Last week we discussed the fact that the process involving offshore investments and more specifically, purchasing offshore shares, has become a lot easier for South-Africans over the years, provided that the relevant regulatory and tax implications have been considered. The fact remains that from a cost perspective, there isn’t a huge difference between the purchase of something like British American Tobacco Company in South Africa or Britain. This means that investors with a focus on building a strong competitive offshore share portfolio, are no longer limited to shares listed only in South Africa.
I came across a very interesting graph this week which showed me the advance-decline line on our local Index. This graph takes all shares of a particular index into consideration and on a daily basis, subtracts shares that performed negatively from those that performed positively (this figure is then added to the previous day’s figures). What it shows us, is that even though an index’s total performance might have been positive, it creates a negative sentiment surrounding the index if there were more negatively performing shares than positive. The FTSE/JSE All Share Index is a great example of this: despite the Index performing marginally positive over the last three years, the advance-decline indicator clearly shows us that over this three-year period, we have been moving closer to negative levels last seen after the 2008 correction.
When we take a look at the S&P 500, we’ll see that according to P/E valuations, this Index is priced very high, and that it has also enjoyed a very positive trend over the last few years according to the advance-decline indicator. So, are there still investment opportunities available in offshore markets? With the help of PJ van Niekerk, equity analyst at PSG Wealth Old Oak, we have identified five companies which we feel still offers value:
Volkswagen consists of two divisions: The Automotive Division and the Financial Services Division. The Automotive division comprises of names like Audi, Skoda, SEAT, Bentley, Porsche, Scania, MAN and Volkswagen. The financial services division combines dealer and customer financing, leasing, banking and insurance activities. The majority of the group’s sales occur in the European markets. For the first quarter of 2018, this company started on a strong foot. Their vehicle sales increased by 6.1% and sales revenue increased by 3.6% compared to the respective period in the prior year. The group expects to produce a year-on-year increase in sales revenue of at least 5% for the 2018 financial year. This company is currently trading at a P/E of 6.43 and forward P/E of 5.54.
RioTinto Plc (LSE: RIO)
RioTinto is one of the world’s largest producers of a range of essential materials consisting out of Iron Ore, Aluminium, Copper, Diamonds, Gold, industrial minerals, thermal and metallurgical coal and uranium. They operate across 35 countries in the world with China contributing the most to their revenue. Iron Ore is contributing 44% to the group’s revenue while their second biggest segment, Aluminium, contributes 26%. For their latest financial year, they produced a return on equity of 21.9% compared to an industry mean of 13.3%. RioTinto seems to be offering some value according to their current P/E of 10.43, which is slightly below the average P/E of their peers.
Brookfield Asset Management (NYSE: BAM)
Brookfield is an alternative asset management company listed on the Toronto and New York stock exchanges. The group operates in more the 30 countries across the globe and has approximately US$285 billion under management. It has been growing assets under management at a compounded annual growth rate of 8.6% since 2013. The group focusses on investing in assets across real estate, renewable power infrastructure and private equity. Relative to peers, the group appears to be offering value. The group managed to increase their dividends and cash flow from operations over the past 5 years.
Samsung Electronics Co Ltd (KS:005930)
Samsung is a Korean-based company principally engaged in the manufacture and distribution of electronic products. Their three major segments are consumer electronics, IT & mobile communications and device solutions. The group’s revenue is well diversified with 19% of sales derived from North and South America, 19% Europe, 16% China, 13% Korea and 18% from Asia and Africa.
They recently released their results for the first quarter of 2018 in which their sales increased by 20%, with Semiconductor sales showing the biggest increase and now contributing 34% to total sales. Operating profit for the group increased by 58%. Samsung appears to be offering value, trading at a P/E and forward P/E of 7 and 6.44 respectively and dividend yield of 2.32%. Their current price-to-book multiple is at 1.46.
British American Tobacco (LSE: BATS)
British American Tobacco was unbundled out of Richemont and Remgro in 2008. The Rupert-controlled company provides tobacco and nicotine products to consumers worldwide. On the 25th of July 2017, the group acquired the remaining 57.8% stake it didn’t already own of Reynold American Inc. for a total consideration £41.8 billion in a combination of cash and ordinary shares. Brands within the group include Rothmans, Camel, Dunhill, Kent, Pall Mall, Peter Stuyvesant, Lucky Strike and Benson & Hedges. The company is currently trading at a dividend yield of 4.4%, their P/E ratio is well below its long-term average.
As always, I recommend that any of these shares are considered as part of balanced portfolio.
The opinions expressed in this blog are the opinions of the writer and not necessarily those of PSG. These opinions do not constitute advice. This is intended as general information and does not form part of any financial, tax, legal or investment related advice. Although the utmost care has been taken in the research and preparation of this blog, no responsibility can be taken for any actions taken based on the information contained herein. Since individual needs and risk profiles differ, it is always advisable to consult a qualified financial adviser before taking action.