Tag Archives: middle-east

Going Shopping: Chicken Vs. Beef

The headlines haven’t been very rosy over the last week, but when is that ever not the case? Simply put, gloom and doom sells. The Chinese stock market is collapsing; the Yuan is plummeting; there are rising tensions in the Middle East; terrorism is rising to the fore; and commodity prices are falling apart at the seams. This is only a partial snapshot of course, and does not paint a complete or accurate picture. Near record-low interest rates; record corporate profits (outside of energy); record-low oil prices; unprecedented accommodative central bank policies; and attractive valuations are but a few of the positive, countervailing factors that rarely surface through the media outlets. At the end of the day, smart long-term investors understand investing in financial markets is a lot like grocery store shopping. Similarly to stocks and bonds, prices at the supermarket fluctuate daily. Whether you’re comparing beef (bonds) and chicken (stocks) prices in the meat department (stock market), or apple (real estate) and orange (commodities) prices in the produce department (global financial markets), ultimately, shrewd shoppers eventually migrate towards purchasing the best values. Since the onset of the 2008-2009 financial crisis, risk aversion has dominated over value-based prudence as evidenced by investors flocking towards the perceived safety of cash, Treasury bonds, and other fixed income securities that are expensively priced near record high prices. As you can see from the chart below, investors poured $1.2 trillion into bonds and effectively $0 into stocks . Consumers may still be eating lots of steaks (bonds) currently priced at $6.08/lb while chicken (stocks) is at $1.48/lb (see U.S. Department of Labor Data – Nov. 2015), but at some point, risk aversion will abate, and consumers will adjust their preferences towards the bargain product. Some Shoppers Still Buying Chicken While the general public may have missed the massive bull market in stocks, astute corporate executives and investment managers took advantage of the equity bargains in recent years, as seen by stock prices tripling from the March 2009 lows. As corporate profits and margins have marched to record levels, CEOs/CFOs put their money where their mouths are by investing trillions of dollars into share buybacks and mergers & acquisitions transactions. Despite the advance in the multi-year bull market, with the recent sell-off in the market, panic has dominated rational thinking. Once again, the rare occurrence (a few times over the last century) the dividend yield of stocks once again exceeds the yield on Treasury bonds (2.2% S&P 500 vs 2.1% 10-Year Treasury). But if we are once again comparing beef vs. chicken prices (bonds vs stocks), the 6% earnings yield on stocks (i.e., Inverse P/E ratio or E/P) now looks even more compelling relative to the 2% yield on bonds. For example, the iShares Core U.S. Aggregate Bond ETF (NYSEARCA: AGG ) is currently yielding a meager 2.3%. For a general overview, Scott Grannis at Calafia Beach Pundit summarizes the grocery store flyer of investment options below: While these yield relationships can and will certainly change under various economic scenarios, there are no concrete signs of an impending recession. The recent employment data of 292,000 new jobs added during December (above the 200,000 estimate) is verification that the economy is not falling off a cliff into recession (see chart below). As I’ve written in the past, the positively-sloped yield curve also bolsters the case for an expansionary economy. Source: Calafia Beach Pundit While it’s true the Chinese economy is slowing, its rate is still growing at multiples of the U.S. economy. As a communist country liberalizes currency and stock market capital controls (i.e., adds/removes circuit breakers), and also attempts to migrate the economy from export-driven growth to consumer-driven expansion, periodic bumps and bruises should surprise nobody. With that said, China’s economy is slowly moving in the right direction and the government will continue to implement policies and programs to stimulate growth (see China Leaders Flag More Stimulus ). As we have recently experienced another China-driven correction in the stock market, and the U.S. economic expansion matures, equity investors must realize volatility is the price of admission for earning higher long-term returns. However, rather than panicking from fear-driven headlines, it’s times like these that should remind you to sharpen your shopping list pencil. You want to prudently allocate your investment dollars when deciding whether now’s the time to buy chicken (6% yield) or beef (2% yield). DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs) including AGG, but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.

