Tag Archives: stocks

Picking Stocks For The Long Term Is Harder Than You Think – So Don’t

Summary It is important to distinguish between stock picking and index investing, because they require different approaches. A common assumption with index investing is that, over the long term, indexes will rise. Often, investors make the same assumption when picking individual stocks, but they shouldn’t. It is extraordinarily difficult to find individual stocks that offer value, long-term predictability, and index out-performance. That doesn’t mean that we should abandon stock-picking. It just means that it is very important to take into account the medium-term prospects of a stock. Alpha is more likely to be achieved if one develops a medium-term investment thesis and then sticks to it. I generally try to avoid referencing super-investors for a variety of reasons, but this article will be an exception. There have been many, many articles and comments on Seeking Alpha that reference Warren Buffett’s investing advice. What is often not taken into account, however, is that Buffett’s advice is directed at two distinct categories of investors: active, knowledgeable investors; and passive, less knowledgeable investors. For passive investors, Buffett’s basic advice is to invest the majority of one’s capital into a low-cost S&P 500 index fund, and perhaps hold some capital in cash in case there is a downturn in which one needs money and does not wish to sell their stocks while the stocks are undervalued. The reasoning behind this is that over the long-term, a large basket of US stocks are likely to outperform other asset classes, and you can purchase a large basket of US stocks rather cheaply. As for investors who are active, intelligent, and knowledgeable, they should look for some combination of value and long-term predictability, and also have a high portfolio concentration, low turn-over, and if possible, aim to seek out companies with small capitalization. (This is summarizing a lot of what Buffett has said, done, and written over the years into one sentence. I would be happy discuss any reasonable objections of the summary in the comments section.) It is important to note that these two investing approaches are often mutually exclusive. You cannot have a high concentration and index at the same time. You also cannot assume that an individual stock that has a low correlation with its respective index will rise over long periods of time like you can with an index. In fact, I think that the relationships may be opposite one another. (Meaning the longer you commit to holding an individual stock, the more likely it is the stock will decline in value, while the longer you commit to holding a US focused index fund, the more likely it is that it will rise in value.) Not everything is mutually exclusive between the two approaches. You can buy a small-cap value fund that charges only small fees (but you can also expect more volatility if you do so). You can limit turnover when purchasing individual stocks, just as many indexes do. You can also try to find long-term individual stocks to purchase, but consider this: If Warren Buffett and Charlie Munger–two of the best investors in the world–can only find one or two worthy long-term picks in any given year, what makes you think that you can find more than that? So, while there is some potential overlap between the approaches, the areas that are mutually exclusive are often forgotten by investors, and the ones that aren’t mutually exclusive either have high volatility or are difficult to find. The mistake I see is that often times investors want to combine an indexing approach–and the assumptions that come with it–with a stock picking approach. Specifically, investors want to (1) be diversified beyond 3-10 holdings even though long-term value stocks are hard to find, (2) assume the historical bias toward long-term index gains applies to individual stocks, (3) assume that picking individual blue-chip stocks that have a high correlation with indexes will outperform indexes, and (4) assume that their goals are unrelated to the performance a benchmark. I will set assumptions 1, 3, and 4 to the side for this article, #1 would make this article too long, #3 is obviously a poor assumption, and #4 is simply a different topic altogether. So this article will focus on why investors have to be careful not to assume that the long-term historical upward bias of index funds also applies to individual stocks that are weakly correlated with the index. The Problem with Visibility: Visibility of the long-term future of individual stocks is more cloudy than people think. Quite often investors will assume that a company will perform well twenty years from now because it has performed well in the decades leading up to that point in time. If the investor purchases the stock and the stock price drops, quite often the investor will insist that the drop in price is okay because they are “holding for the long term”, and long term the company will be fine. It is absolutely critical the investors realize just how difficult it is to forecast out ten or twenty years on an individual stock. That is a key difference between an index and an individual stock. It might be okay to assume the S&P 500 index will be higher in twenty years than it is now. But if one were to pick an individual stock at random from the S&P 500, there is a greater than 50% chance that in twenty years the company will not even qualify as part of index. Half of the components of the S&P 500 in 1999 are not in the index today , only 16 years later. But, Cory, you say, I am not picking my stocks at random, I am picking only blue-chip stocks like Johnson & Johnson (NYSE: JNJ ), Coca-Cola (NYSE: KO ), Exxon Mobil (NYSE: XOM ), Procter & Gamble (NYSE: PG ), and Kinder Morgan (NYSE: KMI ) –I’m only partially kidding about Kinder Morgan. Your picks are probably not going to be perfect, right? My response is that if you only purchase huge, blue-chip, depression resistant companies, and you are going to diversify beyond ten of them just in case a couple of them turn out to be duds, then your performance will probably be similar to an S&P 500 index. You cannot assume that big, widely followed blue-chip companies will be available for purchase at value investor prices very often. And you cannot assume that value opportunities with small-cap companies will possess the same long-term visibility as big, blue-chips. It seems clear that those who purchase only the biggest and safest stocks are few and far between. Many stock-pickers might have a core portfolio of these companies, but they also branch out to other areas in search of alpha with regard to either yield or total return. In many cases what we have are stock-pickers who are moving beyond the confines of blue-chips in search of alpha who are carrying with them the assumptions that rightly apply only to indexes or the blue-chip stocks that are highly correlated with the indexes. Specifically, the assumption that if they just hold on to something long enough, it will rise or pay out steady dividends for the next ten or twenty years while also out-performing the market. This assumption can lead to under-performance or disaster. It is not an assumption that should be made. So, if one wants to seek alpha by picking individual stocks, what is it one could do to deal with the emotions and short term volatility in the stock market that compel investors to sell at the wrong time, without resorting to the fallback of aiming to hold for the long-term? I think the solution is to develop both a short and medium-term thesis while picking stocks, and only when a thesis comes to fruition should one consider holding a stock for the long-term. In my next article, I will explain the method I have been using recently with some success. Note: Please consider “following” me for real-time notification of my latest articles. My views are a constant work in progress and I am always interested in hearing other points of view, so if you have any thoughts, please feel free to share them in the comments section.

