF for just about any kind of sector of the market.

  1. If you are interested in the healthcare sector, Vanguard’s Health Care Viper VHT would be worth looking into.
  2. If you would like exposure to the emerging market, then take a look at iShare MSCI Emerging Market Index EEM. Similarly if you are interested in any country’s index, like say Brazil, you can follow the iShare MSCI Brazil Index EWZ
  3. If you’d like exposure to the internet infrastructure sector, then maybe Internet Infrastructure HOLDRS IIH might be for you.

Below you will find a closer look at some of the more popular ETFs:

Nasdaq-100 Index Tracking Stock (QQQQ)
As the name suggests, this EFT consists of the 100 largest and most actively traded non-financial stocks on the Nasdaq. QQQQ offers broad exposure to the tech sector. Because it curbs the risk that comes with investing in individual stocks, the QQQQ is a great way to invest in the long-term prospects of the technology industry.

SPDRs – Spiders
Imagine trying to buy all 500 stocks in the S&P 500. How crazy that would be ? SPDRs allow individual investors to own the index’s stocks in a cost-effective manner. You can trade the S&P Index 500 (SPY) on the AMEX. Another nice feature of SPDRs is that they divide various sectors of the S&P 500 stocks and sell them as separate ETFs. Here is the list of ETFs for various sectors.

The energy sector SPDR index XLE invests in industries, such as energy equipment and services, and oil and gas services, among others. The technology sector SPDR index XLK invests in industries, such as communications equipment, computers and peripherals, electronic equipment and instruments, telecommunication services, semiconductor equipment and products, information services, Internet software and services and software, office electronics.

iShares
iShares is Barclay’s brand of ETFs. Barclay has put out a number of technology-oriented iShares that follow Goldman Sachs’s technology indexes trading on the AMEX.

Vipers
VIPERs are Vanguard’s brand of EFTs. Vanguard also offers ETFs for many different areas of the market including the financial, healthcare and utilities sectors.

Diamonds
Diamonds Trust DIA tracks the Dow Jones Industrial Average. The fund is structured as a unit investment trust.

Conclusion:
A great reason to consider ETFs is that they simplify index and sector investing in a way that is easy to understand. If you feel a sector is going to do well in the near future, go buy it. If however, you think that a sector is going to slump, go short it.

The combination of diversification, low cost, tax efficient and the flexibility that ETFs offer, makes them attractive trading options. They are easy to understand and easy to use, and they are gaining in popularity at such a rapid pace that some experts anticipate that they will one day surpass the popularity of mutual funds. If ETFs haven’t found a place in your portfolio yet, there is a pretty good chance that they will in the future.

You can also view a small video explaining ETFs.

To be continued…

Related Posts:

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  2. Should we trust these analyst ?
  3. Few interesting number…
  4. Which sector are you in ??

(Source: Investopedia)

Posted in Exchange Trade Funds, Investor, Sector, Trading | Leave a Comment »