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The Global X FTSE Nordic Region ETF: The Perfect Fit

The fund is concentrated, holding 30 of the region’s top companies. Almost every company held in the fund has a broad global reach. Inclusion in the index requires ample market trading liquidity. European economies get a lot of undeserved bad press. Take the European Union for instance. A few of its economies are indeed lagging like Portugal and Greece, but at the same time several are excelling like the United Kingdom and Germany. The same may be said for the core Eurozone economy. Then there are the Central and Eastern European (CEE) states, several of whom have made remarkable strides within the EU. With a moment’s reflection, an economic comparison can be made with the United States. Some states, like New York, California and Maryland are economic powerhouses, whereas Mississippi, Louisiana and Illinois are still struggling with tough economic times. The same is true of the wider region of North American economies like Canada and Mexico. Some states or provinces do well with natural resources or foreign investment while other must rely on seasonal tourism or agriculture. It takes governments with foresight and courage to forge ahead to establish economic zones while being as inclusive as possible. It is, in fact, the basic purpose of an economic zone: to eliminate economic border constraints and provider opportunity for the weaker entities through unencumbered economic interaction with the stronger entities. It’s different from the investor’s point of view, however. For the investor, it’s always a matter of risk vs reward. The majority of individual retail investors do not have loads of free capital to risk on large scale ‘turn-around’ stories no matter how tempting the total returns might be. The average mid-career investor, saving for retirement or college fund, must look for ways to ‘pick and choose’ the best potential reward with the least possible risk. Those higher reward ventures are best left to the so ‘high rollers’; hedge funds, venture capitalist and the like. (click to enlarge) A good example of a region whose economies are outperforming its neighbors is collectively known as Scandinavia . These are the nations of Sweden, Norway, Finland, Denmark (and sometimes Iceland). The region of Scandinavia is loosely defined and more a matter of cultural and historical relations. However, a word or two needs to be said about their legal economic affiliations. First, Norway is, essentially, an independent economic nation whose primary trading partners are in western Europe most of whom are European Union members. Importantly, Norway uses its own free-float currency the Krone . Sweden is a member of the European Union; it retains the use of its free-float currency, the Krona . Denmark is also a member of the EU and for the time being is using its own currency, the Krone . However, Denmark is in the process of adopting the Euro and must maintain a fixed rate (called a peg) with the Euro before it fully adopts the currency. It should be noted that (about) 7.5 Danish Krone is a virtual Euro. Finland is all in: EU and Euro. Although Iceland is considered a part of Scandinavia, it is not an EU member and uses its traditional Krona. The point of the matter is this: for those investors who wish to pick and choose the best regional ETFs with stability and reasonable returns, the Global X family of funds offers the FTSE Nordic Region ETF (NYSEARCA: GXF ) . Global X seeks to: … provide access to high quality and cost efficient investment solutions… …recognized for its smart core, income, alpha, risk management and access suites of ETFs.. . Indeed this is the case with the Nordic Region Fund. The fund’s tracking index is the FTSE Nordic 30 Index. As for the tracking index itself: … The FTSE Nordic 30 Index is designed to represent the performance of the Danish, Finnish, Norwegian and Swedish Stock Exchanges in real time for the purpose of derivative trading. The index consists of the top 30 companies in the FTSE All-World Index – Nordic Region, ranked by full market capitalization. In order to be eligible for inclusion in the Index, securities (other than new issues) must have a velocity of 40% or more. Velocity is based on the previous six months trading and is defined as the total value of six months exchange turnover annualized and shown as a percentage of the full market capitalization… The description includes the terms “derivatives” and “velocity”, however, don’t be put off. The fund does not involve any derivatives, only common stock. The index is composed of companies whose stocks have high trading volume. This works in favor of the investor. Velocity may be more familiarly expressed as liquidity . Since the velocity measurement is based on the previous six months, this is an indication of a large cap stock, i.e., similar to trading volumes experienced by, for example, GE (NYSE: GE ) , Intel (NASDAQ: INTC ) or Alphabet, (NASDAQ: GOOGL ) here in the U.S. Indeed, this will prove to be the case. The FTSE Nordic 30 includes the four continental nations of Scandinavia. The chart below demonstrates that the sector allocation is, for all intents and purposes, identical. (click to enlarge) Data from FTSE and Global X When the returns are tabulated and compared, again, the fund does reflect the FTSE index. Annualized Returns Comparison Year to Date One Year Three Years Five Years Since Inception 8/17/2009 GXF NAV -2.43% -9.91% 7.76% 5.84% 9.16% GXF Shares -1.86% -9.57% 7.88% 5.88% 