Mary Daniel's  Instablog

TAT Technologies is an Israeli-based company that engineers and manufactures products for civil and military applications.  The company's product line includes heat exchangers, cooling systems, cold plates, air conditioning systems, and fuel systems.  Customers include Lockheed-Martin (LMT), Boeing Co. (BA), Cessna Aircraft Co., and Liebherr Aerospace.  Although many investors are still weary of investing in Israel due to the Palestinian conflict.  It seems as though every time Hezbollah or Hamas launch a new attack, investor confidence in this emerging market is lost.  What investors need to realize is that the conflict is well contained.  Geographically the majority of conflict takes up only a small corner of the country.  Also, the Israeli military is one of the most effective and efficient in the world.  Not to mention, the company we are speaking of here manufactures products for military applications.  And since it seems that Israel is continually in some state of conflict, TAT Technologies should be a safe bet.

The stock comes at a steal with a current share price of $7.77.  In addition, the stock paid out a cash dividend in March of 2.29 giving a projected yield of 29.5%.  Not bad for a small-cap Israeli-based company.  Historically, dividends have not been paid on a regular basis.  Over the past couple of years revenue has grown approximately 25% and current assets have nearly doubled.  On August 18, the company reported its second quarter 2009 results.  North America accounts for TATTF's largest source of revenue, followed by Europe and Israel, respectively.  Total revenues from the three month period decreased 7.6% from the second quarter 2008.  Cost of revenues decreased only 3.77%.  Considering the economic downfall that occurred late 2008 and also the fact that the economy is in large still recovering, one cannot evaluate the company based on these numbers alone.

Just this July TAT completed a merger with Limco-Piedmont Inc. and following the merger appointed a new director and CEO for the subsidiary.  TAT, which previously owned 61.8% of Limco's common stock, acquired all of the shares of Limco's common stock held by the public.  Pursuant to the merger agreement, Limco's common stock was converted into one half of an ordinary share of TAT.  Since the merger the stock's growth pattern has been extremely consistent.  One of TAT's major competitors is Honeywell International Inc. (HON).  The two stocks seem to be sharing the same moving average over the past three months, completely in line with one another. 
Most analysts are bullish on Honeywell.  So carrying that over to TAT Technologies, it seems only wise to take a bullish stance here as well.  Still, it is difficult comparing a large cap company (HON) to a small-cap company (TATTF).

TAT's largest revenue sources come from North American customers such as Lockheed-Martin (LMT) and Boeing (BA).  Lockheed's revenue and cash from operations has grown consistently over the past three years.  And they are still a leader in the defense industry with important government contracts.  Lockheed needs TAT's products in order to fulfill these contracts.  Though Boeing's revenue decreased in 2008, the second quarter numbers for 2009 are already remarkably better than this time last year.  All in all, TAT Technologies is a strong buy for a long-term holding.

Disclosure:  No Positions

Ukraine is ranked 72 out of 134 countries in the 2009 Global Competitiveness Index, showing little improvement over the previous year.  Ukraine falls right in between Morocco and The Philippines as far as the index is concerned.  The areas Ukraine is the weakest in are institutional environment, infrastructure, macroeconomic stability, and goods market efficiency.  Not being sure how the rankings in this index are tabulated, I have to say the new Ukraine presents a different picture.  Of course, there are still negatives such as poor legal protection of investments, corruption and double standards, and contradictory legislature.  However, there are so many good things coming out of Ukraine recently.  And there is so much geographical potential.  Now the report also states that Ukraine is in line with the major European countries as far as secondary education and outperforms these countries when it comes down to market size.  In addition, the Ukrainian economy is expanding at a rate well above the European average.  With 47 million consumers it is the greatest market in Eastern Europe.  The new generation has produced a highly competitive, educated, and skilled workforce taking advantage of the country's university system.  The location is a key location intersecting the major railways, ports, and roadways in Europe.  It is a prime location for manufacturing with easy exporting to Russia and the EU.  It boasts strong technical capabilities with specialized knowledge.  Also, the country is considered to be in the top 10 by the prospects of retail development.  The recent decrease in exports and the Hryvnia drop against main currencies created a favorable environment for Ukrainian production development to replace imports and increase exports.  Though the negatives make investing in Ukraine a bit unpredictable and some analysts will warn you to stay away until the politics calm down, the positives make this country a great investment opportunity.