Global X Southeast Asia ETF: Un-Emerging Market

Regional growth is very dependent on China’s economy. The fund is very heavily weighted in financial services. A few of the holdings operate in unique niches, with little competition. A proverb is timeless and has application generation after generation. For example, in Southeast Asia one might often hear that ‘ a tray full of money is not worth a mind full of knowledge ‘. That proverb will no doubt catch the attention of any ‘experienced’ investor. There’s quite a difference between “not knowing something” and “not realizing something”. The former seems to imply a lack of information: not knowing. The latter seems to imply that the information is there, but not understood: not realizing. Unfortunately, investors are often lost in the misty in-between of not knowing and not realizing. However, logic dictates that in either event, the odds are not in your favor. With that in mind, the question must be asked: has the emerging market expansion run its course? A critical bit of information is determining whether the Chinese economy is experiencing a normal correction, or looking for a sustainable bottom in an ongoing economic contraction. It’s difficult to say. There is one certain fact, though: the amazing bull market expansion of China’s once emerging economy pulled the entire global economy along with it and, in particular, the economies of Southeast Asia. Hence, are the odds in favor of a rebound in Southeast Asia? Picking and choosing individual investments from among countries with different varied rules and regulations would be a daunting task. If an investor were to choose an ETF, there’s only one way to enter that market: Global X Southeast Asia ETF (NYSEARCA: ASEA ) . According to Global X, the fund ” …seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/ASEAN 40 Index …” The fund employs a passive methodology; 80% of total assets are invested in American Depository or Global Depository receipts; hence, most of the companies will be listed on OTC exchanges. The index is one of the five FTSE ASEAN Index series. The selected stocks of all of the ASEAN indexes are selected from “… Bursa Malaysia, Hanoi Stock Exchange, Ho Chi Minh Exchange, Indonesia Stock Exchange, The Philippine Stock Exchange, Singapore Stock Exchange and the Stock Exchange of Thailand… ” According to FTSE-Russell, the FTSE/ASEAN 40 index “… is designed to represent the performance of the largest companies in the ASEAN region’s markets …” So, the first bit of basic information is to know the geographic allocation of the fund. Data from Global X A quick overview of the included country’s annualized growth is outlined in the table below. Country Annualized GDP as of Q3, 2015 Core Inflation Debt/GDP Unemployment Rate Sovereign 10-Year Bond Ratings S&P, Moody, Fitch Singapore 1.9% 0.3% 99.3% 2.0% AAA, Aaa, AAA Malaysia 4.7% 2.5% 52.5 3.2% A-, A3, A- Indonesia 4.73% 5.02% 25.02% 6.18% BB+, Baa3, BBB- Thailand 2.9% 0.88% 45.7% 0.9% BBB+, Baa1, BBB+ Philippines 6.0% 1.8% 45.4% 5.7% BBB, BAA2, BBB- Averages 10.93% 3.60% Data from Trading Economics No doubt, these particular emerging markets have experienced a rate of growth that is the envy of the entire region, even when compared to the larger, more established economies such as Japan and Korea. However, this seems to be the ‘modus operandi’ of emerging markets throughout history. So without the economic pull of China, can these economies readjust and grow organically? Data from Global X Clearly, the fund heavily weights the Financial sector. Of the fund’s 40 holdings, 14 holdings, totaling 35% of the fund, are financials. Several of these financial services companies are global and importantly, most offer Sharia compliant financial services in a region of the world where 240 million Muslims or 40% of the entire population resides. Of the 14 financial holdings, there’s only one REIT. Also, six are either ‘holding companies’ or ‘groups’. This may serve as an advantage as the financial services of these holding companies are well diversified among the full spectrum of financial services, and in several cases, diversified internationally. Lastly, DBS Group Holdings ( OTC:DBSAY ) , Malayan Banking ( OTCPK:MLYNF ) , CIMB Group Holdings ( OTCPK:CIMDF ) , and Bangkok Bank ( OTC:BGKKF ) all have offices in the UK or New York, thus established in the major global financial centers. Financials 48.72% Ticker Fund Weighting Market Cap ( USD Billions) Yield P/E 5-Year EPS Growth Rate Primary Business DBS Group Holdings OTC: DBSAY 7.44% $41.267 3.66% 9.55 12.95% Global Financial Services Holding Company; Full line from retail to wealth management; Main subsidiary in London, UK; operations in Asia Overseas Chinese Banking OTC:OVCGF 7.02% $35.528 4.18% 9.48 12.23% Financial Services group; retail banking, insurance; equities and futures trading; headquartered in Singapore United Overseas Bank OTCPK:UOVEF 5.87% $30.935 4.44% 9.95 10.68% Banking Services from retail through corporate levels; asset, wealth and venture capital management; Clearing operations; Singapore Public Bank Berhad OTC:PBLOF 4.74% $16.316 3.02% 14.60 