9.16% FTSE Nordic 30 Index -3.70% -10.30% 7.45% 5.73% 9.04% Data from Reuters As the index suggests, there are indeed 30 holdings in the fund, plus a small cash position. A quick over view of the fund gives a good indication of its true nature. Since there are so few holdings, they are group together where appropriate. For Example, Financials are only financials, however, the few IT , Tech and Telecom Services holdings are grouped together for conciseness; however, the description will make clear their sub-classifications. Data from Global X The heaviest allocation is the Financial Sector, followed by Industrials and Health Care; 82.51% of the fund. The smaller sectors are Consumer Products, Energy and Materials. Financial 28.90% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield 5 Year Dividend Growth Rate Total Debt to Equity ROI: ROE: Primary Business Nordea Bank OTCPK:NRBAY 5.80% $44.60 6.01% 19.92% 667.54 NA 12.30 Retail, corporate banking, wealth management Sampo OYJ OTCPK:SAXPY 4.19% $27.72 4.17% 14.29% 21.09 NA 15.50 Property, casualty, life, liability, asset, business, agricultural, insurance SwedBank OTCPK:SWDBY 4.13% $24.88 5.91% NA 791.32 NA 14.74 Savings, brick & mortar, telephone and internet; loans, credit, corporate lending Danske Bank OTCPK:DNSKY 3.33% $26.33 2.99% NA 714.24 NA 4.21 Retail banking, mortgages, insurance, RE, asset mgmt; business & corporate banking Svebska HandelsBanken OTCPK:SVNLY 3.16% $25.34 5.02% 16.95% 1032.5 NA 12.21 Private and Corporate banking, financial services, mortgages, credit cards Investor (Industrial Holding company) OTC:IVSXF 3.07% $28.663 2.72% 17.61% 20.32 5.11 6.23 Minority holdings in Nordic big cap industry; also in EQT and Investor Growth Capital funds Skandinaviska Enskilda OTCPK:SVKEF 2.75% $23.14 4.75% 36.56% 560.83 NA 13.33 Merchant, retail, wealth mgmt, insurance DNB ASA OTCPK:DNHBY 2.47% $20.93 3.40% 16.77% 473.32 NA 13.60 Full range of retail, business, corporate; Offices also in Asia and Americas Averages 3.61% $27.70 4.13% *20.35% 535.15 ROE: 11.515 *x-SWEDa and DANSKE Data from Reuters There are, surprisingly, no REITs. With one exception, they are all big cap, well established banks serving their region, the Baltics Europe including the UK and to a lesser extent, Asia and the Americas. The only unusual position in the sector is Investor , which is not a ‘financial’ per se. Investor , is a holding company, buying minority positions in mostly industrials, but also owns portions of private equity group ‘ EQT’ and venture capital fund ‘ Investor Growth Capital ‘. The holdings do have very high total debt to equity ratios. That’s usually an indication of an aggressive growth strategy. This may not be the case here. The overnight reserve rates in these nations are at, near or below 0 in order to deter ‘safe-haven’ capital inflows, which strengthen the currency, making their exports more expensive. These high ratios may reflect offsetting overnight reserve rate strategies. Health Care 18.20% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield 5 Year Dividend Growth Rate Total Debt to Equity ROI: ROE: Primary Business Novo-Nordisk NVO 16.77% $113.1 1.39% 27.78% 1.46 75.36 81.73 R&D, manufacturing, marketing of biopharma for diabetes and obesity. Africa, Americas, Europe, Russia, Asia, Coloplast OTCPK:CLPBY 1.43% $16.30 2.20% 44.27% 2.12 13.74 16.36 R&D, manufacturing, marketing of Ostomy, Continence, Urology, Chronic wound care products. Global distribution Averages 9.10% $64.65 1.80% 36.03% 1.79 44.55 49.05 Data from Reuters There are only two holdings for Health Care, but it’s just as good, if not better than a portfolio of several holdings. Novo-Nordisk ranks with the premier global pharmaceutical companies as best in class. Coloplast designs, manufactures, markets and distributes niche personal care products. Together, they cover a significant portion of the sector and contribute to the efficiency of the fund. Industrials 19.73% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield 5 Year Dividend Growth Rate Total Debt to Equity ROI: ROE: Primary Business Assa Abloy OTCPK:ASAZY 3.54% $22.15 1.18% 12.54% 57.43 12.31 20.46 Ingress and Egress security solutions and components Svenska Cellulosa Aktiebolaget OTCPK:SVCBY 3.03% $25.34 5.02% 7.25% 53.78 5.84 8.36 Sustainable forest products, personal care, hygiene, kitchen paper, bath tissue, packaging Atlas Copco OTC:ATTLF 2.95% $31.90 2.58% 14.87% 50.27 19.11 30.80 Industrial and medical solutions compressors, blowers, filter, vacuum, air, piping; safety, productivity, ergonomics focus Kone OYJ OTCPK:KNYJY 2.90% $19.155 2.98% 13.05% 9.29 36.75 44.34 Elevators, escalators, travelator, auto doors; access control systems Sandvik OTCPK:SDVKY 1.77% $12.61 3.98% 28.47% 121.31 6.53 14.90 Mining and Construction tooling solutions; industrial metal cutting AP Moeller Maersk OTCPK:AMKBF 1.72% $31.54 18.93% NA NA NA International ocean freight and oil shipping; towing and salvage SKF OTCPK:SKFRY 1.25% $7.74 3.70% 9.46% 99.06 7.41 18.86 Lubrication, bearings, seals, services, support, solutions Volvo OTC:VOLAF 2.57% $21.55 3.40% NA 181.72 4.50 11.91 Industrial equipment construction division of Volvo Group Averages 2.47% $21.50 5.22% *14.27% **81.837 **13.20 **21.38 *x- AMKBF, VOLAF **x- AMKBF Data from Reuters There seems to be a common theme among Nordic industrials. They are focused on sustainability, recycling and environmental responsibility. This often gives their industrial sector a more cyclically defensive bias. Two examples from the sector are Svenska Celluosa , a forest product paper and packaging company and Kone , essential a ‘people mover’ designer, manufacturer and service company. Both involve products or services that will be in demand in both good and bad times. Technology 15.68% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield 5 Year Dividend Growth Rate Total Debt to Equity ROI: ROE: Primary Business Nokia NOK 4.84% $28.92 2.17% -20.87% 31.58 7.44 11.96 Network software, hardware, services; networks, voice, data, global mobile Ericsson ERIC 4.72% $31.676 4.09% 12.34% 18.81 5.84 7.67 Telecom service, software, broadband, cloud services, network infrastructure TeliaSonera OTCPK:TLSNF 2.28% $21.20 7.01% 5.92% 100.11 7.13 13.71 Telecom service, network access, mobile services, broadband and landline services Telenor OTCPK:TELNY 2.20% $26.51 4.75% 23.90% 114.97 7.01 9.16 Mobile telecom services, voice, data, internet, telephony and television, landline Hexagon OTC:HXGBF 1.64% $12.4 1.03% 28.67% 48.70 8.45 13.36 IT operations research services; industrial productivity via sensors, software, workflow data Averages 3.14% $24.14 3.81% 9.99% 62.83 7.17 11.17 Data from Reuters When one thinks of technology in the north countries, Nokia and Ericsson immediately come to mind. The interesting holding is Hexagon which applies real time monitoring and data collection towards improving efficiencies and productivity. This may be concisely described as operations research services. Consumer Products 9.71% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield 5 Year Dividend Growth Rate Total Debt to Equity ROI: ROE: Primary Business Hennes & Mauritz OTCPK:HNNMY 5.75% $53.4 3.05% 4.04% 0.00 41.57 44.71 Design and manufacture of apparel, sportswear, footwear accessories Pandora OTCPK:PNDZF 2.40% $14.32 1.09% NA 55.17 41.42 55.91 Precious metal jewelry and accessories Carlsberg OTCPK:CABGY 1.56% $12.83 1.53% 20.79% 82.84 -2.20 -5.11 World renowned brewer and soft-drink manufacturer Averages 3.24% $26.85 1.89% 12.42% 46.00 26.93 31.84 Data from Reuters The fund seems well thought out in its construct and the consumer sector exemplifies this. It covers the spectrum of consumer products from the very basics to the very discretionary in just three holdings. Energy 3.57% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield 5 Year Dividend Growth Rate Total Debt to Equity ROI: ROE: Primary Business StatsOil STO 2.41% $49.24 5.87% 15.63% 77.90 -4.86 -10.32 Global oil and gas exploration, development production Fortum OYJ OTC:FOJCF 1.16% $13.1 9.35% 5.39% 44.15 -8.63 -13.94 Heat and electric production and distribution; plant management services and solutions Averages 1.79% $31.17 7.61% 10.51% 61.03 -6.75 -12.14 Data from Reuters Again, two holdings of best-in-class companies covering the industry from wellhead to home; simple, well founded and concise. Materials 3.31% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield 5 Year Dividend Growth Rate Total Debt to Equity ROI: ROE: Primary Business Novozymes OTCPK:NVZMY 1.92% $12.36 0.89% 21.14% 12.73 19.15 24.69 Industrial bioengineered enzymes for consumer products; agricultural and feed additives; wastewater treatment Yara International OTCPK:YARIY 1.39% $12.22 3.35% 23.64% 18.32 12.18 14.75 Sustainable fertilizer production, marketing and distribution ammonia, nitrates, nitrogen, phosphorous and potassium Averages 1.66% $12.29 2.12% 22.39% 15.53 15.67 19.72 Data from Reuters Two unique holdings covering the very essence of materials manufacturing products that are less sensitive to business cycle swings: enzymes for household cleaning products, wastewater recycling, agricultural feed, food flavorings, ingredients, and essential fertilizer chemicals all produced with sustainability and environmentally friendly methods. (click to enlarge) A few things need to be said for the fund itself. The expense ratio just a bit higher than average at 0.50%; the distributions are annual. The fund is not large with 30 holdings and roughly $52,249,671.00 in assets. Volume seems reasonable with a three month average daily volume of about 4300 shares/day; more than enough liquidity for a retail position. Smaller, focused ETFs seem to have an advantage over those larger comprehensive funds with hundreds of holdings. Having two or three large funds will most likely result in ‘overlapping positions’ and may have risks not easily noticed among so many holdings. Also, smaller ETFs create the opportunity to piece together the best performers of a region, in a much focused way, and the Global X FTSE Nordic Region ETF is a perfect fit for what an interested retail investor needs to construct an efficient yet diversified portfolio. Lastly, the investor should be aware of a slight currency risk. On December 3rd, the ECB announced a continuation of its weak Euro policy. The non-Eurozone or other European central banks must somehow respond in order to maintain purchasing power parity. Europe, EU or not, has a large, internal trading network so purchasing power parity must be maintained. Hence, when translating back to U.S. Dollars, there may be a short term risk, if any at all; it will present an opportunity if it occurs. One last word about Global X: the website presentation is well thought out and interesting. The link to the GXF page contains a link to a ‘minisite’. The minisite presents an overview of the Scandinavian region: the economies, sovereign credit quality, demographics and culture; a welcome addition to the usual facts & figures presentation. 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.

