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Regions of Growth – Investing in Emerging Markets
Increasing prosperity leads people to aspire to a better life. This normally begins with a marked increase in the quality and amount of food consumed; types of leisure activities available and the level of participation; increased use of toiletries, fashion, make-up and other lifestyle goods and of course better housing and infrastructure which leads to increased resource demand.
Investors looking for exposure to developing nations in their portfolios have a number of options:
- Foreign or sector focused mutual funds. The downside is that funds in these categories typically charge 2.5 – 3.5% per year in fees in Canada.
- Specialized index funds like the iShares CDN MSCI Emerging Markets Index Fund (XEM) which charges 0.75% per year. The downside is that the fund has 537 holdings (as of Aug 31) and investors have no control over which countries are chosen or their weightings.
- Direct investment in foreign shares, which can be associated with higher risks and difficulty for North American based investors.
Another option investors might consider is closer to home. There are some excellent businesses based in North America that do a significant portion of their business in Brazil, China, India, Mexico or elsewhere.
The benefit of investing in a company listed on a major North American exchange like the NYSE is that they are required to comply with US (or Canadian for Toronto/Venture listed companies) generally accepted accounting principals (GAAP) and other reporting requirements which helps investors when they are trying to determine a fair value for the business they are considering investing in.
A few ideas are listed below, please call or e-mail me if you’d like more details or research:
S&P/TSX (Can) listed securities:
Agrium (AGU on TSX) operates in North and South America but sells fertilizers, seeds and chemicals globally. Agrium has investments in Hanfeng (19% owned), Profertil S.A. (50% owned), MISR Oil Processing (26% owned), Common Market Fertilizers (70% owned) and continues to expand globally. 46% of potash sales in 2008 were from international operations, and 54% of sales were from North America.
Teck Resources (TCK.b on TSX) based in Vancouver, B.C. the company has mines in North and South America, but they produce commodities that are used throughout the world: copper, metallurgical coal, zinc, gold and energy. (Metallurgical coal is used predominantly in steel production).
SNC Lavalin (SNC on TSX) is a Canadian based diversified global engineering firm with operations on every major continent in more than 100 countries. It designs and builds chemical and petroleum plants, power generation and transmission systems, bridges, highways, mass transit systems, and water treatment plants.
New York (US) listed securities:
Yum! Brands Inc (YUM on NY) does business in 110 countries with about 30% of their annual profits coming from China alone.
Avon Products (AVP on NY) does business in more than 100 countries with more than 70% of sales coming from developing nations. Avon is a leading global beauty company with over US $10 billion in annual revenue. As the world’s largest direct seller, Avon markets through 5.8 million independent Avon Sales Representatives dispersed globally.
Femsa Coca-Cola (KOF on NY) is the Latin American arm of Coke, offering water, beer and other beverages in Mexico, Brazil, Guatemala, Costa Rica, Venezuela, etc..
April M. Dorey, B.Comm, FMA, FCSI
T: 250.405.2429 or 1.877.405.2400
april.dorey@raymondjames.ca
www.aprildorey.com
*Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. You should discuss any tax or legal matters with the appropriate professional. Written by April Dorey and expresses the opinions of the author and not necessarily those of Raymond James Ltd. Statistics and factual data and other information in this newsletter are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. Securities-related products and services are offered through Raymond James Ltd., member CIPF. Financial planning and insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a member CIPF.
© April Dorey. Articles, statistics and other data referred to or cited are intended to provide readers with potentially useful information for their own personal use. *Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. You should discuss any tax or legal matters with the appropriate professional. Reproduction without permission is permitted with due acknowledgement. The views expressed are those of the author, April M. Dorey, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. The information contained in this article was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.
For more information please contact:
April Dorey, B.Comm, FMA, FCSI
Financial Advisor
Raymond James
10th Floor, 1175 Douglas Street
Victoria, BC.
Tel. 250-405-2429
www.aprildorey.com
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