12.06% Banking group, retail, corporate lending, proprietary trading,, securities trading, some property holding; Kuala Lumpur PT Bank Central Asia OTC:PBCRF 4.23% $24.419 1.29% 18.43 19.07% a.k.a. Bank BCA conventional and Sharia retail services; underwriting and brokering; Jakarta Malayan Banking OTC: MLYNF 3.68% $18.736 6.84% 10.97 NA Holding Company for Maybank Group; offices in Singapore, Malaysia, New York, London Hong Kong and Bahrain; HQ: Kuala Lumpur Bank Rakyat OTCPK:BKRKF 2.995% $20.037 2.72% 10.90 26.92% a.k.a. Bank BRI; retail services, lending, and Sharia services; Jakarta PT Bank Mandiri Persero OTCPK:PPERF 2.12% $15.320 2.43% 10.21 20.47% a.k.a. Bank Mandiri; retail conventional and Sharia services; insurance, business finance, securities brokering; Jakarta CapitaLand OTCPK:CLLDF 2.05% $13.421 2.87% 11.79 -0.47% Real Estate investment; consulting, development, holding; shopping malls, residences; HQ Singapore CIMB Group Holdings OTC: CIMDF 2.04% $8.723 1.80% 16.89 -1.17% Financial services holding company; conventional and Sharia services; Offices in Malaysia, Indonesia, Singapore, Thailand, Cambodia and London, UK; HQ Kuala Lumpur SM Investments Corp. OTCPK:SVTMF 2.01% $13.851 1.29% 22.03 11.23% Investment holding company property, retail and banking service; convention centers, hotel holdings; merchandise trading; HQ Pasay, Philippines Siam Commercial Bank OTCPK:SMCBF 1.96% $11.665 4.86% 8.82 20.77% Financial service for retail and small-medium size business; non-performing loan solutions; Bangkok Kasikornbank PLC OTCPK:KPCPF 1.82% $10.207 2.61% 8.36 25.66% Commercial Banking; small-medium size business, credit, home loans, insurance, international transaction, security services; Bangkok Bangkok Bank Public Company OTC:BGKKF 0.75% $7.982 4.32% 8.15 12.06% Commercial Bank; retail, cash management, project and trade financing, credit; China, Hong Kong, US, UK, Singapore, Indonesia, Laos, Vietnam, Philippines; HQ: Bangkok Averages 3.48% $19.17 3.31% 12.15 1 14.04% 1 Excluding MLYNF Data from Reuters, Yahoo! The main reason mobile communication rooted itself so well in so many emerging markets is because it was far more cost efficient to construct cell-phone towers, or transmit content via satellite, than it was to run thousands of miles of copper across the country or countries . These are not so much ‘outstanding companies’ as much as they are necessary , particularly in rural areas. Telecom Service 20.05% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business Singapore Telecommunications OTC:SGTCF 7.16% $43.402 4.56% 15.80 -0.66% Telecom investment holding company; consumer, enterprise, digital solutions; Singapore, Australia, Asia, Africa; HQ : Singapore PT Telekomunikasi Indonesia NYSE: TLK 3.82% $21.323 2.75% 19.31 -24.81% Domestic and international telecom services; internet, Wi-Fi, data and satellite services; HQ: Bandung, Indonesia Advanced Info Services OTC:AVIKF 2.35% $15.902 6.47% 15.27 16.60% Mobile, call centers, broadband; IT solutions; Bangkok Axiata Group OTCPK:AXXTF 2.24% $12.350 3.62% 22.16 4.84% Telecom investment holding company; network services, mobile services; Kuala Lumpur Digi.com OTC:DIGBF 1.59% $9.047 4.81% 20.66 15.21% Telecom investment holding company; mobile, internet and services; Malaysia; HQ Kuala Lumpur Maxis OTC:MAXSF 1.45% $11.386 4.71% 30.70 -3.44% Telecom investment holding company; mobile, fixed line, international, broadband Philippine Long Distance NYSE: PHI 1.31% $8.984 6.63% 13.51 -5.62% Telecom services; fixed line, wireless, satellite and fiber networks; Makati, Philippines Averages 2.85% $17.48 4.79% 19.63 0.30% Data from Reuters, Yahoo! The industrial companies, again, are often diversified holding companies which span many other sectors. For example, Jardine Cycle & Carriage ( OTCPK:JCYCF ) may be considered a consumer discretionary holding via its marketing and sale of motor vehicles, but it also has investments in heavy equipment manufacturing, mining, agriculture and infrastructure management. Similarly, Sime Darby ( OTCPK:SMEBF ) has investments in agriculture, property holdings, equipment leasing, energy, utilities and land management. The most notable, unique and focused holding in the sector is Singapore’s Kepple Corp. (STI: KPLM) . Kepple is one of the few global, large scale, diversified marine engineering and construction companies. Further, its base of operation is centered among the busiest seaports on the planet. Industrials 9.69% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business PT Astra International OTCPK:PTAIF 3.20% $18.103 3.66% 14.31 13.82% Diversified vehicle component manufacture; financing, service; agri-logistics and IT; Jakarta Keppel Corp. Ltd. STI: KPLM 2.32% $8.199 7.55% 6.30 2.13% Marine construction, service, management; ship construction, repair, refitting; Singapore Sime Darby OTC: SMEBF 2.01% $10.347 3.46% 21.02 20.11% Industrial agriculture investment holdings; property, equipment; energy, utilities; palm oil, rubber, land management Wilmar International OTCPK:WLMIF 1.53% $13.079 2.78% 11.71 -7.97% Industrial agri-investment holdings; palm products, oil