To make good stock decisions, consider a global perspective
Thanks to globalization, U.S. investors pay attention to China's voracious appetite for oil and other commodities, and we grow anxious when Europe's debt markets go haywire. Borders are becoming 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.
At Causeway and other investment firms, analysts who have spent their careers following U.S.-based drug makers or banks or airlines are now looking for the most-compelling firms at the most-attractive prices all over the world.
"To make good stock decisions, you'd better have a global perspective," says Bob Turner, co-manager of Turner Core Growth Fund.
What matters, says Ketterer, is not where a company has its headquarters but where it generates its revenue and profit and where future growth opportunities lie. For instance, tobacco giant Philip Morris International is based in New York, but it generates 100 percent of its sales abroad. Teva Pharmaceutical, the world's biggest seller of generic drugs, is based in Israel but books most of its sales in the United States and Europe.
We have assembled stocks - based in the United States and overseas - that are global leaders in their industries. In addition to looking for strong profitability, finances and management, we sought companies with bright long-term-growth prospects - which in several cases stem from high exposure to emerging markets. Finally, we focused on stocks that may not be cheap but are at least trading at prices that appear attractive relative to the companies' commanding market positions and long-term business prospects. All of the foreign stocks trade in the United States as American depositary receipts. Prices and related data are through Dec. 3.
Peter Baughan, co-manager of Harding Loevner Global Equity, identifies firms that can tap into long-term-growth themes. Sad to say, he's found one such theme in diabetes, a disease that is growing worldwide. His play on this scourge caused by modern diets and lifestyles is Novo Nordisk, the leader in diabetes care, with just more than half of the global market for insulin.
Unlike its diversified competitors in the synthetic-insulin business (the U.S.'s Eli Lilly and France's Sanofi-Aventis), Novo Nordisk benefits from its laserlike focus on diabetes. It plows 15 percent of sales each year back into research, which generates contraptions, such as pen-delivery systems for insulin, and new drugs, such as Victoza, a once-a-day insulin shot that, as a positive side effect, promotes weight loss.
Canon, a world leader in printers, copiers, high-end cameras and semiconductor-making equipment, exemplifies Japan's prowess in precision engineering and product miniaturization.
Canon generates about 80 percent of its sales outside the moribund Japanese economy. And Rob Taylor, co-manager of Oakmark Global Fund, likes that 30 percent of Canon's revenue comes from royalties (for example, 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. And it has been repurchasing shares - unusual for a Japanese company.
Siemens, a lumbering giant no more, combines superb German engineering with ruthless, American-style cost cutting to rise as a formidable competitor.
Siemens's decision to cut head count, close plants and exit weaker businesses in which it's not the No. 1 or 2 player accelerated after Austrian Peter Loescher became chief executive in 2007. "Loescher makes changes, not excuses," says David Marcus, manager of Evermore Global Value Fund.. Productivity and profit margins are surging, and earnings are way up despite only modest growth in sales.