The iShares MSCI Ireland Capped ETF: Ireland Revisited

Ireland is generating growth well in excess of its fellow Eurozone member states. Ireland employed a corporate ‘tax haven’ strategy, at 12.5%, in order to attract foreign investment. Many global, best in class companies now officially headquarter in Ireland. Ireland had been bestowed with the title “Celtic Tiger” and it has been well earned. During the worst of the EU recession years, 2008 through 2010, Ireland’s GDP contracted over 14% . Ireland, however, was not alone in its struggle to revive its economy. With few exception, advance economies around the globe were struggling; some on the very brink of complete economic collapse. In response, the Irish government jumped aboard the ‘austerity bandwagon’, raised taxes, reduced public sector spending and requested nearly $90 billion in bailout funds from the EU. The persistence has paid off. Over the past two years, the Celtic Tiger roared back with a vengeance. According to the European Commission , Ireland’s 2014 GDP growth was 5.2% with year over year inflation of 0.3% and debt to GDP of 107.5%. For 2015, it is expected that Ireland will have 6.0% growth with year over year inflation of 0.3% and a debt to GDP ratio of 99.8%. Over the past two years, unemployment has gone from 11.3% to 9.5%. The forecasts are equally impressive with 2016 GDP growth expected to be 4.5%, unemployment at 8.7% and debt at 95.4% of GDP. One of the cornerstones of Ireland’s recovery is the low corporate tax rate at 12.5%. Finance Minister Michael Noonan intends to reduce it again by half, to 6.25%. Recently, the pharmaceutical giant Pfizer (NYSE: PFE ) , acquired Ireland based Allegan in order to reestablish Pfizer’s corporate headquarters in Ireland and take advantage of the low tax rate. Spain’s pharmaceutical giant Grifols (NASDAQ: GRFS ) has also ‘taken the leap’. Ireland’s Knowledge Development Box , which includes the favorable tax rate, has attracted other global giants such as Medtronic (NYSE: MDT ) , Horizon Pharma (NASDAQ: HZNP ) , Endo (NASDAQ: ENDP ) , Pentair (NYSE: PNR ) and a host of others. The most recent data indicates that US companies now employ over 140,000 citizens of the Irish Republic. To be sure, all is not perfect with the Irish economy. Aside from those positive projections, the European Commission has made observations and recommendations which Ireland needs to address, including, “…High level of private and public debt …” as well as “…Financial sector vulnerabilities…” The European Commission has determined that these issues, among others, require “…decisive policy action and specific monitoring…” So it seems that, so far, the Irish economy has continued to outperform the rest of Europe, is aggressively pursuing major global corporations with its low corporate tax and R&D tax credit policy, however, the country still has concerning macroeconomic issues. So is it worth the risk to hold a piece of the Emerald Isle in your portfolio? If so, you’re limited in your choices. BlackRock ‘s (NYSE: BLK ) iShares portfolio has the best possible venue with its MSCI Ireland Capped ETF (NYSEARCA: EIRL ) . According to iShares, the fund is over 87% invested in Ireland, the rest in the UK, US and a wee bit in ‘other’. It’s important to note something here. The fund concentrates on the EU member: Republic of Ireland . Northern Ireland is a constituent part of the United Kingdom. Also, Northern Ireland’s Finance Minister has recently announced a ‘tax matching’ corporate tax rate reduction of 12.5% hoping to make that economic region of the United Kingdom a competitor for direct foreign investment. This bodes well for the fund since, as the pie chart below demonstrates, includes UK based company exposure . Data from iShares It’s also interesting to take note of the fund’s sector allocations. Interestingly, the heaviest allocation belongs to the Materials sector, which is usually very sensitive to the business cycle. This is followed by the more defensive Consumer Staples, then Financials and then Industrials. Healthcare and Consumer Discretionary middleweights follow. The observant investor may notice that many global pharmaceutical or healthcare companies have reestablished themselves in Ireland. It should be emphasized that as well as the 12.5% corporate tax credit, Ireland offers a 25% Research & Development tax credit ; R&D is a major expense for pharmaceutical companies. Data from iShares Before examining the individual fund holdings it’s a good idea, as always, to know a bit about the index the fund is tracking. In this case it’s the Morgan Stanley Capital International ” All Ireland Index “. The fund is a ‘Regulated Investment Company’ subject to an IRS ‘capping’ requirement so that .. .at the end of each quarter of a RIC’s tax year no more than 25% of the value of the RIC’s assets may be invested in a single issuer and the sum of the weights of all issuers representing more than 5% of the fund should not exceed 50% of the fund’s total assets… The fund is small, even by single country focused fund standards, with only 24 holdings. The net assets totaling approximately $170,027,303.00 and has 4.2 million shares outstanding. The 3 month average daily volume is good for a small fund and more than adequate for a retail investor to enter or exit a position. (click to enlarge) The question then becomes, is there a proverbial “pot o’ gold” at the end of the rainbow? In order to answer that, it’s necessary to look a little deeper into the fund’s holdings. Materials 25.90% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield P/E Ratio Price to Cash Flow Avg. 5 year Dividend Primary Business CRH Plc CRH 22.0086% $24.266 