seeds, grains, sugar; Singapore Singapore Airlines Ltd. OTCPK:SINGF 1.39% $9.351 2.46% 23.58 11.70% Passenger and cargo transport; air charter services; operations managements, maintenance services; Singapore Airports of Thailand OTC:AIPUF 1.33% $11.811 2.00% 24.96 55.81% Airport and hotel management and services; Bangkok SM Prime Holdings OTC:SPHXY 1.24% $12.885 0.99% 21.90 4.60% Property Developer: malls, residence, office, hotel and convention centers; Pasay, Philippines Jardine Cycle & Carriage OTC: JCYCF 0.97% $9.473 3.46% 12.32 9.90% Auto and motorcycle, heavy equipment, mining manufacturer, mining, agribusiness, infrastructure management Averages 1.86% $11.97 3.27% 17.86 14.31% Data from Reuters, Yahoo! The utilities sector is pretty much focused on just that: utilities. These three companies focus on gas and electricity distribution, with some overlap in the energy sector via exploration and drilling. Utilities 5.60% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business Tenaga Nasional OTC:TNABF 3.90% $17.086 2.21% 12.12 13.05% Electric Utility; generation and distribution; Kuala Lumpur Petronas Gas OTC:PNAGF 1.50% $10.340 2.56% 19.88 NA Gas utility; processing, storage, transport and distribution; Kuala Lumpur Perusahaan Gas Negara OTCPK:PPAAF 0.70% $4.338 5.82% 9.91 3.36% Gas Utility; natural gas distribution; oil and gas exploration; Jakarta Averages 2.03% $10.59 3.53% 13.97 2 8.21% 2 Excluding PNAGF Data from Reuters, Yahoo! In consumer staples, CP ( OTC:CPBQF ) has a unique niche as the exclusive manager of all 7-Eleven stores in Thailand. Consumer Staples 4.69% Ticker Fund Weighting Market Cap Yield P/E 5 Year EPS Growth Rate Primary Business CP All Public CPBQF 1.79% $10.421 1.92% 30.44 15.27% Convenience store management; includes 7-Eleven; bakery, coffee shops, health and beauty; Bangkok Unilever Indonesia Tbk OTCPK:UNLRF 1.03% $20.052 2.19% 45.05 13.52% Household, personal care and food products under a dozen brand names; Jakarta Averages 1.41% $15.24 2.06% 37.75 14.40 Data from Reuters, Yahoo! There’s only one discretionary holding, Genting ( OTCPK:GIGNF ) , a diversified hospitality company. What makes it interesting, on its own merits, is its global reach, managing properties not just in Southeast Asia, but also in Australia, the UK and the Bahamas with plans to expand to China and Japan. Consumer Discretionary 4.64% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business Genting Singapore PLC OTC: GIGNF 1.18% $6.558 1.31% 54.22 NA Resorts, Hotels and Casinos, Australia, Bahamas, Malaysia, Philippines, Singapore, UK. Other regions in development Data from Reuters, Yahoo! The ‘drag’ on any fund these days is the energy company holdings, particularly the smaller scale exploration and drilling companies. The current market price simply cannot justify costs. Energy accounts for 3.12% of the fund. Energy 3.12% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business PTT Public OTC:PUTRF 1.95% $17.460 5.00% 12.65 1 -1.59% Gas and petroleum fuel and chemical products domestic and overseas distribution; Bangkok PTT Exploration and Products PCL OTCPK:PEXNY 0.75% $6.177 4.46% 15.15 1 -4.15% Petroleum exploration and production; pipeline and general energy investment; Bangkok Averages 1.35% $11.82 4.73% 13.9 -2.87% 1 Approximate Data from Reuters, Yahoo! Similarly, many materials manufacturers, like building and plastic related chemicals, have experience decreasing demand during the regional economic slowdown. The two materials manufacturer holdings are in those sub-sectors: chemicals and building materials. Materials account for 2.92% of the fund. Materials 2.92% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business Petronas Chemicals Group OTC:PECGF 1.61% $12.31 2.40% 20.72 NA Material investment holdings; chemicals, olefins, glycols, polymers, aromatics, fertilizers; Kuala Lumpur Siam Cement OTC:SCVPF 1.28% $14.203 3.40% 11.94 6.67% Industrial Supplies and building materials, ready mix, concrete, pulp, and chemicals; Bangkok Averages 1.45% $13.26 2.90% 16.33 ——– Data from Reuters, Yahoo! Lastly, the most defensive sector, Health Care, accounts for only 1.48% of the fund with IHH Health Care ( [[ IHHHF]]) . In a perhaps ‘over bought’ health care sector, this company occupies an interesting niche as a hospital management company with services in Central and Eastern Europe, the Middle East and North Africa. Health Care 1.48% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business IHH Health Care BHD OTC: IHHHF 1.48% $0.416 0.48% 68.38 Health Care holding company; hospital management in CEE, Middle East, N. Africa and Malaysia; Kuala Lumpur Data from Reuters, Yahoo! As for the fund itself, it first listed in February 2011. It’s comparatively small with $13.7 million in net assets. Its yield is relatively good, although it must be seen in the context of an ‘EM’ region with slowing growth. Management fees are rather high at 0.65% and the 3-month average daily volume is low at approximately 9,500 shares a day. The returns reflect the region’s economic slowdown: -19.57% year to date, -22.50% in the past year and -6.14% over 3 years. Since inception, the