Natixis And AlphaSimplex Launch Dynamic Allocation Fund

By DailyAlts Staff On November 30, Natixis Global Asset Management added its tenth alternative mutual fund to its lineup: the Natixis ASG Dynamic Allocation Fund (MUTF: DAAFX ). The new fund is the firm’s fourth fund sub-advised by affiliate AlphaSimplex Group, which was founded by MIT finance professor Andrew Lo, PhD. The new fund seeks to deliver long-term capital appreciation, with a secondary goal of capital-preservation during unfavorable market conditions, via a “tactical global asset allocation strategy.” “Building a durable investment portfolio has become even more challenging in a volatile market environment buffeted by global economic uncertainty,” said David Giunta, president and CEO of U.S. Distribution for Natixis, in a recent statement announcing the launch of the new fund. “To successfully diversify a portfolio of traditional stock and bond funds, investors need adaptive tools, such as the ASG Dynamic Allocation Fund, which incorporate a wide range of information available today to make investment decisions.” Investment Approach The ASG Dynamic Allocation Fund employs dynamic tactical allocation across global markets and asset classes through the use of futures, forwards, and ETFs. Its long positions will span the following traditional asset classes: U.S. stocks; Non-U.S. developed market stocks; Emerging markets stocks; U.S. bonds; and Non-U.S. developed market bonds. The prospectus for the fund indicates that commodities will be added in the future, which will be limited to 20% of the fund’s assets. The strategy starts with a balanced allocation to “high-risk” and “low-risk” asset classes, and then adjusts the allocations according to AlphaSimplex’s quantitative analysis of market behaviors. Portfolio managers Alexander Healy, Robert Rickard, and Derek Schug are also charged with the task of managing the fund’s annualized volatility, which is targeted at no more than 20%, as measured by the standard deviation of the fund’s returns. The fund will also use leverage, which will not exceed 200% of assets, and may hold short positions through the use of derivatives. The fund’s portfolio construction process is depicted in the graphic below. “The ASG Dynamic Allocation Fund seeks to balance risk with expected return by tactically allocating to multiple asset classes across a range of global markets using a disciplined quantitative approach that draws on AlphaSimplex’s current strategies and our experience managing liquid alternatives since 2003,” said AlphaSimplex CEO Duncan B. E. Wilkinson. “We created the fund to help investors shift exposures among global assets in a fast-paced global market environment and help them stay invested over the long term.” Fund Details Shares of the fund are available in A (DAAFX), C (MUTF: DACFX ), and Y (MUTF: DAYFX ) classes, all with an investment management fee of 0.70% and respective net-expense ratios of 1.25%, 2.00%, and 1.00%. The minimum initial investment for A and C shares is $2,500. The minimum for Y shares is $100,000. For more information, visit the fund’s web page .

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.