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Recession-proof Stocks: These U.S. companies will continue to thrive on international demand

Posted March 10, 2008

"This great homegrown play on globalization actually generates over half of its $50 billion in annual sales from markets outside the U.S. today." — Mike Burnick

by Krista Das

Baltimore — (TFN): Emerging market economies such as China and India are leading the way in global growth. U.S. investors have begun to diversify their portfolios with foreign stocks more than ever before.

Mike Burnick is the editor of Global Market Investor, which uncovers profit opportunities and emerging market trends worldwide. Today, he will reveal how to have the best of both worlds. Mike, I see a recurring theme in your research, which is to think global and invest local. What exactly do you mean by this?

Click here to watch the financial video!

Mike Burnick: That’s exactly right. With the volatility we’ve seen in global markets over the last several months, investors are understandably getting a little nervous about investing in emerging markets like China or Brazil — even though some of the best investment opportunities around the world can be found there.

But there is another way really to invest globally while staying close to home and investing on local exchanges. That’s by investing in U.S. blue chip multinational companies. Firms like Coca-Cola and Disney, quickly come to mind. Kraft Foods is a good case in point. Warren Buffett just made a big splash in the financial press announcing he’d acquired a huge stake in Kraft Foods. Now, Buffett himself has said that he’s seeing much better investment opportunities offshore, away from the U.S. and the falling dollar. True to his word, Kraft Foods actually generates about 40 percent of its sales internationally, selling its Ritz Crackers and Oreo Cookies in about 150 different markets around the world. It’s a true multinational.

KD: Can you give us another example of a U.S. company with strong international sales?

MB: Another great homegrown play on globalization is industrial giant General Electric. GE is one of the oldest and proudest companies included in the Dow Jones Industrial Average here in the U.S., but this American icon actually generates over half of its $50 billion in annual sales from markets outside the U.S. today.

KD: What is making GE’s profits so solid?

MB: GE’s best customers really are found in the rapidly developing emerging markets. These nations are in the process of modernizing their infrastructure, building out their economies in a very big well. GE’s transportation products, infrastructure products are in very hot demand overseas. The company’s transportation infrastructure division is actually based in the old mill town of Erie, Pennsylvania.

Now, here’s a town that most people gave up for dead. Years ago, all the plants shut down and all the good jobs moved overseas. Well, General Electric has totally refurbished a 100-year-old plant there. Today, a large part of GE’s earnings growth is coming infrastructure transportation plays in overseas markets.

KD: So what exactly comprises GE’s infrastructure business and where are the sales coming from?

MB: It’s really mainly these emerging markets that are building out their infrastructure. The U.S. started that process in the post-Civil War era, building coast-to-coast railroads and industrializing. That’s now going on in a big way overseas. Everything from jet aircraft engines to railroad equipment is what General Electric manufacturers in their Erie, Pennsylvania plant. Sales are booming.

One of GE’s best-selling products right now are state-of-the-art, 150-ton diesel electric locomotives. These are the big train engines that can pull tons of freight coast to coast. GE sold 900 of these monsters last year alone at a price tag of about $4 million apiece. In fact, GE sold 200 of these locomotives just into China alone last year.

Many other emerging market countries, Brazil and even Kazakhstan, are customers of GE’s transportation division. In fact, the president of GE’s transport business kind of jokes that Erie, Pennsylvania is one of the only American cities to actually run a trade surplus with China last year.

 

To find out about other solid companies worth of your investing dollars, using Mike’s "Think Global and Invest Local" strategy as well as profit opportunities in emerging markets, click right here.

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Posted by Krista Das · Filed Under US Stocks and Markets 

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