fund has been essentially flat, totaling a -1.26% return. If the fund presents any advantage, it’s in the list of those 40 companies. A few have what seems to be great future potential when the region turns the corner. (click to enlarge) Currently, there’s more risk on the downside than there is on the upside. The chart demonstrates clearly that. The shares traded at an all-time low in mid-August and well off the May 2013 all-time high. There’s absolutely no doubt that Southeast Asia has made remarkable strides among emerging markets. However, these cycles simply don’t go on forever. Even the arguably second largest global economy, China, has admittedly met the end of its externally sourced expansion and is now transitioning to a domestically driven economy. It’s just as reasonable to expect that China’s economy will find a bottom and start an expansion cycle again. Hence, the point of the matter is that, right now, realizing the risk is worth far more than knowing that there will be a turnaround, eventually. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

The iShares MSCI France ETF: An Exceptional Fund

France has a diversified advanced economy. France has at least one world class competitor in almost every sector. The fund is comprehensive, balancing individual large caps with combined less weighted mid-caps. It simply cannot be helped. France has a certain ‘ambience’. Think of France and Gustave Eiffel’s ‘ Tour Eiffel’ immediately comes to mind. The imagination strolls around Champ de Mars or perhaps Champs-Élysées gloriously crowned by the Arc de Triomphe de l’Étoile . The mind’s eye bicycles along country roads winding along endless pastures, or through the narrow rue des villes médiévales . Then, of course, French epicure , le pain , la pâtisserie , le vin , le fromage and of course, le champagne . Lastly, where would we be without the fashion innovations originating from the very heart of France: Paris! Rarely does one think of France along with machinery, aircraft, electronics, high speed railways or industrial centers. However, France is one of the world’s leading advanced economies. Needless to say, agriculture is a large part of the French economy as are luxury goods, tourism and ‘specialty foods’. So then, is France in your future? Well, if you simply can’t get away for a few months for a leisurely, casual tour of France, perhaps you can start saving for a family excursion some time in the future! There aren’t too many ways to invest with an ‘all France ETF’, however. The best available way is found in BlackRock’s (NYSE: BLK ) portfolio of single country ETFs, namely, the iShares MSCI France ETF (NYSEARCA: EWQ ) . (click to enlarge) According to BlackRock, the fund is composed of “… large and mid-sized companies in France …” with exposure to “…85% of the French stock market…” The pie chart demonstrates the fund’s sector allocation. The table directly below the chart defines the MSCI (NYSE: MSCI ) France Index allocation. It’s clear that the fund and index are essentially allocated the same way. Both fund and index have the same number of holdings, with the exception of a small fund allocation in Euro or U.S. Dollar cash. The fund weights individual companies differently. For example, the index weights L’Air Liquide SA ( OTCPK:AIQUF ) slightly more than Danone (OTC: OTCQX:GPDNF ) and Societe Generale (OTC: OTCPK:SCGLF ) over Schneider Electric ( OTCPK:SBGSY ) . Data from BlackRock Financials 18.36% Industrials 18.28% Consumer Discretionary 17.43% Health Care 10.62% Consumer Staples 10.59% Energy 9.08% Information Technology 4.37% Materials 4.36% Utilities 3.67% Telecom Services 3.24% Data from Reuters, Yahoo Finance and multiple sources The heaviest weighting in the financial sector is BNP Paribas ( OTCQX:BNPQY ) , France’s largest domestic financial services company which extends throughout Belgium, France, Italy and Luxembourg. Its international services extends to 75 countries, globally. The distribution in this sector ‘ladders’ down without having any one company dominate. Further, the sector is diversified in insurance, investment banking and commercial real estate. There are also included a number of holdings of less than 1%; all such holdings total 3.21% of the sector. These include four REITS, insurance and reinsurance as well as two interesting investment companies. Wendel Investissement (OTC: OTCPK:WNDLF ) may best be described as an ‘activist investment company’, taking large majority ownerships in listed or unlisted companies along with activist board management. Eurazeo ( OTC:EUZOF ) is the merged Eurafrance and Azeo . It is essentially a diversified venture capital fund. Financials 18.41% Fund Weight Ticker Market Cap (In USD Billions) Yield Payout Ratio 5 Year Sales Growth Price/ Earnings Primary Business BNP Paribas 5.083% BNPQY $72.503 2.76% 26.42 -3.36% 9.46 Bank services in Europe; retail personal finance, asset management, corporate finance; International AXA 4.227% OTCQX:AXAHY $67.20 3.88% 48.52 -0.74% 12.89 Insurance, life, property, casualty, asset management and banking; International Societe Generale 2.8165% SCGLF $38.116 2.73% 