The Top 10 Global Companies Based on Foreign Sales

Some of the multinational firms derive a very high percentage of sales relative to total sales from countries outside of their home countries.Ten such firms from the ING Erasmus 100 Top International Firms published in Dec 2013 are listed below:

Rank
Company
Foreign Sales/Total Sales (in 2013)
1Roche Group98.90%
2Novartis98.80%
3Liberty Global98.60%
4SAB Miller98.40%
5Nestlé98.40%
6Royal Philips97.30%
7Hon Hai Precision97.20%
8Teva Pharmaceutical96.90%
9Barrick Gold96.60%
10Rio Tinto96.20%

Source: ING Erasmus 100,Rotterdam School of Management, ING Economics Department, December 2013

Pharmaceutical companies dominate the list with Swiss-based Roche Group(RHHBY) having almost all of its sales outside Switzerland.The world’s largest generic drug market Teva(TEVA) of Israel also high foreign sales.According to the authors of the report:

US firms score relatively low on this ranking due to their large home market. Firms like Wal-Mart, General Motors, Ford, Microsoft and PepsiCo all obtain less than half of their sales abroad.

Disclosure: No Positions

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How To Profit From Lower Oil Prices

Oil prices have been stable up until recently at around $110 price per barrel and $100 seemed to be the floor.However since mid-June this year prices have plunged dramatically to below $60 per barrel. On Friday Brent crude oil closed at  $61.38 for February, 2015 delivery on the NYMEX.

There are many ways to profit from the decline in oil prices. One way is to buy the stocks of major oil producing giants such as BP Plc(BP), Royal Dutch Shell PLC (RDS.A, RDS.B), Exxon Mobil Corp (XOM), Total SA (TOT), etc as their stock prices are cheaper at current levels and they have attractive dividend yields as well.This strategy is not the best move since there is no guarantee that oil prices will quickly recover and dividend payments may be cut when earnings take a hit. A better way to take advantage of the lower oil prices is to invest in companies operating in the consumer staples and consumer discretionary sectors. As consumers spend less on gasoline they are left with extra cash to spend on consumer goods and services.

From a recent article by UK-based Clare Hart, Manager of the JPMorgan US Equity Income Fund:

Given the significant recent decline in oil prices and subsequent market volatility, it is worth considering what this means for investors in US equities.

With the exception of the very end of last week, US equity markets have for the most part continued to grind higher as investors have shrugged off the vicious collapse in crude oil prices and instead focused on increasing central bank accommodation and continued strength in the US economy.

In our view, lower oil prices should also act as a beneficial tail wind for the US consumer. US families with income below $50,000 (£32,000) on average spent about 20-25 per cent of their total household income on energy.

Further, approximately 60 per cent of Americans spent nearly 15 per cent of their discretionary spending on gas. Lower energy bills should leave consumers with more dollars in their pockets to spend on goods and services, which should benefit overall consumer spending.

Source: What falling oil prices can mean for US equity dividend investors, Dec 19, 2014, Money Observer

Generally one could go no wrong investing for the long-term in consumer staples companies.Even when gasoline prices were much higher they were able to generate solid earnings and pay decent dividends consistently.

Ten U.S. stocks in the consumer staples sector are listed below with their current dividends for consideration:

1.Company: Kellogg Co (K)
Current Dividend Yield: 2.93%
Sector:Food Products

2.Company: General Mills Inc (GIS)
Current Dividend Yield: 3.05%
Sector: Food Products

3.Company:Colgate-Palmolive Co (CL)
Current Dividend Yield: 2.06%
Sector: Household Products

4.Company:Procter & Gamble Co (PG)
Current Dividend Yield: 2.80%
Sector: Household Products

5.Company: Mondelez International Inc(MDLZ)
Current Dividend Yield: 1.61%
Sector: Household Products

6.Company:Kraft Foods Group Inc(KRFT)
Current Dividend Yield: 3.46%
Sector: Household Products

7.Company:Campbell Soup Co(CPB)
Current Dividend Yield: 2.82%
Sector: Household Products

8.Company: ConAgra Foods Inc(CAG)
Current Dividend Yield: 2.71%
Sector: Household Products

9.Company:The Clorox Co (CLX)
Current Dividend Yield: 2.83%
Sector:Household Products

10.Company: Kimberly-Clark Corp (KMB)
Current Dividend Yield: 2.90%
Sector: Household Products

Note: Dividend yields noted above are as of Dec 19, 2014. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: Long GIS

A Note On The Market Capitalization Of Russian Stock Market

The stock market capitalization of the Russian is small compared to the U.S. market. The total market cap of the US market is in the Trillions of dollars while the Russian market is just a couple of hundred billion dollars. Back in January The Economist published the following graph showing the market caps of select countries:

Click to enlarge

Russia Market Cap

Source: The Economist

At that time the market cap of Russian market was about $223.0 billion which was equivalent to the market cap of Proctor & Gamble (PG) at that time. By November this year, the market cap of tech giant Apple (AAPL) exceeded that of the Russian market as the share prices of Russian stocks fell. As we approach the end of the year, Russia has been hit hard by the crash in crude oil prices. Russian oil companies such as Gazprom(OGZPY) and LUKOIL (LUKOY), dominate the equity market and oil and natural gas are the major exports of the country. A recent article in Marketwatch noted that the market cap of Google(GOOG) is bigger than the entire Russian equity market.

