Investing Related Items

Over at Trust Funds for Kids I’ve been updating the portfolios and researching relevant topics for detailed analysis.

One interesting item to me is ADR’s or American Depository Receipts, which represent foreign stocks trading in US markets. “Sponsored” ADR’s trade on NYSE and NASDAQ and “unsponsored” ones trade on the OTC or “pink sheet” markets. Recently one of my stocks (Siemens) went from a sponsored to non-sponsored ADR status and I started researching it here.

I also researched the impact of currency moves on a portfolio, focusing on the Australian dollar vs. the US dollar and its effect on a particular Australian Bank Westpac. It is interesting to view the two elements in an intertwined fashion, since the US dollar was a poor performer over the last 5 years relative to many other currencies.

Finally I look a bit at performance over the last year and marvel about how easy it is to assess performance these days with free graphing and overlay tools, compared to the manual effort in past years’. It still is difficult to always properly factor in dividends and the timing of cash flows (investments), but that’s a different story.

Cross posted at LITGM

5 thoughts on “Investing Related Items”

  1. Watch out for abandoned property status. I have been warned by a few investments that the state of West Virginia would like to confiscate my investments based solely on the fact that if I didn’t contact the investment managers within a year, the investment would be deemed “abandoned” and thus confiscated by the State. I know other states are now doing this also. Crooks.

  2. The Siemens ADR is still sponsored, it’s just a different level of sponsorship that does not fulfill all the requirements for a listing on an American stock exchange.

  3. Fair it is sponsored but on the OTC exchange. This means that they don’t necessarily comply with the Sarbanes-Oxley rules and you may face additional charges when purchasing OTC stocks.

    I guess there are other stocks on OTC exchanges that are completely unsponsored but haven’t researched this yet.

  4. If I understand you correctly, it’s possible that the stock went down on its home exchange, but may have gone up with the ADR due to currency fluctuation?

  5. Absolutely. The return on the ADR is a combination of the currency fluctuation and the return of the stock on the home exchange.

    Simple example – stock stays flat on Australian exchange and US dollar slides vs. Australian dollar – the value of the ADR increases. Both items are factored into the price at all times. Else there would be a huge arbitration opportunity.

    When you start viewing your portfolio as “US Dollar Denominated Assets” – if the US dollar declines by 20% against major currencies – and your portfolio is flat – you’ve lost 20% in “real” purchasing power.

    You would see this if you 1) went overseas and tried to buy goods in their country (like my famous $20 beer in Norway) or 2) had to buy overseas goods shipped into the US (the Japanese are punishing themselves because they’ve devalued their currency but they have to import fuel from abroad which is denominated in US dollars).

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