28.00 -5.06% 10.04 Retail, corporate and investment banking services; insurance, vehicle leasing; asset clearing, asset management; International Unibail Rodamco 2.033% OTC:UNBLF $24.779 4.11% 42.66 2.93% 11.56 REIT: Commercial real estate, development, construction and management; Shopping Centers, Convention; International Credit Agricole 1.040% OTCPK:CRARF $31.623 3.14% 28.34 -5.33% 9.25 Insurance and international retail banking services; corporate banking services; International Averages 3.04% $46.84 3.32% 34.788 -2.31% 10.64 Data from Reuters, Yahoo Finance and multiple sources Financial holdings less than 1% accounting for 3.2109% of Financials WENDEL 0.2785% KLEPIERRE REIT SA ( OTC:KLPEF ) 0.8122% EURAZEO SA 0.2204% SCOR SE 0.4904% FONCIERE DES REGIONS REIT SA ( OTC:GSEFF ) 0.2174% NATIXIS SA ( OTCPK:NTXFF ) 0.4648% ICADE REIT SA ( OTC:CDMGF ) 0.1936% GECINA ( OTC:GECFF ) 0.3478% CNP ASSURANCES ( OTC:CNPAF ) 0.1858% Data from Reuters, Yahoo Finance and multiple sources Industrials are also ‘well scaled’, starting with aerospace giant Airbus ( OTCPK:EADSF ) ( OTCPK:EADSY ) at 3.322%. The heavier weighted holdings include engineering and design firms, another aerospace company, Safran ( OTCPK:SAFRY ) and Schneider Electric specializing in energy application design and management. The sector includes 11 holdings of less than 1% each, totaling 4.1877%. Some of the more interesting companies include Bouygues SA ( OTCPK:BOUYY ) , specializing in media and telecom infrastructure construction and management; rail transportation specialist Alstom SA ( OTCPK:ALSMY ) and lastly, the famous maker of the most familiar ball point pen ever, SOCIETE BIC . Industrials 18.14% Fund Weight Ticker Market Cap (In USD Billions) Yield Payout Ratio 5 Year Sales Growth Price/ Earnings Primary Business AirBus 3.322% EADSF $54.482 1.89% 34.02 7.23% 17.67 Premier aerospace commercial and defense; space launch vehicles and satellites (fmr: EADS NV) Schneider Electric 2.72% SBGSY $35.213 3.48% *42.91 9.57% 18.38 Energy management, automation, infrastructure, distribution, building automation and security, data centers Vinci 2.4915% OTCPK:VCISY $28.246 3.04% 46.57 4.47% 16.64 Engineering, design and construction, urban development, buildings, water, energy, and communications services Safran 1.820% SAFRY $29.269 1.82% *10.65 7.02% NA Aerospace, propulsion systems, solid fuel boosters, aircraft components, aircraft engines Compagnie de Saint-Gobain 1.709% OTCPK:CODYY $24.287 3.13% 90.14 1.67% 29.11 Materials and packaging; high-performance ceramics, plastics, abrasives; gypsum, piping; bottles and jars LeGrand 1.257% OTC:LGRDY $15.50 2.06 *46.53 4.69% **26.26 Electrical engineering and equipment manufacturing including data information networks Averages 2.22% $31.17 2.22% 45.137 5.78% 21.612 *percent of operating cash flow **trailing Data from Reuters, Yahoo and multiple sources Industrial holdings less than 1%, accounting for 4.1877% of Industrials ZODIAC AEROSPACE (OTC: OTC:ZODFF ) 0.4311% THALES SA ( OTCPK:THLEF ) 0.6457% SOCIETE BIC 0.3854% BOUYGUES SA 0.6201% EDENRED ( OTCPK:EDNMY ) 0.3333% ALSTOM SA 0.54% REXEL SA ( OTCPK:RXEEY ) 0.3322% GROUPE EUROTUNNEL ( OTCPK:GRPTY ) 0.481% BOLLORE SA ( OTC:BOLRF ) 0.3156% BUREAU VERITAS REGISTRE INTERNATIONAL ( OTC:BVRDF ) 0.4501% AEROPORTS DE PARIS ( OTC:AEOXF ) 0.2832% Data from Reuters, Yahoo Finance and multiple sources France is the home of many of the most well-known consumer discretionary brand names such as Moet Hennessy Louis Vuitton ( OTCPK:LVMHF ) or Kering ( OTC:PPRUF ) . The lesser weightings are no less “brand impressive”, such as Christian Dior (OTC: OTC:CHDRF ) . The interesting holdings include SODEXO SA ( OTC:SDXOF ) , providing ‘on-site’ services from housekeeping to prisoner rehab and anything in between; Ses Global SA ( OTCPK:SGBAF ), a Luxembourg based satellite communication and broadcasting service; and international media company Lagardere ( OTCPK:LGDDF ) . Consumer Discretionary 17.6851% Fund Weight Ticker Market Cap (In USD Billions) Yield Payout Ratio 5 Year Sales Growth Price/ Earnings Primary Business LVMH Moet Hennessy Louis Vuitton 3.732% LVMHF $83.55 2.18% 17.14 12.43% 13.43 The brand name which speaks luxury. Champagne, cognac, fragrances, cosmetics, accessories, under a host of brand names Vivendi 2.025% OTCPK:VIVEF $28.95 10.14% *180.07 -17.95% **7.07 Media through subsidiaries Canal+, Universal Music, Vivendi Village Renault SA 1.553% OTC:RNSDF $29.65 2.08% ***20.54 4.02% 10.04 Auto, light truck manufacturer; financing, commercial services under Renault, Renault Samsung, Dacia Michelin 1.486% OTCPK:MGDDF $18.328 2.77% 41.88 5.72% 15.45 The brand name that speaks tires of every type as well as its coveted restaurant and hotel guides Kering 1.073% PPRUF $21.89 2.50% 40.40 -5.87% 22.25 Luxury goods manufacturer and retailer; apparel, accessories, fragrances, cosmetics Publicis Groupe 1.006% OTC:PBCBF $14.347 1.99% 32.25 9.91% 16.56 Communications platform management services: Digitas, Razorfish, and social network platforms Valeo 0.9636% OTCPK:VLEEY $11.885 1.60% ***26.86 11.16% 16.91 Auto replacements parts, driver assist