2.33% 35.58 17.74 3.45% Building Materials; global product distribution; minority ownership in Yatai Building Materials; 50% joint venture with My Home Ltd ., India Smurfit Kappa Group Plc. OTCPK:SMFTF 3.8954% $6.283 2.38% 19.69 8.64 NA Paper packaging products, container board, corrugated containers, etc. European, US and Central Americas Averages 12.95% $15.27 2.36% 27.635 13.19 *2.54% *Industry Average Data from Reuters, Yahoo! Finance Surprisingly, for such a large sector allocation, there are only two holdings and then almost 85% of that in just one company, CRH Plc. and maybe for good reason. CRH qualifies for an NYSE-ARCA listing. CRH does have global reach and services across the entire spectrum of building materials through two segments: Heavyside materials for major construction, Lightside materials for smaller projects. CRH is a good example of the type of cross-border reach of an Ireland based company. CRH has 18,400 employees in 44 US states in 1200 US locations. CRH is also established in Brazil and Canada, not to mention Europe. However, as well established and global as it is, building materials are still subject to business cycles. Consumer Staples 24.2233% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield P/E Ratio Price to Cash Flow Avg. 5 Year Dividend Primary Business Kerry Group Plc OTCPK:KRYAF 12.3368% $13.804 0.62% 25.16 19.73 0.91% Ingredient and flavor products in food, beverage and Pharma. Primarily in the EU Glanbia Plc OTC:GLAPF 4.0275% $5.396 0.66% 31.96 22.52 1.11% Performance, nutritional, vitamin/mineral premixes; Dairy and non-dairy products C&C Group Plc OTCQX:CCGGY 3.8715% $1.31 3.16% **16.41 **12.83 2.16% Hard cider, beer, wine and soft drinks; over 15 brand; UK, EU, US and Canada, Asia, Australia Origin Enterprises Plc OTC:ORENF 2.9352% $0.972 2.87% 11.98 9.88 2.87% Agricultural products and agronomy services in UK, Poland, Romania, Ukraine Total Produce Plc OTC:TTPPF 0.5455% $0.482 1.78% 16.00 8.07 3.21% Fresh produce, flowers, vitamins, minerals, health foods in UK, Scandinavia, Poland, Czech Republic Fyffes Plc OTCPK:FYFFF 0.4448% $0.480 1.61% 11.03 8.85 3.30% Tropical produce distributer, warehouses in Florida, UK, Germany; holds 40% of Balmoral Land Holdings Donegal Investment Group DGICA 0.062% $0.060 2.81% 31.76 17.37 3.64% Farm and dairy supplies, seeds and products; Specialty dairy and vegetable products Averages 3.46% $3.21 1.93% 20.614 14.18 2.46% **Approximate Data from Reuters, Yahoo! Finance Again, it seems that about 50% of the Consumer Staples sector is weighted by one company, Kerry Group Plc . This company occupies a niche in consumer products, through food additives for taste and nutrition, including enzymes, probiotics, specialized proteins and ‘life staged nutrition’ products. Kerry Food Brands include popular European brand names such as Dairygold , Richmond , Wall’s and more. Lastly, Kerry’s agribusiness focuses on sustainability, dairy input products and feeds. Kerry Group distributes in over 140 countries. A quick glance at the entire table demonstrates that this is one of the stronger segments of the fund, with its focus on agriculture, nutritional additives and beverages. Financials 17.3355% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield P/E Ratio Price to Cash Flow Avg. 5 Year Dividend Primary Business Bank of Ireland OTCPK:IREBY 10.0582% $12.042 *2.27% 12.50 10.98 *1.97% Retail financial services, foreign exchange and hedging products, life assurance Green REIT Plc OTCPK:GREEF 3.4012% $1.10 1.04% 6.57 *18.18 *3.07% REIT: primarily Irish commercial real estate investment company; office, industrial and retail space Hibernia Plc OTCPK:HIBRF 3.3854% $1.002 0.86% 6.79 *18.18 *2.92% REIT: Irish commercial real estate investment company, commercial and residential IFG Group Plc OTC:IFGPF 0.2662% $0.256 2.56% 98.37 *37.52 *1.91% Financial services management, insurance. Pensions, wealth mgmt., financial advisors FBD Holdings OTC:FBDHF 0.2245% $0.254 4.89% *18.51 *13.66 3.78% Insurance underwriting farm and non-farm business. Retail insurance, pension and investment mgmt. Averages 3.47% $2.93 *2.32% *28.548 *19.704 *2.73% *Indicates data was not available; industry average included for comparison Data from Reuters, YaHoo! and Multiple Sources It should be emphasized that the financial holdings are probably the most sensitive area in the fund. As noted above, the European Commission has voiced its concerns about public sector debt. Recently, the Irish Times reported Ireland’s ‘shadow banking’ debt amounted to approximately $2.36 billion. The shadow banking sector includes other entities such as investment funds. Irish banks will undergo an EU stress test in February. On the other hand, it’s also fair to note that the Irish banking sector has seen more difficult times and have survived through them all. Industrials 17.2922% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield P/E Ratio Price to Cash Flow Avg. 5 Year Dividend Primary Business Kingspan Group Plc. OTC:KGSPF 4.7023% $4.637 0.72% 31.84 22.92 1.28% Energy usage reduction systems and solutions. Water recycling and renewable energy solutions Ryan Air Holdings RYAAY 4.687% $20.869 4.28% 13.76 10.00 *0.23% Well known and popular discount airline serving UK, Europe, Morocco Grafton Group Plc OTCPK:GROUY 4.0124% $1.07 1.68% 17.40 **31.37 *2.67% DIY home improvement and building materials and supplies; home and garden products Irish Continental Group OTC: IRCUF 3.7035% $1.027 2.03% 14.36 11.34 4.63% Maritime freight and passenger ferry services; High speed ferry services CPL Resources Plc OTCPK:CPGLF 0.187% $0.205 1.52% 15.80 15.19 1.66% Placement/Employment services; workforce