Happy belated-St. Patrick’s Day! Yesterday was all about the parades and the stock market was closed, so today is the day to celebrate with Cherries. St. Patrick’s Day has been honored in the US since the early Colonial Era. Although the nature of the festivities has shifted over time, it’s always remained a chance to celebrate Ireland and Irish-American culture and history. To this day, St. Patrick’s Day is observed with everything from religious services and cultural performances to heavy drinking and dying public waterways green. Of course, here at Cherries, we’re celebrating on the stock exchange.
Luck of the Irish on the US Stock Market
This year, St. Patrick’s Day fell on a Sunday so the stock market happened to be closed. But St. Patty’s day is known among traders as one of the best days of trading every year. Believe it or not, the stock market tends to do better than average on St. Patrick’s Day. It’s not a reliable enough trend that we recommend betting on it, but it’s fun to keep an eye on nonetheless. Whether it’s caused by the luck of the Irish or some other factor, it’s definitely in line with the spirit of the holiday.
Irish ADRs on Wall Street
Of course, Ireland is represented on US stock exchanges year round, not just on St. Patrick’s Day. Both the NYSE and NASDAQ list a number of Irish companies as ADRs. ADRs (American Depository Receipts) are a way for companies around the world to make their stock easy for investors to trade on US exchanges. An ADR is a certificate that represents one or more shares of a foreign company. Instead of trading shares, American investors can trade ADRs without having to worry about currency changes, multiple stock exchanges, or regulatory issues. It’s just as easy as trading any American stock.
How do ADRs Work?
The trick of ADRs is the extra middleman. With domestic stocks, the company lists shares through an American stock exchange and investors can buy them. With ADRs, the company or a broker deposits some shares with a local bank, which then issues ADRs, which are then listed on an American exchange. Sponsored ADRs are arranged by the company itself, through an agreement with the depository bank. An unsponsored ADR can actually be created without the company’s involvement. A broker simply decides to buy a lot of a particular stock and deposit it with a bank that can issue the ADRs. No matter who takes the initiative, ADRs can only be created for companies that fulfill SEC reporting requirements.
What’s the Point of an ADR?
In the era before ADRs, investing in foreign stocks was messy. You’d have to go to an international exchange, change currencies back and forth, and make sure that the stock you wanted to buy fulfilled regulatory requirements in both its host country and the US. Then, if you wanted to sell, you’d have to do the same thing all over again. This changed in 1927 when the first ADR (Selfridges, the British department store) was listed on the New York Curb Exchange.
Are ADRs a Good Investment?
The beauty of ADRs is that they’re just like any other stock, as far as most investors are concerned. For the purposes of your stock portfolio, ADRs shouldn’t be considered a category. They’re subject to most of the same influences as other American stocks and the success of the particular company is a lot more important than the fact that the stock is an ADR.
On the other hand, the companies represented by ADRs aren’t in the US. That means that things like changes to US law may not affect them the same way. At the same time, the economic situation in their home country could come into play. For example, if there did turn out to be some leprechaun gold at the end of the rainbow, Irish ADRs may suddenly do well as consumer spending in their local market skyrocketed.
So Should I Buy ADRs?
As usual, the answer is maybe. ADRs are a great way to invest in a particular country. Whether you’re of Irish descent and want to support the ancestral homeland or simply believe that the Irish economy is due for an upswing, ADRs let you express that. For most investors, however, ADRs are just one more way to diversify your portfolio.
The Cherries St. Patty’s Day Stock List
To celebrate St. Patrick’s Day, Cherries style, check out these Irish stocks trading on major US stock exchanges:
Trinity Biotech (TRIB)
ICON Plc. (ICLR)
Fly Leasing (FLY)
Bank of Ireland (IRE)
Elan Corporation (ELN)