Time to Rethink the Role of Emerging Market Bonds
Emerging market debt can be a great source of income potential in a diversified portfolio, provided you can manage it during a period of extreme volatility.
The VanEck Vectors EM Local Currency Bond ETF (EMLC) could be a good entry point after it took a hit following rising interest rates and volatility in the US dollar.
You have two options when it comes to investing in emerging market bonds—hard currency bonds and local bonds.
Strong investor interest in emerging market debt has continued despite adverse political and economic issues in some countries.
According to a recent BofA Merrill Lynch Global Investment strategy report, emerging markets are expected to grow at a modest pace of 4.7% in 2017.
Negative bond yields in Japan and low Fed funds rates in the United States and the Eurozone were one reason emerging market bonds performed well in 2016.
Since the US presidential election, emerging markets have bounced back as though the election never happened.
The US GDP growth outlook is near its potential at ~3%, with increased investment in infrastructure.
The Permian Basin, which spans parts of West Texas and New Mexico, is considered one of the most prolific regions for oil and gas production in the US.
Perhaps the most important metric that matters most to investors is returns. With the focus on common equity investors, we’ve used ROE to measure return.
If you’ve invested in agricultural fertilizer companies, you’ve failed to beat the S&P 500 (SPY), which had a CAGR of 10.3% over the past seven years.
Borrowing can lead to interest costs that a company must be able to cover from ongoing operations. A ratio of 1.0x means it will take one year to pay off a company’s debt.
Let’s look at EBITDA margins for a ten-year period, which encapsulates one full agricultural business cycle that can last one to eight years.
Cost of production can impact the realized prices of fertilizers and, in turn, impact the profitabilities and valuations of fertilizer companies.
Potash salts are the key cost of production for potash, so most producers have an integrated production.
Energy as well as freight and handling can be the two biggest costs for nitrogen fertilizer production.
Since phosphate rock is one of the major costs of production, companies such as Mosaic (MOS) have an integrated production process.
Investing in the agricultural fertilizer industry can be rewarding. But lately, this industry has come under severe pressure.
There’s a handful of big players in the agricultural fertilizer industry. Setting up business requires huge capital, which makes for a high barrier to entry.
According to the USDA, fertilizer was the major cost of operations in 2015, accounting for as much as 41.0% of operating costs.