{"id":29386,"date":"2012-04-30T08:36:48","date_gmt":"2012-04-30T12:36:48","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/04\/investing-in-switzerland\/"},"modified":"2012-04-30T08:36:48","modified_gmt":"2012-04-30T12:36:48","slug":"investing-in-switzerland","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/04\/30\/investing-in-switzerland\/","title":{"rendered":"Investing in Switzerland"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

Switzerland will always have a special place in the hearts of doom mongers.\u00a0\u00a0 For decades its franc has been the \u201cgo to\u201d safe haven currency when the world got dicey.\u00a0\u00a0 The meticulous Swiss gnomes have always had a well-deserved reputation as prudent stewards of wealth\u2014and a well-deserved reputation for discretion and privacy.\u00a0 And importantly, their policymakers had little tolerance for inflation.<\/p>\n

Investors with long memories will recall that the Swiss franc was the currency of choice in the 1970s for Americans looking to escape rampant inflation (and perhaps leisure suits and disco as well). \u00a0Outside of gold Krugerrands, few other asset classes offered much in the way of protection.<\/p>\n

Like shag carpet and other novelties from the 1970s, Switzerland is popular again.\u00a0 It\u2019s easy enough to understand why.\u00a0 With the world\u2014and particularly Switzerland\u2019s backyard of Europe\u2014in a prolonged period of on-again \/ off-again crisis, the Alpine country is viewed as a refuge.<\/p>\n

Consider the strength in recent years of the CurrencyShares Swiss Franc Trust (NYSE:$<\/span>FXF<\/a>)<\/strong>.\u00a0 As the European sovereign debt crisis really started to heat up last year, the franc almost went parabolic vs. the and euro.\u00a0 Unfortunately, the strength of the currency was killing exports and destabilizing the Swiss financial system.\u00a0 To the detriment of investors and traders who had been piling into the franc as a haven, the Swiss National Bank came down like a hammer to weaken the value of the franc.\u00a0 Yet even after the move, many trust a devalued franc over a fragile euro or dollar.\u00a0\u00a0 I can\u2019t say I that don\u2019t understand.<\/p>\n

\"\"<\/a><\/p>\n

There is a lot to like about Switzerland as an investment haven.\u00a0 It is home to some of the world\u2019s finest multinational companies, including Sizemore Investment Letter favorite Nestle (Pink:$<\/span>NSRGY<\/a>)<\/strong>, pharmaceutical heavyweights Roche(Pink:$<\/span>RHHBY<\/a>)<\/strong> and Novartis (NYSE:$<\/span>NVS<\/a>)<\/strong> and engineering juggernaut ABB Ltd (NYSE:$<\/span>ABB<\/a>), <\/strong>which is the major competitor to Sizemore Investment Letter recommendation Siemens (NYSE:$<\/span>SI<\/a>).<\/strong><\/p>\n

Perhaps unfortunately, it is also home to two of the largest international banks in the world, UBS AG (NYSE:$<\/span>UBS<\/a>)<\/strong> and Credit Suisse (NYSE:$<\/span>CS<\/a>)<\/strong>, two institutions that gave country quite a bit of heartburn during the 2008-2009 meltdown.<\/p>\n

Investors looking for blanket exposure to Swiss stocks could consider the iShares MSCI Switzerland ETF (NYSE:$<\/span>EWL<\/a>)<\/strong>.\u00a0 It is a basket of Switzerland\u2019s biggest and most influential companies.<\/p>\n

A note of warning on this ETF, however.\u00a0 If you buy EWL, you had better like Nestle, as the food and consumer products company makes up nearly a quarter of the portfolio.\u00a0 Health care stocks collectively chip in 30 percent as well.\u00a0 So, well over half of the ETF is investing in defensive (if not outright boring) sectors.\u00a0 \u00a0\u00a0This is not necessarily bad, of course.\u00a0 It\u2019s just something to consider.<\/p>\n

Nestle has been hit in recent years by rising commodity costs and the trend of consumers trading down to generic food products.\u00a0 Even so, the company has a fantastic foothold in virtually every major emerging market country, and I consider Nestle about the closest thing to a \u201cbuy and forget\u201d company available today.\u00a0 It helps that the company pays a solid dividend of 3.5 percent.<\/p>\n

Nestle recently made a splash by announcing that it would buy Pfizer\u2019s (NYSE:$<\/span>PFE<\/a>)<\/strong> baby food business for $12 billion.\u00a0 The purchase fits well with Nestle\u2019s existing product lines, and it further strengthens its position in emerging markets.\u00a0\u00a0 Roughly 85 percent of the unit\u2019s revenues come from emerging markets, and I would expect that number to only increase with rising incomes and livings standards.<\/p>\n

On April 19, management announced that the company would be raising the dividend by CHF 1.95.\u00a0 Expect to see more of this in the years ahead.\u00a0 Nestle is not a \u201chome run\u201d stock, but it should be a steady producer for decades to come.<\/p>\n

ABB also announced earnings in April, with mixed results.\u00a0\u00a0 Revenues grew by 8 percent\u00a0 for the quarter , but new orders from China\u2014one of ABB\u2019s key markets\u2014were down 35 percent.\u00a0\u00a0 ABB, like Siemens, is a fine company with great long-term prospects in building out the infrastructure that emerging markets need to rise to developed-world status.\u00a0 But with budgets tight and markets jittery, the next year may prove to be challenging.<\/p>\n

The Swiss banks, like their American and European counterparts, also face a rocky road ahead.\u00a0 Regulators are squeezing risk out of the system and banks are shrinking their balance sheets and reducing leverage\u2014all of which is good for long-term stability.\u00a0 But it\u2019s not good at all for bank profits.<\/p>\n

Credit Suisse revealed late the month that earnings had improved over the last quarter but were down substantially from the first quarter of last year.\u00a0 Profits were 44 million Swiss francs, down from 1.1 billion the first quarter of 2011.<\/p>\n

Overall, I continue to like Swiss stocks in general and Nestle in particular.\u00a0 \u00a0But given the nonexistent yields and the SNB\u2019s recent tendencies to aggressively lower its value, I\u2019d stay away from currency positions in the franc.<\/p>\n

Disclosures: Charles Sizemore is long Nestle.<\/p>\n","protected":false},"excerpt":{"rendered":"

By The Sizemore Letter Switzerland will always have a special place in the hearts of doom mongers.\u00a0\u00a0 For decades its franc has been the \u201cgo to\u201d safe haven currency when the world got dicey.\u00a0\u00a0 The meticulous Swiss gnomes have always had a well-deserved reputation as prudent stewards of wealth\u2014and a well-deserved reputation for discretion and … <\/p>\n

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