Given the strong performance of our Systematic RS International portfolio this year and since inception we have been receiving many questions about the strategy. One of the most commonly asked questions is simply, “What does it own?” The short answer is 30-40 stocks out of a universe of several hundred ADR’s. For those unfamiliar with American Depository Receipts (ADR’s), the FAQ from J.P. Morgan is a good resource:
What is an ADR?
An American Depository Receipt (“ADR”) is a physical certificate evidencing ownership of American Depositary Shares (“ADSs”). The term is often used to refer to the ADSs themselves.
What is an ADS?
An American Depositary Share (“ADS”) is a U.S. dollar denominated form of equity ownership in a non-U.S. company. It represents the foreign shares of the company held on deposit by a custodian bank in the company’s home country and carries the corporate and economic rights of the foreign shares, subject to the terms specified on the ADR certificate.
One or several ADSs can be represented by a physical ADR certificate. The terms ADR and ADS are often used interchangeably.
ADSs provide U.S. investors with a convenient way to invest in overseas securities and to trade non-U.S. securities in the U.S. ADSs are issued by a depositary bank, such as JPMorgan Chase & Co. They are traded in the same manner as shares in U.S. companies, on the New York Stock Exchange (“NYSE”) and the American Stock Exchange (“AMEX”) or quoted on NASDAQ and the over-the-counter (“OTC”) market.
Although ADSs are U.S. dollar denominated securities and pay dividends in U.S. dollars, they do not eliminate the currency risk associated with an investment in a non-U.S. company.
What are the benefits of holding ADRs?
ADRs eliminate many of the obstacles of holding non-U.S. securities since they trade and settle according to U.S. market practices, are quoted and traded in dollars and pay dividends in dollars. They eliminate custodian safekeeping charges in the issuer’s home country and facilitate prompt dividend payments and corporate action notifications.
Performance of our Systematic RS International portfolio, through 11/30/14, is shown below:
Inception 3/31/2006; Updated through 11/30/2014
Current Holdings (a/o 11/30/14) are shown below:
Click here for a fact sheet on the strategy and here for a list of platforms where the strategy is currently available.
Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. The relative strength strategy is NOT a guarantee. There may be times where all investments and strategies are unfavorable and depreciate in value. Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This post does not attempt to examine all the facts and circumstances which may be relevant to any product or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Dorsey, Wright & Associates, LLC (“Dorsey, Wright & Associates”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice or recommendation in this document, clients should consider whether the security or strategy in question is suitable for their particular circumstances and, if necessary, seek professional advice. A list of all holdings for the past 12 months is available upon request. Click here for additional disclosures.
