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Credit Suisse: 27 Great Brands of Tomorrow

The Credit Suisse Research Institute released the 27 Great Brands of Tomorrow that have the potential to outperform the market in the next 3-5 years. Their research shows that “Strong brand companies have consistently generated out-sized long-term growth and returns for shareholders.”

The 27 “Great Brands of Tomorrow” are:

1. Alibaba.com
2. Almarai
3. Amazon (AMZN)
4. Apple (APPL)
5. BIM
6. Capitec
7. China Merchants Bank
8. Commercial Aircraft Corporation of China
9. Enfamil (MJN)
10. Facebook
11. Hyundai Motor
12. Indian Hotels
13. Julius Baer
14. Li Ning
15. Mahindra & Mahindra
16. MercadoLibre
17. Mercedes-Benz
18. Polo Ralph Lauren
19. Sonova Holding
20. Swatch
21. Tiffany & Co (TIF)
22. Tingyi
23. Trader Joe’s
24. Tsingtao Brewery (OTC: TSGTY)
25. Under Armour (UA)
26. Uniqlo
27. Yakult Honsha

Some of the companies that own the brands listed above are expanding into regions where they did not have a big presence before. For example, DaimlerChrysler (DCX) the owner of the global luxury brand Mercedes-Benz is now focusing on emerging markets where the demand for luxury products is growing. Last month the company announced that the sales of its high-end Mercedes-Benz autos in China shot up by 77% in 2009 compared to 2008. Simiarly Mahindra & Mahindra of India is slowly expanding in the US market with its cheap but high quality tractors for the farming industry. Mahindra & Mahindra is coompeting against established American player Deere & Co (DE).

The Nifty 50 BRIC Champions

In an earlier post, we discussed about the companies from developed countries that have the potential to profit from emerging markets’ growth. Many companies in the emerging markets are already champions in their domestic markets and are poised to become global market leaders. This is especially true with BRIC companies.

The economic power is projected to shift from the US and Western Europe to the emerging countries in Asia and Latin America in the next decade and beyond. Goldman Sachs noted in a November report:

“Since 2001, we have focused on the increasing importance of BRICs countries in the
global economy; we believe they remain on a trajectory that will see their combined
output reach 50% of the G7 level by 2020 and parity between 2030 and 2050.” Emerging markets will see lots of action in the next few years and offer investment opportunities for global investors. Investing directly in emerging market equities requires access to those markets or one can invest via ADRs if they are available, ETFs or other vehicles.

Goldman Sachs has compiled a list of the ‘Nifty 50′ BRIC companies that are likely to become global winners in the next few years. Many of them are strong players in their respective industries. There companies were selected based on the following criteria:

• Returns on capital
• Industry positioning
• Management quality (with respect to environmental, social and governance issues)

The Nifty 50 BRIC companies are:

S.No.	Company	Country	Sector	Ticker
1	Hero Honda Motors	India	Automobile & Parts
2	China Constr Bank	China	Banks	CICHY
3	ICBC	China	Banks
4	Itau Unibanco Holding	Brazil	Banks	ITUB
5	Sberbank	Russia	Banks
6	State Bank of India	India	Banks
7	Angang Steel	China	Basic Resources
8	China Shenhua Energy	China	Basic Resources
9	Companhia Siderurgica Nacional	Brazil	Basic Resources	SID
10	Jiangxi Copper	China	Basic Resources
11	JSW Steel	India	Basic Resources
12	NLMK	Russia	Basic Resources
13	Sterlite Ind India	India	Basic Resources
14	Vale	Brazil	Basic Resources	VALE
15	Votorantim Celulose e Papel	Brazil	Basic Resources
16	China National Building Mat	China	Construction & Materials
17	Jaiprakash Associates	India	Construction & Materials
18	Larsen & Toubro	India	Construction & Materials
19	Visanet	Brazil	Financial Services
20	Housing Dev Finance	India	Financial Services	HDB
21	China Mengniu Dairy	China	Food & Beverage	MR
22	Want Want China	China	Food & Beverage
23	Mindray Medical International	China	Healthcare
24	China Shipping Dev	China	Industrial Goods & Services
25	China Life Insurance	China	Insurance	LFC
26	Cairn India	India	Oil & Gas
27	China High Speed Transmission Equiment	China	Oil & Gas
28	CNOOC	China	Oil & Gas	CEO
29	Gazprom	Russia	Oil & Gas	OGZPF
30	Novatek	Russia	Oil & Gas
31	Petrobras	Brazil	Oil & Gas	PBR
32	Reliance Ind	India	Oil & Gas
33	Belle Intl	China	Personal & Household Goods
34	ITC	India	Personal & Household Goods
35	China Overseas Land & Inv	China	Real Estate
36	PDG Realty	Brazil	Real Estate
37	Unitech	India	Real Estate
38	China Dongxiang	China	Retail
39	Localiza Rent A Car	Brazil	Retail
40	Magnit	Russia	Retail
41	X5 Retail	Russia	Retail
42	Baidu.com	China	Technology	BIDU
43	Lenovo	China	Technology
44	Tencent	China	Technology
45	China Mobile	China	Telecommunications	CHL
46	Mobile TeleSystems	Russia	Telecommunications	MBT
47	Vimpel Communications	Russia	Telecommunications	VIP
48	Vivo	Brazil	Telecommunications	VIV
49	China Resources Power	China	Utilities
50	CPFL Energia S.A.	Brazil	Utilities	CPL

Petrobras(PBR), Vale(VALE), Gazprom(OTC: OGZPF)  were among the five companies with the largest market cap gains in this decade. With the global demand for natural resources rising, it is possible that they may continue the incredible growth into the next decade.

Multinational Companies with Large Exposure to Emerging Markets

Companies from developed countries are increasingly investing heavily in emerging markets to participate in the tremendous growth. The BRIC countries (Brazil, Russia, India and China) are the preferred destination for these companies.

Foreign Direct Investment (FDI) fell sharply last year to $1 Trillion from $1.7 Trillion in 2008(Source: UNCTAD). However the overall trend of FDI flow is still up in the last decade since FDI into many of the emerging countries peaked in 2008.

OECD Economist Javier Santiso mentioned in The rise of “euro-emerging” multinationals:

“China drew a comfortable $90 billion from foreign companies investing in the country’s factories and other productive assets in 2009. In December 2009 alone, China attracted more than $12 billion in FDI, up 103% from a year earlier. Some emerging countries like Peru even enjoyed a rise of 28%. Most of the emerging countries however saw a reduction of FDI – but from a peak in 2008. In Brazil, for example, FDI fell by half in 2009 but from a historical record in 2008 of $45 billion. In Colombia, the fall has been less pronounced (-15% in 2009) but also from a peak in 2008. In India, according to the national estimates, FDI in the year to March 2010 would be about $18 billion, from a peak of $27 billion in the year 2008/2009.”

Some investors prefer to invest directly in emerging market companies. However this comes with high risk. For example, during the credit crisis in 2008 the markets in BRIC fell more than those in developed countries. Except Brazil, the other three countries fell more than 50%. Compared to this, markets in the UK, Canada, USA, Germany, etc. were all down less than 50%. In 2009, when the global markets rebounded the BRIC countries rose sharply then the developed markets. Despite this performance, some investors prefer to invest in emerging markets via developed market companies that have high exposure to those markets. This is a simple but effective strategy to profit from the growth of developing countries.

The number of people in the middle class category in BRIC countries is growing. An estimated two billion people could join the global middle class by 203o, mainly from India and China according to a Goldman Sachs report. In addition to the rising middle class and growing incomes, infrastructure demand is also expected to rise over the next decade. Hence companies that are well positioned to cater to the needs of the emerging markets will profit nicely.

Which companies from the Developed Countries have high exposure to BRICs?

Goldman Sachs has identified 50 companies (‘BRICs Nifty 50’) that have excellent potential to benefit from growth in the BRIC countries.

