Norway is rich in resources – particularly oil and gas. In this article, Vince Stanzione explores the Nordic country in more detail
Norway is a small country with a population of about 4.8 million bordered by Sweden, Finland and Russia. You don’t hear much about this country apart from maybe the Eurovision song contest which they won in 2009 and hosted in 2010 or around Christmas time when Norway sends a Christmas tree to the UK as thank you for the help that British army gave Norway in the second world war, but don’t be fooled by this quiet county it is a commodities rich powerhouse.
Norway’s fortunes turned when oil was discovered in the North Sea in the late 1960s. Today Norway is the third largest exporter of natural gas, the fourth largest exporter of oil and the second largest exporter of fish in the world. The country consistently ranks high in many global rankings, such as Global Competitiveness Index, Human Development Index and its population have one of the highest living standards in the world with top healthcare and schools. The unemployment rate currently stands at 3.5% the lowest in the OECD.
Some of the reasons to invest in Norway are:
- Norway is a surplus country. The budget surplus last year was 11% of its GDP. The Norwegian Krone is in my view the world’s safest currency. Whilst Norway has a good relationships with Europe it is not part of the European Union and nor will they ever join. Norway’s interest rates are currently 2% and are decided by its own central bank, the Norges Bank.
- Oil and natural gas accounts for about 25% of the GDP. With oil back near $100 nobody is complaining in Norway. Surplus oil revenue is saved into a sovereign wealth fund that is the second largest in the world with assets of over NOK 2.1 Trillion. Unlike the UK Norway did not squander its petroleum wealth by wasteful spending. The Norwegian government still owns 67% of Statoil (NYSE:STO)
- Sound banking system. Norwegian banks are highly regulated and did not get involved heavily in the sub-prime mess. The banking industry also represents just 2% of the country’s GDP (take note Ireland). The largest bank Dnb Nor is 34% government owned and bank customers also own a large share.
One company which stands out and I have been buying is fertilizer and chemical maker Yara International (listed in Oslo: YAR) and is also available as a spread bet with most firms. The Norwegian government own 36%. The company was founded in 1905 as Norsk Hydo and then Yara was demerged in 2004. Yara is the number 1 in Ammonia, Nitrates and NPK complex fertilizer the company stands to benefit from higher prices. Yara is on a P/E of 11 which is much lower than its US listed peers. Whilst the shares gained 40% in 2010 they are still 30% off the 2008 highs.
Global X FTSE 30 Norway ETF (NYSE: NORW)
Global X recently launched an ETF to tracks the FTSE Norway 30 Index. Companies that make up the index include Statoil ASA, 18.82%, DnB NOR ASA, 13.58%, Telenor ASA, 10.76%, Royal Caribbean Cruises Ltd. 6%, Yara International, 5.86%, Seadrill Ltd., 5.71%, Norsk Hydro, 5.31% and Orkla ASA, 4.48%
You can also look at the OBXEXACT:NO which is the Norway Index ETF listed in Norway in Norweign Krone
If you’re looking for 100% overnight, then Norway is not for you but if you’re looking for a 10% to 12% a year return in a fairly safe environment then Norway could be for you. Statoil (NYSE:STO) is currently paying a near 4% dividend and I look for a year end price of $27 giving you a 20% return.
Vince Stanzione has produced a home-study course to teach private investors how to benefit from trading financial spread bets and fixed odds. For more details visit www.fintrader.net