Exclusive Footage: Bill Bonner
It's not often that Bill Bonner, the founder and chairman of Agora Publishing, agrees to appear on video. But Bill's identified some massive problems with America's financial markets. In fact, he calls this set of problems "the fattest, juiciest financial bubble that's ever existed." Click here for this rare message from Bill -- a warning of the crisis, and a unique way you could sidestep the fallout…
Finding Explosive Growth in Tomorrow's Multinationals
By Jeff Opdyke, Editor of The Sovereign Individual Dear Sovereign Investor Subscriber,
It's nearly impossible for me to check into a hotel – nearly anywhere in the world – and not run into a Herbalife convention. I am exaggerating only slightly. Last February in Montevideo, I hopped on the elevator and was joined by eight Herbalife attendees who had just taken a coffee break. Then in Los Cabos, Mexico, in April, I spotted three women with Herbalife laptop bags … sure enough, another convention. I've also seen these vitamin pushers in Singapore. It seems they're everywhere. But back in the '80s, when the company was founded in California, Herbalife was just your typical start-up, generating most of its sales domestically. It was in the '90s that the company planted the seeds for explosive growth by moving into emerging markets.
Advertisement A Revolutionary New Way to Buy Gold & Silver
We believe so strongly in gold's future that we've joined forces with a new group called the Hard Asset Alliance. Through a new trading platform, the Alliance provides the most-transparent, safe and convenient way to buy gold, silver and other precious metals at competitive prices - from the convenience of your computer. Better still, the Alliance even gives you the option to hold your metals overseas – in Zurich, London, Sydney or Singapore – if you'd rather have them outside the purview of the U.S. To learn more, click here.
Today, it generates less than 20% of its sales in the U.S. Asia accounts for 33% of its revenues, and most of the remaining portion comes from regions such as Latin America and Africa. Herbalife is just one example of companies that have been able to grow by focusing on faster-growing markets outside America. That's how companies such as McDonalds and Wal-Mart have been able to grow over the past decade or two. Of course, that's a well-known trend. What few investors realize, however, is that this same trend is taking place in a special group of smaller U.S. companies. And that's where you will find the best growth opportunities.
These Are Tomorrow's Blue-Chip Multinationals
Most of the companies in the Dow Jones Industrial Average are big multinationals that generate much of their sales abroad. So, the Dow is a good way to measure the performance of large-cap companies with a global presence. If you had invested in Dow 10 years ago, you would be up 50% overall. That's great. But you could have done much – much – better. A group of companies I like to call "baby multinationals" generated returns almost five times higher than the Dow during that same period. These are small U.S. companies (with a market cap below $5 billion) that generate at least half of their sales abroad. More than a thousand such companies trade on major U.S. exchanges. In order to fairly compare their historic performance with the Dow, I only looked at companies that have been around for at least 10 years. This additional criterion reduced that universe to about 880 stocks. If you'd built a portfolio with all those companies a decade ago, you would be up an impressive 245% today. What makes these baby multinationals so special is that they have a unique advantage. It's no secret that big companies, such as Coca-Cola and Wal-Mart, have been increasing their exposure to emerging markets. The baby multinationals are pursuing exactly the same strategy – exploiting the rapid growth that is transforming consumers and economies from Asia to Africa to South America. But for baby multinationals, their size is their strength. They're still years, or even decades, away from reaching maturity. They still have years of explosive overseas growth ahead of them. And because they are so much smaller, the sales they generate outside America have an outsized impact on earnings and, most importantly, the stock price here at home.
If a huge company, such as Wal-Mart, added Bangladesh, Sri Lanka and several African countries to its line-up, it wouldn't add much pop to the top or bottom lines. The company is so large that it takes huge moves of the needle to register with the stock. But, for a smaller company, adding such countries would make a huge difference. And for you, as an investor, it means the difference in earning 50% in 10 years … or 245%.
The time to have owned these blue-chip multinationals was when they were much younger, much smaller and just beginning to penetrate foreign markets. That's exactly why you want to own "baby multinationals" today. They are, literally, tomorrow's blue-chip multinationals.
A Better Way to Invest Abroad Many U.S. investors gain exposure to overseas markets by investing in big, multinational stocks. Some also invest in ADRs (American depositary receipts), the U.S.-listed shares of foreign companies. But if you're looking for triple- and even quadruple-digit growth, the real opportunities exist in baby multinationals.
Big multinational companies are close to reaching (or have already reached) maturity. Most ADRs are big multinationals themselves – think Toyota, Samsung, Phillips Electronics and the like – with limited growth potential. And the smallest ADRs typically trade in the Pink Sheets, which presents a risk because of the often severely limited trading volume.
That's why, to me, baby multinationals represent a savvier way to gain foreign exposure in your portfolio. They're in the early stages of a growth curve overseas that will last for decades. So you get the purer, foreign diversification of smaller, Pink Sheet ADRs… but with the liquidity of the big ADRs traded on the New York Stock Exchange or the Nasdaq. Those are the kinds of companies around which I've built my Global Growth Strategist advisory service. I wanted to find a way to highlight the smaller, unheralded companies that trade in the U.S. and Canadian stock markets, but which collect much of their revenue outside America's borders. Let me give you an example of the kind of potential those companies offer. Two weeks ago, I recommended that my subscribers buy Pure Energy Services, a small Canadian company that operates in the oilfield-services industry. Earlier this week, I told subscribers to sell the shares for a gain of 50%. The reason is because a large U.S. multinational swooped in and agreed to pay a big premium to acquire Pure Energy Services. It did so for the exact reasons I'm telling you about – the opportunity to tap into fast, international growth. That's the power of baby multinationals. It's extremely unlikely you will see this kind of profit in such a short period of time if you're investing in ADRs or big U.S. multinational stocks. Those who invested in McDonalds and Wal-Mart when they were just beginning to grow overseas made a fortune as the companies grew into the big multinationals you know today. Those same opportunities still exist – you just have to go searching for them among today's baby multinationals.
Until next time, stay Sovereign…
Jeff D. Opdyke
P.S. Last March, I discovered one of the safest, most beautiful countries I have ever seen – a place any sovereign individual could easily call home. That country was Uruguay, and I want to show you everything this incredible country has to offer, from safe banks and low taxes to real estate and farmland investments. That's why this November, I'll be taking a handful of individuals with me on a tour of this hidden jewel of Latin America. To learn how you can join me, click here.
Related Reading: A Risk-Free Way to Play the Euro… Without Buying It
How to Profit in Today's Volatile Markets The Way to Gain Safe Exposure to Emerging Market Economies in Burma Why Wealth is Migrating from the U.S.
| 
No comments:
Post a Comment
Keep a civil tongue.