mgmt., temps, contract, outplacement and training Averages 3.46% $5.56 2.05% 18.63 18.16 2.09% *Indicates data was not available; industry average included for comparison. **Approximated Data from Reuters, YaHoo! and Multiple Sources The Industrial holdings have a more evenly distributed weighting, the most notable one being the successful discount airline, Ryanair . Here in the states, companies such as Home Depot (NYSE: HD ) and Lowes (NYSE: LOW ) have proven themselves as less sensitive to the business cycle. Grafton is a similar company with 37 DIY retail stores in Ireland as well as 313 branches under different brand names in Great Britain and Europe. Grafton also manufactures building materials such as plastic piping and mortar mixes. Health Care 8.5191% Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield P/E Ratio Price to Cash Flow Avg. 5 year Dividend Primary Business UDG HealthCare Co Plc OTC:UDHCF 4.3235% $1.959 *0.84% 6.45 12.77 *1.01% Healthcare outsourcing services provider; supply chain services, event mgmt. UK, N America and Europe Icon Plc. ICLR 4.1956% $4.293 *0.48% 22.25 16.13 *0.51% Clinical trial services for pharmaceutical, biotech, medical device industry Averages 4.26% $3.13 *0.66% 14.35 14.45 0.76% *Data not available; Industry Average for comparison Data from Reuters, YaHoo! and Multiple Sources What might be the deciding factor for owning the fund is the Health Care sector. Presently, the fund holds two equally weighted companies. However, as noted above, the aggressive corporate tax rate and R&D tax credit have attracted global Health Care companies to reestablish corporate headquarters in Ireland . Any complicated legal issues aside, these companies, Pfizer, Medtronic, Horizon Pharma and Grifols are perfectly good candidates for the fund. In general, as long as the ‘Knowledge Development Box’ policy continues to attract global leaders, it’s not too far-fetched to expect some kind of allocation of those newly established companies in the fund. It isn’t a given, but shouldn’t be ruled out. Discretionary, IT and Energy Ticker Fund Weight Market Cap (in USD Billions) Dividend Yield P/E Ratio Price to Cash Flow 5 Year Dividend Growth Primary Business Paddy Power Plc. (Consumer Discretionary) OTC:PDYPF 6.1526% $5.581 1.44% 36.39 25.30 1.82% Consumer Discretionary: betting and gaming services and management; UK and Australia and global online access Datalex Plc (NYSE: IT ) OTC:DLEXF 0.2534% $0.236 0.91% 101.55 30.41 0.95% Travel industry digital solutions; e-business services and consulting San Leon Energy (Energy) OTCQX:SLGYY 0.0471% $0.016 NA NA NA Na Oil and gas exploration; N Celtic Sea, France, Poland, Carpathian Basin Data from Reuters, YaHoo! and Multiple Sources The smaller holdings consisting of one company each; Consumer Discretionary , IT and Energy comprise about 6.4% of the fund, and 95% of that weighted by Paddy Power . This is not the energy holding as the name might suggest, but rather a venue for sports betting including internet and live betting. The investor should make note that internet sports betting laws in the US are regulated state by state and Federal law enforcement is constantly monitoring for illegal offshore betting activities. That being said, online sports betting, and sports betting itself is wildly popular in Europe. Lastly, San Leon Energy is an independent oil and gas exploration company. It suffices to note that its weighting is a mere 0.0471% of the fund. All told and in spite of its shortcomings, the fund has proven itself over the past several years. However, the fund seems out-of-step with the new entrants in the Irish economy. This may be more of a result of the tracking index. MSCI’s Investable Market Methodology of the funds objectives and inclusions states that: …Each company and its securities (i.e., share classes) is classified in one and only one country, which allows for a distinctive sorting of each company by its respective country… …Securities may be represented by either a local listing or a foreign listing…The security’s foreign listing is traded on an eligible stock exchange.. ” It may be a technicality for the present, for the present, but it will be difficult to ignore the fact that many global, major league, publicly owned companies have established corporate headquarters in Ireland. However, even without the inclusion of the recently relocated companies, as long as the economy performs well, foreign investment on this scale is certain to be a driving factor for the economy and supportive of its weakest sectors. Hence the fund is likely to benefit either directly or indirectly from foreign capital investment. It should be noted that the fund’s expense ratio is a mere 4 basis points above the industry average .044%, and recently is trading at a discount to net asset value. The fund’s P/E is 21.90 and price to book multiple is 2.51. The annualized distribution yield is 2.39%; trailing 12 month yield at 1.56% and after expense (SEC) yield is 1.09%. Also, the fund has low volatility with a beta of only 0.80% of the market and is passively managed. Returns Comparison 1 Year 3 Years 5 Years Since 5/5/2009 Inception Total Return 14.22% 21.39% 16.23% 12.41% Share Price 15.77% 22.08% 16.67% 12.67% Index 15.24% 22.35% 16.71% 12.96% Data from Reuters, YaHoo! and Multiple Sources Generally, the fund has potential for capital appreciation, as it is now, however, with the potential of having the future inclusion of the global giants that now call Ireland home, the potential is even greater. Like any investment, it’s a rainbow to follow, but one that just might have a pot o’ gold at its end. 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.

