Equity Trifecta: This Country, These Stocks, One Great Price
Joseph L. Shaefer | Mar 15, 2015 06:14AM ET
Commodities and basic materials are not exactly a popular investment theme these days. Citicorp analysts predict oil is vulnerable to $20, the demand for industrial metals has plummeted, chemical companies can’t get any traction, and farmers aren’t buying any more equipment, supplies and fertilizer than they must. Of course, we don’t invest for today; we invest today to be where we want to be tomorrow. If only we could add some hi tech to the mix, it’d be great. And, what the heck, let’s dare to dream and say if we can do it with a near 7% yield, we’d like it even better!
Well… there is a country ETF we’ve owned before that may be just the ticket: the Global X Norway ETF (NYSE:NORW). One caveat before we go on. This is not a currency-hedged ETF.
If the US dollar continues to climb against every other world currency, our returns in Norwegian kroner will take a haircut when the fund translates those returns into dollar-denominated numbers. I may be in the minority here, but I am skeptical that the dollar will continue its meteoric rise. QE in Japan and Euroland is likely to have a beneficial effect on those economies as investors begin to perceive that they may not be such basket cases after all. And, about the dollar? Trees do not grow to the clouds. With oil priced in dollars, either the entire oil-consuming world will rebel at the prices they must pay in inflated dollars or we will have to intervene and cool its ascent.
Besides, if ever there was a nation that is likely to enjoy a strong currency when others fail, it would be one that has a $900 billion sovereign wealth fund established for the future of its people, a nation blessed with abundant natural resources in demand for export trade, and a AAA country credit rating from S&P, Moody’s and Fitch. That would describe Norway, so I’m less concerned with currency fluctuation here.
The #1 largest position held by NORW is Statoil (NYSE:STO) which I have discussed a number of times in the past and which we currently hold in our growth and value portfolio. STO comprises 16% of NORW and I think that’s just dandy. Sure STO is down right now — it is, after all, an oil stock. But if you wanted a rock solid anchor for your ETF, I don’t believe you could do better. Statoil is an industry leader in terms of its interest coverage, cash to debt ratio, operating and net margins, ROE, ROA, revenue growth, and earnings per share growth. It sells at a trailing P/E of just 10, which I imagine will be more like 15 this year, given the supply/demand matrix in the oil patch. It’s price/book ratio is just 1.2, price/sales 0.7 and its EV/EBIT only 3.15 (which may well be the lowest in the entire industry; even Exxon Mobil's (NYSE:XOM) is higher at 6.81.)
Get The News You Want
Further, Statoil may be a company “headquartered” in Norway but its reach is decidedly global. In competition with Russia, it sells natural gas to Europeans. It is a major player in the US with active operations in the Bakken Marcellus, Eagle Ford and offshore Gulf of Mexico. In India, Mexico, my old stomping grounds of Myanmar, and 30 other nations, Statoil’s experience in deep oceans and on the Norwegian continental shelf is the company’s entrée to joint venturing for deep water exploration. Fracked wells are easy to establish — but have a short life and an expensive tail. Deep water is where the next elephant fields will be found, and Statoil is there.
The 2nd biggest holding of NORW is DNB Financial Corp (NASDAQ:DNBF), Norway’s largest financial services firm, underwriter, and bank. It, too, has a global reach, as befits a nation that is a giant in both energy and shipping, with offices in Houston, New York, London, Shanghai, Singapore, Mumbai, and numerous points between these.
#3 on NORW’s hit parade is Telenor (OTC:TELNF). Norway has long produced engineers, entrepreneurs and technology firms out of proportion to the size of its population. Telenor is but one example. It is just out of the top 10 telecom companies in terms of revenue, falling below Nippon T&T (NYSE:NTT) and Australia’s Telstra (OTC:TLSYY), but in another measure of size, total number of mobile subscribers, it is bigger than AT&T (NYSE:T) or Verizon (NYSE:VZ) and only slightly smaller than China Telecom (NYSE:CHA). AT&T and Verizon focus mostly on the overpriced, thus very profitable, USA, but Telenor owns networks in 12 countries and has other operations in 29 more.
My first interaction with Telenor occurred some 20 years ago or so. I was in Italy trying to call back to my office in the USA. Cell phones weren’t even available in those telephonic Dark Ages, so I bought two different phone calling cards, neither of which worked of course, and spent nearly an hour in gesticulatory Italian slugging it out with the vendor that sold them to me to get him to take back two in exchange for a third one that *I* selected from his collection. He finally acquiesced when I used two important-to-know Italian words: “Polizia, ora!” Then I made the call from the 4th pay-phone I visited (the first one that actually worked) and had the pleasure of dealing with an operator who spoke only Italian and clearly had more important things to do. “Lentamente, per favore,” (More slowly, please) is all I could get in before the $7 I’d invested in this enterprise ran out. An hour later we flew to Norway.
I still hadn’t gotten answers I could only get via phone. We checked in to the airport hotel in Oslo about 10 p.m. and I shuddered as I asked the front desk what it would cost to call the US from my hotel room. “Two kroner” was the answer. That was the equivalent of about 33 cents back then. “No, you don’t understand,” I said. “I want to call America. From my room.” She looked at me quizzically and said, “Yes. That will cost you two kroner.”
Later on that same trip, I discovered that I could put any credit card into any pay phone in Norway and make that same call back home for that same 33 cents. I was forever sold on Telenor, and it seems lots of others are as well. The company has operations in Norway, Sweden and Denmark, but also all over Central Europe and South and Southeast Asia from Pakistan to Malaysia, the prime areas of the world Telenor’s strategic planners have deemed under-served and with fast-growing populations. They also reach into Russia, the ‘Stans and elsewhere via their 33% joint venture with Russia’s Vimpel, and have extensive broadcasting and TV distribution throughout Scandinavia.
I could go on about NORW’s other holdings, but suffice it to say they are an accurate representation of Norwegian companies and that nation’s entrepreneurialism and innovation. They include Yara International ASA (OTC:YARIY), the global chemicals and agricultural fertilizer company; Norsk Hydro ASA (OTC:NHYDY), the aluminum and hydroelectric power firm; Schibsted ASA (OSLO:SBST), international publisher of print and online newspapers and information; Marine Harvest Asa (OTC:MNHVF), which provides salmon and other seafood worldwide; Opera Software ASA (OSLO:OPERA), the Internet browser, cloud provider, and more; and Norwegian Air Shuttle ASA (OSLO:NWC), which provides what is quite possibly the best bargain fares from the US to most of the key European gateways and which is growing like Topsy.
NORW’s average PE is 11. It is currently selling at pennies from its low for the past year. And it yields 6.75%, payable only at year-end. For us -- it’s a buy.
Disclosure: The author is long NORW. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.
Disclaimer: As Registered Investment Advisors, we believe it is our responsibility to advise that we do not know your personal financial situation, so the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.
Past performance is no guarantee of future results, rather an obvious statement but clearly too often unheeded judging by the number of investors who buy the current #1 mutual fund one year only to watch it plummet the following year.
We encourage you to do your own due diligence on issues we discuss to see if they might be of value in your own investing. We take our responsibility to offer intelligent commentary seriously, but it should not be assumed that investing in any securities we are investing in will always be profitable. We do our best to get it right, and we "eat our own cooking," but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.