Why it’s still OK to invest around the globe
Even in a global slowdown, international investing is a wise move, says this advisory. Just pick U.S. multinationals with a worldwide reach.
Diversify! That has been one of the pillars of investment advice since Warren Buffett was taking apples to the teacher in Omaha.
Spread your investments across stocks, bonds and cash. Spread them among different sectors of the economy. And send them to a veritable travelogue of geographical locations.
The geographic theme grew particularly hot as economies around the globe, especially those in Asia, started to earn the title “emerging.”
When the credit crisis hit, it cooled off considerably.
“Individual foreign stocks can be risky and difficult to analyze,” says a top U.S. advisory, Dow Theory Forecasts. And when the global economy is slowing down, the risk just may not seem worth it.
But that shouldn’t stop anyone from investing overseas, says the advisory. You can do it from home.
You can pick U.S. multinational stocks that are doing more and more of their business overseas.
This is certainly a strategy that many of the experts we consult recommend for Canadians. Not that many Canadian stocks can match the big American giants for spreading their wares around the world.
Expanding faster
This advisory publishes a chart showing that overseas sales by U.S. companies have grown more than twice as fast as domestic sales in recent years.
Among 271 non-financial firms on the S&P 500 Index, overseas operations accounted for 44 per cent of total revenue over the past fiscal year, up from 40 per cent three years ago (and 40 per cent ain’t chicken feed, either).
What’s more, during this slowdown, the rest of the world’s economy is expanding faster than that of the U.S.
In fact, throw out the U.S., Europe and Japan, and the global gross domestic product rose a rather healthy 6.3 per cent in the past year.
And there’s one more thing. Many companies’ overseas sales were even higher than the figures show. But thanks to the muscular U.S. dollar, they got scaled back on the books due to losses in currency translation.
The advisory has 19 companies that it lists as buys for their foreign reach, and it highlights three. But we will also name six other firms that are listed as Focus Buys (best buys for the next 12 months).
Still out there spending
You can’t get much more global than Exxon Mobil (NYSE-XOM). This integrated oil behemoth has pulled back in some areas since the price of crude came down from its great height — but it still has lots of cash to spend.
It will devote less to share buybacks, and may be a little “pickier” about acquisitions, says this advisory. But with more than $32 billion on the books, it will still be out there spending.
In fact, $29 billion is earmarked for exploration and production this year and an average of $27.5 billion for the next three years.
Exxon is well ahead of other U.S. oil majors in reserves and production and all that capital spending should widen the gap. Plus it has the lowest finding and development costs among the majors.
Oil prices have been pushing up lately. As they increase, so does the value of Exxon Mobil’s strategy. It’s a Long-Term Buy.
Downloading songs and movies
China is the market of choice for tech giant Qualcomm (NASDQ-QCOM). Its third-generation (3-G) networks bring higher download speeds to phones that browse the Internet and download songs and movies.
With “only a hint” of a 3-G network in place, China has offered up $40 billion to telecom companies to develop the network.
As this translates into cell phone purchases, Qualcomm should be in the thick of things, selling its microchips to mobile phone makers. And China is just one leg of the journey. There are plenty more emerging markets on Qualcomm’s agenda.
Qualcomm is settling a long-running patent dispute with Broadcom, which has helped cut into its recent earnings. But demands in emerging markets have the company pumping up its sales guidance. This, too, is a Long-Term Buy.
Endoscopy and orthopedics
Medical technology is also in demand around the world, of course. And Stryker (NASDQ-SYK) is this advisory’s third choice as a global investment. Among other things, Stryker is a specialist in endoscopy (scopes that probe inside the body).
While endoscopy and medical sales have been down in the U.S., they have enjoyed double-digit growth overseas.
At home, the company believes it is seeing a bottom in the fall-off of hospital spending. And even if hospital business remains modest, it expects to see modest growth in orthopedics. These implants “have shown resilience in the face of the economic slowdown,” says the advisory.
Although Stryker was turned down in its application for a bone-growth compound, it has three new products coming on the market. Per-share profits are expected to grow by 5 per cent this year, which makes this another Long-Term Buy.
We also promised you six stocks that are Focus Buys. Note that there are few of the obvious consumer stocks — the Coca-Colas and Gaps — that are often trotted out as evidence of America’s conquest of the commercial world.
In alphabetical order, the buys are: oncology and immunology specialist Biogen Idec (NASDQ-BIIB); management and administrative software maker BMC Software (NYSE-BMC); the almost inevitable IBM (NYSE-IBM); Johnson & Johnson (NYSE-JNJ); Latin American mobile communications provider NII Holdings (NASDQ-NIHD); and yet another medical tech group, St. Jude Medical (NYSE-STJ).
Investing around the globe from home is a bit like seeing the world on the Discovery Channel, we suppose. Except that in this case, you can get paid for it.
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