Reasons Why The United States Oil ETF Is A Sell

Summary 1-month return is -10.85%. Year-to-date return is -35.41%. USO is a Sell. Poor ROE for USO unsettles WTI crude oil investors. Upcoming OPEC meeting to provide no long-term relief. (click to enlarge) USO NYSE ARCA 3-Month Performance of Oil The United States Oil ETF (NYSEARCA: USO ) has been listed on the NYSE ARCA since 10 April 2006. The 30-day yield is 0% and the 12-month yield is 0%. The total net assets of the company are $2.80 billion. But the performance of USO has been anything but exemplary. With a year-to-date return of -35.58%, it is ranked among the poorer performing oil funds on the market. There is no price/earnings ratio to speak of either. The fund price is $13.11 (as at 30 November 2015) and the 52-week trading range spans $12.37 on the low end and $26.39 on the high end. The 1-year chart paints an even more disturbing picture in the sense that the stock has plunged 41.87% between November 30, 2014 and November 30, 2015, from $25.58 to the current trading price of $13.11. Here are some interesting metrics about United States Oil, to further illustrate why is a strong sell contender – despite the news of falling inventories, rising oil price projections, Fed rate hikes and declining WTI oil inventories for 2016 and beyond. Looking at the total market returns for the past 3 years we see the following: The year-to-date return is -35.58 % The 1-year return is -53.30 % The 3-year return is -25.87 % USO Fund Performance Overview More importantly, the performance of USO trails the performance of the index by almost 10%, with -26.14% for the year-to-date and an index year-to-date return of -15.43%. When compared to the S&P 500 index, the performance history of USO is equally bearish. The 10-year annualized return of the S&P 500 index is 6.84%, the five-year annualized return of the S&P 500 index is 13.69% and three-year annualized return of the S&P 500 index is 16.12%. USO has a significantly poorer performance record over 1 year, 3 years and 5 years. The worst year of course has been the period between November 2014 and November 2015 when the price of WTI crude oil dropped from over $120 per barrel to its current trading range in the region of $40 – $45 per barrel. Things to Look Out For in Coming Weeks As at 1 December 2015, the likelihood of a Fed rate hike following the December 15/16 Fed FOMC meeting is 76%. The dollar index is now over 100, and close to its 52-week high. The Euro for its part is faltering and is trading under the critical 1.06 support level. This is likely to decrease further when two things happen: the ECB decides to implement quantitative easing with additional stimulus measures to boost the money supply, and the Fed moves in the opposite direction with monetary tightening to increase interest rates. This will open up plenty of daylight between the euro and the dollar, sending the European currency closer to parity with the greenback. However, despite general market weakness in China and its impact on EM countries, we are seeing some positive movements in commodity prices around the world. Both gold and copper staged minor rallies, but the concern remains crude oil. In this vein, the USO fund will likely be driven lower on the back of several upcoming meetings and announcements by OPEC and non-OPEC producers. On Friday, 4 of December OPEC members will meet to discuss the issue of supply, demand and equilibrium prices for crude oil. For its part, WTI crude oil has been clinging to single digit gains over the past couple of days. The price of WTI crude oil dropped by 3.19% ($-1.33) over the past month. The price of Brent crude oil dropped 2.92% ($-1.31) since October 30, 2015. The 1-year forecast for WTI crude oil is $47 per barrel. For its part, United States Oil Fund of Delaware has the objective of having changes in its unit’s net asset values reflect the equivalent changes in the price of WTI crude oil from Cushing, Oklahoma. It operates as an oil futures price on the WTI crude oil futures on the NYMEX. The current fund managers are Ray Allen. How Crude Oil is Going to Be Impacted in the Weeks Ahead A big part of the problem with the oil markets is the oversupply. This is true of WTI crude oil, Brent crude oil and other crude oil suppliers. Oil companies are jockeying for position with one another, refusing to budge on market share considerations in favor of price considerations. A global supply glut is the order of the day and there are real concerns about a stronger USD, weakness in China and the possibility of a Fed rate hike. On the Nymex, crude oil for January delivery closed the week at $41.71 per barrel. This is now the fourth consecutive week of declines for oil futures traded in New York. For November alone, Nymex futures have declined by 10%. The EIA released a report detailing increases of 961K barrels of crude oil for its ninth consecutive gain in inventories. Now, US