Related topics: Apple, stocks, Schlumberger, investing strategy, Disney
The world is interconnected. American investors pay attention to China's voracious appetite for commodities and grow anxious when Europe's debt markets go haywire. Borders are less important when it comes to stocks, too.
"Where a stock is listed is becoming almost irrelevant," says Sarah Ketterer, co-manager of Causeway Global Value Fund (CGVIX).
At Causeway and elsewhere, money managers and analysts who spent careers following U.S. banks, airlines or drug-makers now scour the globe for the most compelling companies at the most attractive prices.
"To make good stock decisions, you'd better have a global perspective," says Bob Turner, co-manager of Turner Core Growth Fund (TTMEX).
What matters is not where a company is headquartered but where it generates its revenues and profits, and where its growth opportunities lie. Tobacco giant Philip Morris International (PM, news) is based in New York City but generates 100% of its sales abroad. Teva Pharmaceutical Industries (TEVA, news), the world's biggest seller of generic drugs, has its headquarters in Israel but books most of its sales in the United States and Europe.
We assembled a list of 10 companies -- five based in the United States and five overseas -- that are global leaders in their industries. In addition to strong profitability, finances and management, we sought businesses with bright growth prospects, which in several cases stem from exposure to emerging markets. The stocks may not be cheap but are trading at prices that appear attractive relative to the companies' commanding market positions and business prospects.
Denmark
Peter Baughan, co-manager of the Harding Loevner Global Equity Fund (HLMVX) identifies companies that tap into long-term-growth themes. He's found one such theme in diabetes, a disease that is reaching epidemic proportions worldwide. Baughan's play on this disease is Novo Nordisk (NVO, news), the leader in diabetes care with just over half of the global market for insulin.
By the end of this decade, half of all adult Americans will be diabetic or pre-diabetic unless they change their diets and lose weight, according to UnitedHealth Group. The incidence of diabetes is also exploding in India and China, where diets and lifestyles are shifting abruptly as incomes rise.
Unlike its diversified competitors in the synthetic-insulin business, Novo Nordisk benefits from its laser focus on diabetes. It plows 15% of annual sales into research, which leads to contraptions such as pen-delivery systems for insulin and new drugs such as Victoza, a once-a-day insulin shot that also promotes weight loss.
Japan
The grim economic news from Japan makes it easy to forget that the country is home to many manufacturers of innovative, high-quality products. Canon (CAJ, news), a world leader in printers, copiers, high-end cameras and semiconductor-making equipment, exemplifies Japan's prowess in precision engineering and product miniaturization.
With a powerful global brand, Canon generates about 80% of its sales outside of Japan. Rob Taylor, co-manager of the Oakmark Global (OAKGX), notes that 30% of Canon's revenue comes from royalties (every Hewlett-Packard laser printer uses Canon technology) and products, such as ink cartridges, that customers buy repeatedly.
Canon has $9 billion of cash on its balance sheet and no debt. The Tokyo company has been repurchasing shares -- unusual for a Japanese company. By Taylor's calculation, Canon sells at a steep discount to his estimate of its true worth. In addition, the stock yields 2.5%.
Germany
When you combine superb engineering with ruthless cost cutting, you create a formidable competitor. That's the story of venerable Siemens (SI, news), a lumbering giant no more.
"Siemens is going through the greatest transformation since the beginning of the company, 163 years ago," says David Marcus, the manager of Evermore Global Value Fund (EVGIX).
Siemens' decision to reduce head count, close plants and exit businesses in which it's not the No. 1 or No. 2 player accelerated when Peter Löscher became the chief executive in 2007. "Löscher makes changes, not excuses," says Marcus. Productivity and profit margins are surging, and earnings are up despite modest sales growth.
Siemens is a global force in industrial-automation, power-generation and transportation equipment. In the quarter that ended Sept. 30, the company landed orders to supply Amtrak with 70 locomotives and to build a steel mill in Brazil and a power plant in India. Siemens also has important businesses in medical equipment, auto electronics and lighting.
Over the past five years, revenues from emerging markets have risen from 19% to 30% of sales (Germany accounts for 15% of Siemens's business). The company is focusing its expansion efforts on Asia.
Mexico
If you're a purveyor of food, beverages, toothpaste or shampoo, developing nations are where the growth is. You can tap into that demand with Coca-Cola (KO, news), which blankets the globe. Or you can focus on fast-growing Latin American countries by investing in Coca-Cola Femsa (KOF, news), the largest bottler of Coca-Cola products outside the United States.
"Coke Femsa is a great way to play consumer spending in emerging markets," says Evermore's Marcus.
Coca-Cola Femsa, 32% owned by Coca-Cola, already dominates in Mexico, whose citizens drink 60% more Coke beverages per capita than do Americans. The big growth opportunities are in fast-growing markets such as Brazil, Colombia and Panama, where Femsa is deploying surplus cash from Mexico to attract the young, fast-growing populations with the new-found wherewithal to buy brand-name beverages.
The bottler, which accounts for 10% of Coca-Cola's global volume, recently entered a joint venture with the Atlanta company to sell juices and sports drinks in Latin America.
Marcus thinks that Coca-Cola Femsa, known as an excellent operator, will be a large beneficiary of the parent company's push to consolidate its bottling operations.
Switzerland
When you mix Asia's rapidly spreading affluence with its cultural affinity for brand names, you have a mouthwatering recipe for Compagnie Financière Richemont (CFRUY, news), owner of the Cartier, Van Cleef & Arpels, Montblanc and other luxury brands.
In the first half of Richemont's fiscal year, which ended Sept. 30, sales in the Asia-Pacific region, excluding Japan, surged 50%, to 36% of total sales. (Japan accounted for an additional 11%.) The company struggled to keep up with demand for its watches and jewelry.