systems, powertrains, comfort and convenience, lighting systems Averages 1.69% $29.80 3.32% 51.306 19.42% 14.53 *percent of operating cash flow **trailing; ***percent of EPS Data from Reuters, Yahoo Finance and multiple sources Consumer Discretionary holdings less than 1%, accounting for 5.846% of Consumer Discretionary holdings CHRISTIAN DIOR 0.8194% PEUGEOT SA ( OTCPK:PEUGF ) 0.6432% SODEXO SA 0.7723% EUTELSAT COMMUNICATIONS ( OTCPK:ETCMY ) 0.4267% SES SA 0.7717% NUMERICABLE-SFR ( OTCPK:NUMCF ) SA 0.3741% HERMES INTERNATIONAL ( OTCPK:HESAY ) 0.7692% LAGARDERE 0.2835% ACCOR SA ( OTCPK:ACRFF ) 0.7552% JC DECAUX SA ( OTCPK:JCDXF ) 0.2307% Data from Reuters, Yahoo Finance and multiple sources The main holdings of the Consumer Staple Sector seem to lean towards consumer discretionary, most notably in the inclusion of L’Oréal ( OTCPK:LRLCY ) at 3.589% of the fund. To be sure, it’s a global, well founded corporation whose primary business is the development, marketing and distribution of cosmetics which seems to put it in competition with the likes of Louis Vuitton held in the consumer discretionary sector. Similarly, Pernod Ricard ( OTCPK:PDRDY ) at 1.964% manufactures higher end distilled spirits. Casino Guichard Perrachon (OTC: OTC:CGUIF ) is a retail chain distributor, supermarkets, hypermarkets, discount and convenience stores; what one would consider a consumer staples company; and lastly, Remy Cointreau SA ( OTCPK:REMYY ) , also a manufacturer of wines and spirits. It seems that the difference between discretionary and staple products is a gray area. C’est la vie. Consumer Staples 10.5318% Fund Weight Ticker Market Cap (In USD Billions) Yield Payout Ratio 5 Year Sales Growth Price/ Earnings Primary Business Loreal 3.589% LRLCY $96.26 1.67% ***52.43 5.22% 30.36 R&D, marketing and distribution, ‘mass-market retail’ Danone 3.255% GPDNF $44.386 2.40% 112.94 7.13% 40.84 Holding company for Danone Group, Dairy, Yogurt, life stage nutrition; nutrition enhanced water Pernod Ricard 1.964% PDRDY $29.84 1.72% 55.49 3.86% 32.11 Wines and spirits under brands Absolut, Ricard Pastis, Chivas, Glenlivet, Beefeater; 16 in all; owns 5660 ha of vineyards Carrefour 1.332% OTCPK:CRRFY $22.08 2.50% 53.22 -2.53% 20.97 Hypermarkets, supermarkets, discount and convenience, cash & carry stores and e-commerce Averages 2.54% $48.14 2.07% 68.52 3.42% 31.07 ***percent of EPS Data from Reuters, Yahoo! and multiple sources Consumer Staple holdings less than 1%, accounting for 1.592% of Consumer Staple holdings Casino Guichard Perrachon 0.246% Remy Cointreau SA 0.1435% Data from Reuters, Yahoo Finance and multiple sources The Health Care holdings are dominated by the world renowned pharmaceutical Sanofi (NYSE: SNY ) at 8.33% of the fund’s 10.4613% combined Health Care holdings. Sanofi is what one might expect; however, the other holding is a bit more interesting. Essilor International ( OTC:ESLOF ) is a developer and manufacturer of Ophthalmology and Optometry medical equipment as well as corrective lenses. Health Care 10.4613% Fund Weight Ticker Market Cap (In USD Billions) Yield Payout Ratio 5 Year Sales Growth Price/ Earnings Primary Business Sanofi 8.330% SNY $122.23 3.71% 75.73 1.78% 21.65 R&D, manufacture and marketing of vaccines, pharmaceuticals, animal health Essilor International 2.132% ESLOF $27.138 0.87% 34.98 11.65% 40.61 Ophthalmology and Optometry medical equipment development through manufacturing Averages 5.23% $74.68 2.29% 55.36 6.72% 31.13 So far, in each of the above sectors, most of the holdings were greater than 1 percent. In the remaining sectors, it is quite the opposite, hence all are included. For example, the energy sector is dominated by the global energy giant Total (NYSE: TOT ) at 8.536% of the total 8.974% of that sector. The remaining 0.438% is weighted by Technip ( OTCQX:TKPPY ), providing project management, consultation and construction in the energy industry. Energy 8.974% Fund Weight Ticker Market Cap (In USD Billions) Yield Payout Ratio 5 Year Sales Growth Price/ Earnings Primary Business Total 8.536% TOT $115.910 5.83% 195.03 6.33% 32.27 Wellhead to final point of sale hydrocarbons, refined petroleum oils, gases and chemicals Technip 0.438% TKPPY $5.844 4.24 185.6 9.31% 337.73 Engineering, construction and management for on/off shore energy projects Averages 4.49% $60.88 5.04 190.315% 7.82% 185.00 Information Technology is pretty well laddered with the major French IT companies, Cap Gemini ( OTCPK:CAPMF ) and Alcatel-Lucent (NYSE: ALU ) . Just one note: Ingenico Group ( OTC:INGIF ) is formerly Compagnie Industrielle et Financiere d’Ingenierie Ingenico SA ; the company provides secure global digital-mobile-internet transaction solutions including software and hardware. In October, it was announced that Ingenico was collaborating with Intel (NASDAQ: INTC ) in the field of secure retail transaction solutions. IT 4.5651% Fund Weight Ticker Market Cap (In USD Billions) Yield Payout Ratio 5 Year Sales Growth Price/ Earnings Primary Business Cap Gemini 1.241% CAPMF $16.066 1.40% 31.16 4.78% 23.35 IT consulting and professional staffing Alcatel Lucent 0.929% ALU $11.444 0.00 