Goog-Russia Market Cap

 

Source: Google is now bigger than Mother Russia’s entire market,  Dec 18, 2014, Marketwatch

Related ETF:

  • Market Vectors Russia ETF (RSX)

Disclosure: No Positions

Vanguard: A Comparison Of Chinese And US Housing Markets

The U.S. housing market is highly different than housing markets in other countries.For example, unlike in most countries mortgages in most of the U.S. are are non-recourse loans which means borrowers can default on their loans and simply walk away free while the lender takes the loss.

I wrote a post back in 2012 comparing the housing markets of U.S. and Canada. A similar comparison can be made between the housing market in the US and Australia, Germany, France, UK, etc. I came across an interesting article in the Vanguard Blog for Advisors showing how the U.S. housing market is different than the housing market in China. For many years now, many people have predicted the collapse of the Chinese housing market. For example, in 2011 the “ghost” city of Ordos in Inner Mongolia became a popular media story on the Chinese housing bubble.

Click to enlarge

“Empty” City of Ordos, Inner Mongolia, China (in 2011)

China/ Ordos/ Geisterstadt

China/ Ordos/ Geisterstadt

 

Photos Source: Der Spiegel

From China won’t export housing crisis by Joe Davis of Vanguard:

China vs US Housing market

In the United States, many investors took out speculative loans on houses they could not afford. In China, lending standards have not loosened. Subprime mortgage loans with minimal down payments do not exist there. Chinese homebuyers must put down at least 30%—and often more than that for a second home. They also can’t walk away from their debts easily because they lack the no-recourse loans that allowed underwater U.S. borrowers to wash their hands of their housing debt. Mortgage securitization, a major factor in the global financial crisis, is also less prevalent in China than in the United States. Overall, the Chinese housing boom is missing the leverage that accelerated the housing bonfire here.

Furthermore, compared with the housing market in the United States, China’s housing market is relatively young and represents a smaller part of the economy. Homeownership took root only in 1998, when Chinese officials began eliminating the state-run housing system.

Finally, the key difference in China is that most of the risk lies with real estate developers and local governments, who have borrowed excessively and left many cities with an oversupply of housing. In fact, revenue from land sales is about one-third of local government revenues, and many local government funding vehicles use land as collateral for their borrowing. Bad loans could emerge in the future if banks tighten lending, and housing and land demand slows.

Mr.Davis makes many compelling arguments above. Investors waiting for a collapse of the Chinese economy due to a crash in the real estate market are mistaken. China’s market is nowhere near the levels of the craziness that occurred in the US housing bubble. Shocking stories of some illegal in California with barely any income getting a mortgage for $500,000 with $0 down payment is not unheard when the bubble crashed. Such scenarios are unlikely to occur in China.Chinese banks have strict lending standards even for local citizens.

Bombay Dyeing: A Dividend Payer Every Year For More Than 125 Years

In 2010, I wrote an article dispelling the myth that Warren Buffet’s Bershire Hathway is the world’s greatest stock in terms of performance. Quoting from that article:

Sweden’s Handelsbanken is the best stock in the world. The company first listed on the Stockholm Stock Exchange in 1873. Since 1900 the stock has gained unimaginable 1.9 million percent thru September last year. That amounts to 10 percent a year not including dividends. A $10 investment made in the stock in 1900 would be worth about  20 million dollars as of September 2009.

Compared to the performance of  Handelsbanken, Warren Buffett’s Berkshire Hathaway(BRK.A, BRK.B) has gained just 362,300% since Buffett’s takeover in 1964. And General Electric (GE) stock has grown 843,000% from 1900 to the peak of 2007. These findings were confirmed by researchers at the London Business School.

When it comes to the reliability of companies paying dividends, people usually cite companies like US-based  Procter & Gamble(PG) which has paid a dividend every year for the past 124 years and has increased dividend payments in the past 58 years. On a similar note, I recently across a company in India that has paid a dividend every year for more than 125 years beating even P&G. The company is
Bombay Dyeing and Manufacturing Co. Ltd of the Wadia Group and is listed on the Bombay Stock Exchange under the code 500020. The company was founded in 1879.Here are some interesting trivia about the Wadia Group:

Click to enlarge

Wadia Group Trivia

Source: Wadia Group: Two centuries and beyond,  Aug 15, 2014, Live Mint

Picture of the HMS Trincomalee, now a Museum ship, Hartlepool, England:

HMS Triconmalee

Trincomalee is the name of a town in Sri Lanka.The Wadia’s connection to the U.S. National Anthem is fascinating.

Disclosure: No Positions