A great way to indirectly invest in the Ukraine is through Central European Media Enterprises (CETV).  This media broadcasting company owns and operates television channels and stations in Central and Eastern Europe.  CETV generates most of its revenue from advertising.  The company maintains an above average revenue growth in comparison to the industry.  The stock price dipped in line with the market late last year and though it is now experiencing consistent growth, it still has a long way to go before it returns to its previous highs.  CETV penetrates, or monopolizes if you will, their market to reach an impressive 88 million of about 97 million total citizens.  If you are in the market for a long-term holding, this should prove a great time to get in on this stock.

Another solid Eastern European company serving the Ukraine market is Vimpel-Communications (VIP).  This wireless communications company has more than 57 million active mobile subscribers, resulting in $331, 977 million in sales compared to its top competitor Mobile Telesystems (MBT) that reported just $9,062 million in sales.  VIP definitely has a corner on the market.  The corporate agenda includes consolidating the Russian market, exploring opportunities to enter adjacent businesses, and expanding geographically both inside and outside the CIS.  The stock split 5:1 in 2007 and still maintains a consistent growth pattern in line with what is seen in CETV's growth.

It is nearly impossible to find Ukraine-based companies that are listed on US. exchanges.  Most Ukrainian companies are listed on European exchanges such as London or Berlin, or else they are available as pink sheets.  The country itself is still torn between Western and Russian loyalties.  Emerging markets ETFs such as EEM and others only have slim holdings in Ukraine.  This is still considered by most analysts a frontier market.  The best way to invest and also avoid the unpredictability and legal confusion with investing in this country is to look for companies based elsewhere that operate in Ukraine, such as CETV and VIP which I have mentioned here.  Hopefully with the now skilled and educated workforce we can see a change in legislation that will lead to more Ukrainian companies listed on Western exchanges so that investors can more readily optimize on Ukraine's positive attributes.

Disclosure:  No positions.

Let me just start out by saying that there are truly many reasons not to invest in Africa.  The political landscape is far from stable.  Corruption is on at a full 360 degrees.  The continent is rocked with conflict without rest.  Infrastructure is pretty much non-existent.  However, similar to the Middle East, Africa has unparalleled quantities of potential.  This is the side of Africa that gets less press.  The side that is full of hopeful, enterprising people who are confident of a better future.  This is the Africa that is home to some of the most attractive potential investments in the world today.  Africa is the fastest growing continent and the richest in terms of resources.  It is prime for investing.

Even with the great investment potential that exists here, it is difficult to invest in the majority of the smaller countries within this continent through the U.S. stock exchange system.  This is where ETFs come in very handy.  One great fund, the PowerShares MENA Frontier Countries Portfolio (PMNA), is invested in Morocco and Egypt, among others.  The Fund may invest at least 80% of its total assets in securities of companies that are domiciled in or principally traded in a Middle East or North African frontier country.  The index included 67 companies with market capitalizations between $243 million and $10.4 billion.

Up 1.22% today alone, this fund has a large growth potential.  34.7% of this fund's assets are applied to the top 5 holdings, which include Arab Bank, Mobile Telecommunications Company, Maroc Telecom, Emaar Properties, and Orascom Construction Industries.  This indicates a modestly diversified fund holding real estate, telecommunications, finance, and development.  I would prefer not to see 2 telecommunications holdings in the top 5 companies.  However, telecom companies have been performing quite well lately.  The fund is currently being sold at a 0.07% premium.  Just what I like.  From my perspective, the closer a fund trades to NAV, the less room it has to fall.

Another great fund is the Market Vectors Africa Index ETF (AFK).  This fund invests in Egypt, Morocco, Nigeria, and South Africa, among others.  It is also well-diversified across sectors, with its top 5 holdings being Tullow Oil, Mobile Telecommunications Company, Orascom Construction Industries, Old Mutual, and Mtn Group Limited.  The fund, utilizing passive or indexing investment approach, attempts to approximate the investment performance of the Africa Titans 50 Index by investing in a portfolio of securities that generally replicates the Africa Titans 50 Index.