0.00 -2.35% 15.46 (est) Cloud, ultra and Broadband network equipment and services Dassault Systems 0.8425% OTCPK:DASTY $20.732 0.58% 29.22 12.89% 50.99 Software application solutions, services; CAD and design software Atos 0.5964% OTCPK:AEXAF $8.684 1.04% ***25.89 12.04 25.17 IT management, services and consulting CIE Industrielle Financiere (Ingenico) 0.5761% INGIF $7.716 0.84 ***23.86 18.06% 33.24 Secure financial transaction systems STMicroelectronics 0.3808% STM $7.247 5.43% 180.69 27.23% 44.50 Semiconductor manufacturer Averages 0.76% $11.98 1.50% 48.47 12.01% 32.118 ***percent of EPS Data from Reuters, Yahoo! and multiple sources The Materials sector has an average weighting of just over 1% and all the better. Over half of the weighting is in the mining and minerals sector through ArcelorMittal (NYSE: MT ) and Imerys ( OTC:IMYSF ) both under pressure from the collapse in commodity prices. Materials 4.1634% Fund Weight Ticker Market Cap (In USD Billions) Yield Payout Ratio 5 Year Sales Growth Price/ Earnings Primary Business L’Air Liquide SA 3.208% AIQUF $39.186 2.42% 51.45 5.10% 20.88 Gasses technology for industry such as beverage, food, pharmaceuticals Arkema 0.3958% OTC:ARKAF $5.31 2.76% 45.17 6.02% 18.73 Industrial chemical packaging, automotive, electronics, edibles and pharmaceuticals Arcelormittal 0.3596% MT $7.143 4.35% NA 5.38% 17.73 (NYSE: AVG ) Mining and steel manufacturing in Europe, Brazil, Africa and trade regions NAFTA and CIS Imerys 0.1998% IMYSF $5.386 2.62% ***45.46 5.86 17.19 Minerals extraction and processing for the production of porcelain, ceramics, tiling, bricks, pigments, paper, graphite and others Averages 1.04% $14.26 3.04% 47.36 5.59% 18.64 ***percent of EPS Data from Reuters, Yahoo Finance and multiple sources The average Utility holding is less than 1% but the yield is a noticeable 5.60%, albeit with a greater than 100% average payout ratio . Engie ( OTCPK:ENGIY ) and Veolia Environnement ( OTCPK:VEOEY ) are international and manage vital service utilities: water, sewage and electric. Veolia has offices in the Americas, Middle East, North Africa and Asia. Utilities 3.6889% Fund Weight Ticker Market Cap (In USD Billions) Yield Payout Ratio 5 Year Sales Growth Price/ Earnings Primary Business Engie 2.0591% ENGIY $42.00 6.27% 259.55 -1.34% 45.80 Natural gas and electricity; Europe, Americas, U.K., Turkey, Middle East, Asia and Africa Veolia Environnement 0.8772% VEOEY $13.289 3.17 99.60 -10.37% 31.97 Water treatment, distribution and recycling; wastewater, sanitations services; International Suez Environnement 0.4642% OTCPK:SZEVY $10.41 3.69% 158.54 3.10% 42.87 Water management, , distribution and recycling; wastewater collection/recovery EDF 0.2884% $26.78 9.27 ***39.31 4.26% 9.17 Electric utility; generating with nuclear, geothermal, hydro and other renewables Averages 0.92% $23.12 5.60% 139.25 -1.09% 32.45 ***percent of EPS Data from Reuters, Yahoo Finance and multiple sources The last sector, Telecom Services, is dominated by Orange (NYSE: ORAN ) , formally France Telecom . Just last week it was announced that Orange was ‘in talks’ to purchase Bouygues a diversified telecom and media company, including engineering, construction and management services mainly for public works projects. Telecom Services 3.2402% Fund Weight Ticker Market Cap (In USD Billions) Yield Payout Ratio 5 Year Sales Growth Price/ Earnings Primary Business Orange 2.7557% ORAN $48.106 4.02% 110.24 -2.53% 43.34 Multi-platform telecom services; internet, mobile, fixed line; submarine/international cable maintenance Iliad 0.4845% OTC:ILIAF $13.170 0.19% 7.57 16.35% 40.73 Telecom holding company with over 14 subsidiaries; multiplatform services Averages 1.62% $30.64 2.11% 58.91 6.91% 42.035 Data from Reuters, Yahoo Finance and multiple sources As for the fund itself, it first listed on March 12, 1996, hence it is well established and now holds $399,541,982 in assets. The expense ratio is 0.48% and its current share price is at a premium to NAV of 0.44%. The fund is liquid, with a 20 average daily volume of about 137,500 share. The fund moves pretty much with the market, having a beta of 1.09, although its standard deviation from its average is nearly 16%, meaning it trades in a range of ±$4.00 around its 3-year average. One last word and it’s important. There’s a bit of currency risk as the ECB continues to weaken the Euro in order to stimulate the EU economy as a whole. However, this is a ‘two sided coin’. On one hand, true, distributions may decline slightly through currency translation should the Euro weaken significantly from its current $1.08 USD per Euro. On the other side of the coin is that French exports of goods and services become less expensive for the importers. Hence, many of those French big caps with global reach will have a price advantage, not to mention other advantages; for example, luxury items, and of course, French Champagnes. Hence, the investor should be aware of the currency risk; however, over the very long term, any near-term weakening of the Euro may end up being an exceptional advantage. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.