Sector Overview – Financial Market Operators

Welcome to a new iteration in the Sector Overview series of articles. In this article, I present an overview of a small subset of companies that is often overlooked by investors – although investors use their services on a day-to-day basis: financial market operators. These can include companies that operate stock markets, derivatives markets, bond markets, commodity markets, currency markets etc.

Whether the overall economy or “market” is up or down – investors always flock to trade their assets on these markets. Suffice it to say, these markets provide one of the most essential service in a capitalistic society. Whether its the need to trade commodities on a daily basis, or a startup company going public, these marketplaces play a crucial role in the corporate world. As mentioned – even though investors may use the services from these companies on a day-to-day or even hour-to-hour or minute-to-minute basis, the same investors overlook these companies as an investment choice. I want to highlight some of the major players in this space and some thoughts on investing options.

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Sector Overview – Fertilizer Companies

This article provides a sector overview of the Fertilizer Companies. Fertilizer companies are an excellent investment vehicle for investors looking in the agricultural space. The world population continues to grow and with that comes the added stress on resources such as arable land, water table, pests and land overuse. In order keep up with the demand of feeding the world, farmers have had to resort to using genetically modified crops coupled with liberal use of fertilizers.

My previous articles in the Sector Overview garnered plenty of interest as you readers found it valuable. So, without further ado, here’s a sector overview for the Fertilizer Companies.

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Sector Overview – Canadian Banks

This article provides a sector overview of the Canadian banks. The Canadian banks are counted amongst the safest and most stable financial institutions of the world and have a proven track record of being conservative and focusing on long term growth and prosperity. It is no wonder that the banks routinely find themselves in portfolios of most long term focused investors and make for a great core position. The banks are also great for income focused investors as they paid a good starting dividend and also raise those dividends regularly. Now that Canada is facing a lot of headwinds in the economy, most bank stocks have been beaten down and provide a great opportunity to initiate/add to the position.

My previous articles in the Sector Overview garnered plenty of interest as you readers found it valuable. So, without further ado, here’s a sector overview for Canadian banks.

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Sector Overview – Railroads

Fewer investments garner as much as attention to the pulse of the economy as the railroad sector. The railroads are considered a leading indicator for the overall health of the economy as transportation of goods is critical and gives investors a sense of how companies and consumers are spending their money. If we observe legendary investors such as Warren Buffett and Bill Gates – it is clear that they are fans of the railroad companies and believe in the long term prospects with Buffett’s Berkshire Hathaway buying out Burlington Santa Fe (BNSF), taking it private and Gates’ Cascade Investments holding a sizeable position in Canadian National Railway. Railroads are what we call a wide-moat industry sector – where it is extremely hard for new entrants to get established and challenge the incumbents. This makes the railroads very attractive for long term investors.

Whether transporting crude, lumber, merchandise, agricultural or industrial products, railroads are what keeps the economy moving. While the transportation for entities such as coal (which used to be the largest users of railroad services a few years ago) has fallen due to the fall in crude prices and rise of green energy alternatives, the transportation need for crude saw significant rise in the recent past. However, the recent turn of events with falling energy prices, has put a damper on crude transportation via railroads. The following chart from Association of American Railroads shows the trend in traffic for various payloads.

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Looking for Gold

Earlier this week, I posted an article on gold as an alternative form of investment. Gold is one of the oldest and most popular forms of investments and has proven to be an excellent hedge against inflation. In that article, I discussed a few different vehicles that one can use to invest in gold. One of the methods is to invest by buying equity in gold mining  companies. This article looks at the beaten down sector, where some truly great value finds can be uncovered.

Why Gold?

Before we go into the details of which companies, lets first address what the role gold plays in this world. It has been touted by many as a useless barbaric metal that does not serve any purpose. I have to respectfully disagree with such comments as gold has proven to be the safe haven everyone runs to, when shit hits the proverbial fan. In a loose monetary policy environment where asset bubbles are inflated everywhere you look, we are stumbling on the verge of one catastrophe to the next. It is just a matter of time before we hit a new financial crisis.

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