This fund also trades amazingly close to NAV, currently at a 0.40% premium.  AFK is more diversified than PMNA.  Also, it pays out dividends and has much less volatile and more optimistic growth pattern.  This fund is comprised of 53 of the largest companies that drive their revenue stream from Africa.  AFK shares a similar growth pattern with the Dow Jones Africa Titans 50 Index (DJAFK), though it naturally trades much lower.  The African continent is ripe with potential.  Now is the time to invest in this emerging market.  South Africa is stable, Mugabe is virtually gone from the scene.  Not to mention the people are standing up full of hope and pride.  Now is the time to invest in Africa.

Disclosure:  No positions

There are many good things about South Africa right now that make it very appealing to offshore investors.  South Africa’s economy dominates the African economy in each and every arena.  Sure, South Africa was one of the last to feel the ripple from the global economic fallout.  What this means to investors is that South Africa has just barely begun the recovery process.  And with the government already promising $98 billion to infrastructure, it is easy to speculate high economic growth from this region in the near future.

 

Over the past few years oil has been the most volatile commodity on the market.  However, oil is always in demand.  Thus, transportation of this commodity is an ongoing process.  Oil is transported around the world mostly by boat.  South Africa is surrounded on three sides by water.  South Africa is home to ports through which OPEC oil is transported to the U.S. and also through which African oil is transported to China.  South Africa is geographically essential to the transportation of the world’s most precious commodity.

 

One occurrence that has been noticed recently is that every time oil goes up, South African steel increases as well.  Highveld Steel and Vanadium Corporation ADR (HSVLY) greatly outperforms the industry with an EPS growth of 167.2 on a three-year average.  And with a current price of just $9.60 this stock would make a great addition to any portfolio.  This occurrence creates an interesting market relationship.  With mining turning up big business in South Africa and the government putting up big funds for construction, it is no surprise that materials production is leading the recovery.  Materials, in fact, account for the largest portion (27.53%) of the iShares MSCI South Africa Index Fund (EZA).  This fund speaks for itself with 100% of its holdings directly in South Africa.  EZA boasts a total YTD return on NAV of 31.65% and share price of 31.89%, which makes this a highly recommended intermediate-term holding.  It also speaks well for this ETF that it trades, on average, extremely close to the actual value.

 

The second largest portion (24.54%) of EZA’s holdings is financials.  As strange as it may seem for an emerging market, South Africa’s banking industry is one of the worlds most stable.  Even as banks across the world were crumbling South Africa’s banks barely experienced so much as a hiccup.  Personally I find it favorable that this is not a consumer-driven economy.  It will serve to keep South Africa consistent for years to come.  Just like other countries have done, South Africa’s Reserve Bank has decreased interest rates to an all-time low.  But consumer spending in this country has not changed.  That brings us to another positive factor, the consistent growth of the South African Rand.  Minimal changes in internal supply and demand mean that the currency is not as susceptible to fluctuations in exchange rates.  Perhaps this is why the WisdomTree Dreyfus South African Rand Fund (SZR) has enjoyed consistent growth since its inception.  This currency ETF is slightly less volatile than EZA yet still boasts amicable growth patterns, making it a welcomed long-term holding.  The YTD total return on NAV is 23.02% and share price is 25.94%.  Not as large as EZA’s returns, but still plenty of room for growth.  Also, the South African Rand is included WisdomTree's newest currency ETF, the Emerging Market Currency Fund (CEW), which experiences equally consistent growth.

 

Another factor that makes South Africa appealing to investors is the stable political climate.  Let’s face it, South Africa rarely makes the news these days.  But let’s not overlook the fact that it is ripe for investment.  Government spending is up.  Consumer spending is flat.  The financial sector is one of the most stable in the world.  The political climate is stable.  This is a product-based economy with GDP primed for a rise.  The timing has never been better to invest in this emerging market on its recovery upswing.

Disclosure:  No positions

            Currency ETFs are relatively new on the market and are quickly gaining popularity as an alternative to forex.  Forex itself is better referred to as gambling than investing.  Trading platforms are untested and spreads are easily manipulated.  With few restrictions in place, the majority of online brokers are still hesitant to provide this investing option to customers.  Still, dabbling in international currencies provides a reward greatly surpassing the risk.  Thus, many investors are picking up currency ETFs in order to hedge the risks associated with forex.

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