How to Invest in Norway

The chart covers ordinary shares of Statoil (STO), Norway's OBX Index, Yara International and Norwegian Property Group for the last year.

I've been writing about Norway for years now and have written many times about using Statoil as a proxy for the country. Last week I disclosed selling some of the position.

The case for Norway has always been the same, which is that anything good for oil will be good for Norway. Additionally, it is a commodity-based economy with surpluses galore and it is at a different point in the economic cycle. (Commodity based economies are often at a different point in the economic cycle, which usually makes for good diversification.) Contrast that with the US, which is a service-based deficit country.

My hope with Statoil has simply been to capture Norway, for good or for bad. If there was value to be added, it would come from just owning the country. As the chart shows the stock correlates closely to the index. Statoil is by far the largest stock in the index and getting the proxy aspect right in this case was very easy.

Also charted is Yara, a chemical and fertilizer company, and like other stocks in the space it is up a lot. It would obviously have been a great hold, but I do not think it is a proxy for Norway. NPRO owns retail and office properties in Norway and has done what a lot of other real estate stocks have done. I'm sure it will have its day in the sun again but, whether it does or not, it is also not a proxy for the country.

There is no ETF for Norway that can be accessed by US investors. In going through the top down process my thought about oil led me to Norway several years ago. The thing that mattered first and foremost was exposure to the country. Once I decided yes, the next step was to figure out what I thought would be the best tool; stock, ETF or some other type of fund.

I didn't find any funds, so that meant stocks. Statoil was and is the biggest component. It is an oil and natural gas company which was the catalyst behind my interest. Additionally, I liked the rest of the story so I bought it.

If you are one to pick a country you might go through a similar process of building a case for the country, then figuring out whether you just want to go along for the ride like with Statoil, or if you are going to try to add value versus that country's index. If you just want to go along for the ride then a country fund could work However, you need to be cognizant of how the sector weightings fit in with everything else you own. The advantage of an ETF in this context is avoiding single stock risk and the downside might be that you give up dividend yield.

Some folks are turned off from buying an individual foreign stock but there may be hope for those folks as an ETF from NETS just listed for the Portugal PSI 20 under ticker. If they were willing to commit to Portugal I think we can infer that other uncovered countries will be on the way at some point.

Comments

[Prudent Speculations]

Norse Energy is another Norwegian oil & gas stock that I have found to be of interest. They have a large position in the Marcellus Shale out in western Pennsylvania, among other things.

[bearfund]

I too have been long STO for a while and trimmed that position substantially last week; a big move *up* on the ex-dividend date to levels far above the 50-day average made me nervous. I expect to add to that position on any further dips, though; the company has awesome deep-water and arctic expertise which is sure to remain in demand. I'm also long TELNY, a Norwegian telco that does a lot of its business outside Norway. The country scores at or near the top on the UN's Human Development Index, has a large positive trade balance, prudent monetary policy, and has reserved money for pensions for Norwegians who haven't even been born yet. Fundamentally, I can't find a better place to invest. They save, so even if everything goes to hell, the Norwegians will be in decent shape. The Americans could learn a lot from these people. It's not gold, but for stocks, it's all Norway all the time. Like the krone too for cash; interest rates have risen and will likely rise further.

[Albert Meyer]

Bearfund, you are spot on. The Norwegian government has roughly (if my memory serves me correctly) $40K per man, women and child invested for their future. The dividends are rolling in. We have piled up roughly $30K per man, women, and child in federal debt, not counting the liabilities of the Social Security Ponzi scheme and the $3 trillion war debt coming down the pike. $500 billion plus in annual interest payment sucked out of our paychecks every year. Norway, not part of the European Union, is a neutral country and can do business anywhere in the world; and they do - smart, honest folk. Long: STO, TELNY, CEQ and PHO.

[sliman]

Yara international (YARIY) is one of the best world wide ag stocks. It sells at a p/e of about 12. Not well known in this country. Go to companies web site for tons of information. Please explain why STO is a better way to gain exposure to Norway.

[Roger Nusbaum]

i explained my opinion in the article. the entire post is geared around that exact question.

[stonebluff]

I have found banks to be a pretty good country proxy. Doesn't Norway have any buyable bank shares? Oil being a commodity over whose prices no one seems to have control, it strikes me as a dubious proxy for any country that has anything other than oil.

[Dean Anderson]

Statoil indeed is an excellent proxy for Norway. And so would NPRO be if it was not a company thrown together by shrewd salesmen just to bring them a quick profit by pumping the net results before selling out. The property stock to use as a proxy for Norway is Olav Thon. Only tradable in Norway, ticker olt.ol on yahoo for instance. As for banks as Norway proxy the biggest is DnB, dnb.ol on yahoo, government controlled like Statoil, but with a solid free float on the Oslo Stock Exchange or as dnbhf in the US pink sheets.
Despite some strengths it is also important to remember that Norway is not paradise. Extreme oil dependency, no industrial base to speak of and clear symptoms of dutch disease are among the problems. And so is politicians wanting to waste the huge oil-fund of USD 80k per person under politicians control.