Invest
Offshore Without Leaving Home
The Overlooked
Advantages Of American Depository Receipts ~ by Eric Roseman
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of the best investments for the remainder of this decade lie overseas.
Marked by faster-growing economies, stronger currencies, superior earnings
and generally more fiscal conservatism, foreign markets have outpaced Wall
Street since 2000.
In the 1990s,
the S&P 500 Index averaged a 15.6% annualized return. That was better
than any other ten-year period for U.S. common stocks since the high-flying
1920s. But so far in the 2000s, the S&P 500 Index has lost a cumulative
7% as the technology bubble came to a crashing end in 2000 while the broader
market imploded, particularly in 2002.
Some of the
most compelling opportunities for 2005 and beyond lie in the oversold and
undervalued health care, biotechnology and insurance sectors. Plus, the
best earnings growth remain in commodities, driven by booming natural resource
prices and growing profit margins for energy and mining companies.
But to invest
in most of these companies, you must invest overseas. That’s where the
big values are as we begin 2005. One of the easiest ways to do so is by
purchasing ADRs, or American Depository Receipts.
ADRs: The
Easiest Way To Invest Offshore
Essentially,
an ADR is a foreign stock traded in the United States, in U.S. dollars.
By investing in an ADR, you participate in the profits or losses for that
foreign company, including any foreign currency gains or losses.
ADRs aren’t
new. Nearly 80 years ago, the first ADR was a British company listed on
the NYSE. Today, ADRs total over 2,000 issues representing over 70 countries.
For example,
if you buy Switzerland’s Nestle ADR (NSRGY or NSRGY.PK), you’ll benefit
if the stock rises on the Zurich exchange, plus you’ll share in the foreign
currency gain should the Swiss franc continue to rise against the U.S.
dollar. While trading Nestle in its home market undoubtedly makes sense
for European investors, the Nestle ADR provides easier access for most
U.S. retail investors. Additionally, there are no withholding taxes and
in most cases, trading costs are usually much lower.
Tracking your
ADRs is easy with two great websites providing daily information plus in-depth
ADR research. These include The Bank of New York (http://www.adrbny.
com) and J.P. Morgan (http://www.adr.com).
Yahoo Finance (http://finance.yahoo.com) also can track most ADR prices.
When you purchase
ADRs, one factor to bear in mind is liquidity—your ability to make transactions
without too great a buy-sell spread. Most ADRs traded on the NYSE have
good liquidity. This includes many large companies from the United Kingdom,
France, Italy, Germany and even Brazil. But some OTC-listed ADRs of smaller
companies might not have enough trading volume on a given day to buy without
paying a significant premium to the bid price or sell without offering
your shares at a big discount to the ask price. The key is to make sure
you’re buying an ADR that is heavily traded so you’re always in a position
to receive the best bid or ask price. |
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 The
Sovereign Society, headquartered in Waterford, Ireland, was founded in
1998 to provide proven legal strategies for individuals to protect their
wealth and privacy, lower their taxes and to help improve their personal
freedom and liberty. |
| The
Society's highly qualified contacts recommend only carefully chosen banks
and investment advisors as well as financial and legal professionals located
in select tax and asset haven jurisdictions around the world. The Society
provides advice concerning the establishement and operation of offshore
bank accounts, asset protection trusts, international business corporations
(IBCs), private foundations, second citizenships and foreign residency,
as well as practical safeguards for financial, Internet and personal privacy. |
| The
Sovereign Society stands alone in fulfilling this singular, international
offshore service role for its members. To learn more about our organization
and how you too can become a member, please click
here. |
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Tap Into
Offshore Insurance And Gold For 2005
My favorite
ADRs now include European insurance companies and gold stocks. The European
insurance market has been plagued all year by rising insurance claims,
mainly a series of disastrous hurricanes across Florida during the third
quarter. Another blow has been New York Attorney General Elliott Spitzer’s
attacks on U.S. and overseas insurance carriers for price collusion.
Some of the
cheapest stocks on the globe right now are a handful of world-class insurance
companies that trade at huge discounts to major market averages. The time
to buy distressed securities is when the news is bad and stock prices very
low. And that’s now.
For example,
Holland’s Aegon NV (NYSE-AEG), one of the world’s largest insurance companies,
currently trades at just 9.6 times trailing earnings and pays a 3.5% dividend.
Compare that multiple to the MSCI World Index, which sells at 21 times
trailing earnings and yields just 1.95%. Aegon’s ADR is now 23% off its
52-week high.
Gold mining
also offers a very profitable opportunity. Gold prices bottomed three years
ago and we are clearly in a bull market uptrend. And following two great
years in 2002 and 2003, gold stocks barely moved at all in 2004, offering
a good entry point for new investors.
Goldcorp (NYSE-GG),
a Canadian producer, has one of the lowest cost mines in the world. Its
Red Lake Mine produces gold at an average price of just $87 per ounce.
Goldcorp, unlike other gold producers in the large-cap area, trades 20%
off its 52-week high, sports no debt and has a clean balance sheet. None
of its production is sold forward, or hedged, either, which means that
shareholders will profit handsomely if gold prices continue to rise.
I’m all in
favor of keeping a portion of your assets offshore and maintaining actual
investments in foreign currencies. But ADRs provide a way to gain exposure
to foreign markets and foreign currencies—without leaving home.
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| Sovereign
Society Council of Experts member Eric Roseman’s Renegade Investor
service focuses on undervalued “contrarian” investments the mainstream
financial media mostly ignore, many of them ADRs. Eric’s been covering
global markets for 15 years, as a money manager and investment editor.
During that time, his subscribers made 400% on The Singapore Fund and 330%
on National Bank of Canada, to name a few. In the last four months, Renegade
Investor subscribers have experienced double-digit gains in two of Europe’s
biggest—but most overlooked—bank shares, both trading as ADRs. For more
information, go to http://www.agora-inc.com/reports/RGI/WRGIEC03. |
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