Trading Foreign Securities in Local Currencies
Comment of the Day

March 04 2013

Commentary by Eoin Treacy

Trading Foreign Securities in Local Currencies

Thanks to a subscriber for this piece from Charles Schwab that may be of interest to subscribers. Here is a section
Sam Prather's latest investing idea came to him literally off the beaten path. On a recent off-roading excursion in the Mojave Desert, he stopped his pickup truck in front of a mining operation.

“The mine was very active,” recalls Sam, 58, a retired engineering executive and venture capitalist from Los Gatos, Calif. “There was quite a bit of security around it, meaning they were protecting something valuable. It got me curious.”

Sam discovered that the mine's owner was a European company that used hectorite to make a specialty product to keep antiperspirants from staining clothes. The company had American Depositary Receipts (ADRs) available to purchase, but they were very lightly traded. So Sam used his Schwab Global Account to buy shares of the company directly over the London Stock Exchange using British pounds.

Eoin Treacy's view Sam regaled the dinner table at the Contrary Opinion Forum last October with his tale of off-roading in the desert. When he and his brother came across a watered road their curiosity was pricked and they followed it to its origin. What they found was a well-fortified facility with nothing to tell the casual observer what was behind the fence. After some research and a number of phone calls they found the name of the company that owns the facility and what it mines.

Hectorite is a relatively rare mineral and is named after the town it was first discovered near in California's San Bernardino County. Some of its primary uses are as an ingredient that reduces the tendency of antiperspirant to stain clothes. It also has uses in the oil and gas drilling industry. Here is a link to a presentation from Elementis, the company Sam told his story about, detailing the advantages of Hectorite over Bentonite.

Elementis has a market cap of £1 billion, a P/E of 15.23 and dividend yield of 2.1%. The share found support in the region of the 200-day MA from late January and a sustained move below it would be required to question medium-term scope for continued higher to lateral ranging.

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