crude oil stockpiles stand at over 488 million barrels – the highest level in over 80 years. But it’s not only WTI crude oil that is feeling the pressure – it’s Brent crude oil too. On the ICE Futures Exchange in London, Brent crude oil retreated by 1.32% to close at $44.86. While there were some concerns about a potential conflagration between Russia and Turkey, that only led to a slight uptick in the oil price, but nothing strong enough to sustain higher prices. Concerns remain over the potential fallout of a larger regional war from Syria into Iraq, Iran, Jordan and other countries. But the most important upcoming announcement will be what is decided at the OPEC meeting on 4 December. This will be one of the most crucial meetings to take place in the final four weeks of 2015. Should OPEC member nations, led by Saudi Arabia, decide to cut output, the price of crude oil will rise moving into 2016. This will invariably have a positive effect on oil futures, oil funds like USO, and inflation rate targets for the US, the UK, the European Union, Japan and other countries. In fact, it is precisely the actions of the energy rich bodies like OPEC that can turn the global economy around. It is not that OPEC lacks the ability to effect change, it lacks the determination to do so. The majority of analysts – Banc De Binary among them – do not expect OPEC to come to any agreement about cutting oil production. That would be a blatant surrender to WTI and global pressures. There are low expectations ahead of this meeting, and even Russia – a key energy producer – has decided not to send an envoy. It is well-known that OPEC nations have deeper pockets to sustain plunging revenues and profits compared to WTI producers. It may well be a war of attrition taking place between both power blocs, but until such time as global demand is able to soak up global supply, prices will remain at historically low levels. US Oil Rig Count Expected by Baker Hughes on Friday Everyone is determined to defend market share at the expense of all else – even if it means putting themselves out of business. That is precisely what is happening with many oil producing countries around the world. High cost oil producers are feeling the pinch in a big way, and they are having to endure falling credit ratings, falling profitability and revenue streams, layoffs and the like. The bigger companies with lower costs of operations are now able to swallow up the smaller companies. Then of course there are the policy decisions of the European Central Bank and the Fed. The ECB is moving towards quantitative easing and the Fed is moving towards quantitative tightening. This will likely strengthen the greenback and make oil prices less affordable in an already flat-demand scenario. One of the things to look for this coming week will be the Baker Hughes report on US oil rig counts on Friday, 4 December. As greater numbers of oil rigs shutter operations, so US supply declines and inventories decline too. Falling numbers of US oil rigs in production is a double-edged sword for investors as it shows the US is incapable of maintaining operations at current prices. Falling numbers of US oil rigs will invariably be perceived negatively by investors in USO. Performance of Oil ETFs Exchange Traded Funds (ETFs) such as USO allow investors to access commodity markets for crude oil without actually taking futures contracts. Since USO has been one of the lower-ranked oil ETFs, it is worth considering other exchange traded funds. Among the strongest performers are the following crude oil ETFs on the US exchanges: The DB Crude Oil Dble Short ETN (NYSEARCA: DTO ) with a year-to-date return of 66.41% and a 5-year return of 140.02% The UltraShort DJ-UBS Crude Oil (NYSEARCA: SCO ) with a year-to-date return of 40.73% and a 5-year return of 102.05% The DB Crude Oil Short ETN (NYSEARCA: SZO ) with a year-to-date return of 35.66% and a 5-year return of 86.73% The United States Short Oil Fund (NYSEARCA: DNO ) with a year-to-date return of 31.98% and a 5-year return of 76.70% The VelocityShares 3x Inverse Crude Oil ETN (NYSEARCA: DWTI ) with a year-to-date return of 26.72% and a 3-year return of 183.02% The United States 12-Month Oil (US) with a year-to-date return of -30.24% and a 5-year return of -54.63% The Pure Beta Crude Oil ETN (NYSEARCA: OLEM ) with a year-to-date return of -33.39% and a 3-year return of -56.26% The DB Oil Fund (NYSEARCA: DBO ) with a year-to-date return of -35.29% and a 5-year return of -62.41% The DD Crude Oil Long ETN (NYSEARCA: OLO ) with a year-to-date return of -36.63% and a 5-year return of -60.39% The United States Oil Fund with a year-to-date return of -38.80% and a 5-year return of -67.48% The S&P GSCI Crude Oil Tot Red IDX ETN (NYSEARCA: OIL ) with a year-to-date return of -42.42% and a 5-year return of -71.32% The Ultra DJ-UBS Crude Oil (UCL) with a year-to-date return of -68.45% and a 5-year return of -93.18%