The BRIC ‘Nifty 50′ Developed Market companies are listed in the table below:

S.No.	Company	Country/Continent	Sector	Exposure to EM	Ticker
1	Suzuki Motors	Japan	Automobile & Parts	46%	OTC: SZKMY
2	Hyundai Motor Co.	Korea	Automobile & Parts	30%	HYMLF
3	Hankook Tire	Korea	Automobile & Parts	25%
4	BBVA	Europe	Banks	N/A	BBV
5	HSBC	Europe	Banks	N/A	HBC
6	Standard Chartered	Europe	Banks	N/A
7	Newmont Mining Corp	US	Basic Resources	48%	NEM
8	Vedanta Resources	Europe	Basic Resources	73%
9	BHP Billiton Plc	Europe	Basic Resources	23%	BBL
10	Xstrata plc	Europe	Basic Resources	21%
11	Posco	Korea	Basic Resources	15%	PKX
12	Fortescue Metals Group Ltd.	Australia	Basic Resources	90%
13	Equinox Minerals Ltd.	Australia	Basic Resources	75%
14	Macarthur Coal Ltd.	Australia	Basic Resources	35%
15	Avery Dennison Corp.	US	Chemicals	23%	AVY
16	FLSmidth & Co.	Europe	Construction & Materials	47%
17	Holcim	Europe	Construction & Materials	34%
18	Carlsberg	Europe	Food & Beverages	54%	OTC: CABJY
19	Anheuser-Busch InBev	Europe	Food & Beverages	35%	BUD
20	Unilever (NV)	Europe	Food & Beverages	25%	UN
21	Diageo	Europe	Food & Beverages	13%	DEO
22	Coca-Cola Co.	US	Food & Beverages	14%	KO
23	Mylan Laboratories	US	Healthcare	24%	MYL
24	Pfizer, Inc.	US	Healthcare	19%	PFE
25	Waters Corporation	US	Healthcare	17%	WAT
26	Expeditors International	US	Industrial Goods & Services	58%	EXPD
27	Boeing Company	US	Industrial Goods & Services	23%	BA
28	Emerson Electric	US	Industrial Goods & Services	21%	EMR
29	ABB Ltd	Europe	Industrial Goods & Services	34%	ABB
30	EADS	Europe	Industrial Goods & Services	29%
31	Komatsu	Japan	Industrial Goods & Services	39%	OTC: KMTUY
32	Hitachi Construction Machinery	Japan	Industrial Goods & Services	52%	HIT
33	Daikin Industries	Japan	Industrial Goods & Services	40%
34	Kawasaki Kisen	Japan	Industrial Goods & Services	24%
35	Schlumberger Ltd.	US	Oil & Gas	14%	SLB
36	Philip Morris Intl	US	Personal & Household Goods	30%	MO
37	Avon Products	US	Personal & Household Goods	52%	AVP
38	Nike	US	Personal & Household Goods	29%	NKE
39	British American Tobacco	Europe	Personal & Household Goods	41%	BAT
40	LVMH Moet-Hennessy Louis Vuitton	Europe	Personal & Household Goods	26%
41	Richemont	Europe	Personal & Household Goods	25%
42	Shiseido	Japan	Personal & Household Goods	25%
43	Unicharm	Japan	Personal & Household Goods	15%
44	ProLogis	US	Real Estate	12%	PLD
45	NVIDIA Corp.	US	Technology	62%	NVDA
46	Novellus Systems	US	Technology	59%	NVLS
47	Ericsson	Europe	Technology	39%	ERIC
48	Samsung Electronics	Korea	Technology	25%
49	LG Electronics	Korea	Technology	18%
50	AES Corp.	US	Utilities	68%	AES

Source: Global Portfolio Strategy, The BRICs Nifty 50: The EM & DM winners
Goldman Sachs

Investors may also want to check out some of the multinationals mentioned in Javier Santiso’s article. The ‘Euro-emerging’ companies with large exposure to emerging markets are:

• Renault, Schneider Electric, Lafarge(LR) and Rhodia (RHA) of France
• MAN, Volkswagen (OTC: VLKAY) of Germany
• Philips (PHG) of The Netherlands
• Arcelor Mittal(MT) of Luxembourg
• Tullow Oil (OTC: TUWOY), Kazakhmys, Cairn Energy of the UK
• Telenor of Norway
• Banco Santander(STD), Inditex, Iberdrola (OTC: IBDRY), Endesa (ELE), Gas Natural, Telefonica(TEF) of Spain

30 S&P 5-STARS Rated Stocks

The S&P’s Platinum Portfolio consists of the top rated stocks from the Standard & Poor’s Fair Value Portfolio and its Stock Appreciation Ranking System (STARS). To be eligible in this portfolio, all stocks must carry a 5-STARS rating and a Fair Value Ranking of 5.

The table below lists the 5-STARS rated stocks in the portfolio as of February 19th:

S.No.	Company	Ticker
1	Advance Auto Parts	AAP
2	Aspen Insurance Holding	AHL
3	Bucyrus International	BUCY
4	Chicos FAS	CHS
5	Coach Inc	COH
6	Computer Sciences	CSC
7	Discover Financial Svcs	DFS
8	eBay Inc	EBAY
9	Express Scripts	ESRX
10	GameStop Corp	GME
11	General Mills	GIS
12	Gilead Sciences	GILD
13	Hewlett-Packard	HPQ
14	International Business Machines	IBM
15	Jacobs Engineering Group	JEC
16	MEMC Electronic Materia	WFR
17	Multi-Fineline Electron	MFLX
18	New York Community Bancshares	NYB
19	NICE-systems	NICE
20	Noble Corp.	NE
21	State Street Corp.	STT
22	Teva Pharmaceutical	TEVA
23	Time Warner Cable	TWC
24	Transocean	RIG
25	Travelers Cos	TRV
26	Under Armour	UA
27	Wal-Mart Stores	WMT
28	Western Digital	WDC
29	Willis Group Holdings	WSH
30	Yahoo Inc	YHOO

New York Community Bancorp (NYB) currently has a dividend yield of 6.40%. With the purchase of AmTrust Bank of Cleveland, Ohio the bank is expanding from its traditional footprint to Ohio, Arizona and Florida. The food products company General Mills (GIS)  and the world’s largest retailer Wal-Mart (WMT) are also in this list.

Ten Promising Agribusiness Stocks

The S&P Agribusiness North America Index consists of 24 largest publicly-traded agribusiness companies that are either Producers, Distributors & Processors and Equipment & Materials Suppliers in this sector.

The Constituents in this Index must meet the following criteria:

• Trade on the U.S. and Canadian exchanges including ADRs
• Have minimum market capitalization of US$ 500M at re-balancing time
• A six-month average daily trading value above US$ 2 million

The Top 10 components in the S&P Agribusiness North America Index are:

1. Bunge Ltd (BG)
Country: USA
Current Dividend Yield: 1.34%

2.Archer-Daniels-Midland Co (ADM)
Country: USA
Current Dividend Yield: 2.00%

3. Potash Corp (POT)
Country: Canada
Current Dividend Yield: 0.35%

4.Monsanto Co (MON)
Country: USA
Current Dividend Yield: 1.36%

5.Syngenta (SYT)
Country: Switzerland
Current Dividend Yield: 2.00%

6. The Mosaic Co (MOS)
Country: USA
Current Dividend Yield: 0.33%

7.Hormel Foods (HRL)
Country: USA
Current Dividend Yield: 2.02%

8.Deere & Co (DE)
Country: USA
Current Dividend Yield: 1.96%

9.Tyson Foods (TSN)
Country: USA
Current Dividend Yield: 0.94%

10. Perdigao SA
Perdiagao and Sadia merged to form BRF Brasil Foods (BRFS)
Country: Brazil
Current Dividend Yield: N/A

In the U.S., the BLS reported that prices of dairy and related products, fruits and vegetables rose sharply last month contributing to a rise in the food consumer price index. In Asia food price increases are pushing inflation higher.

Chart:

Source: WSJ

Prices of food staples such as rice, milk, and sugar have been rising in recent months. Other food items such as  fruits, vegetables and cooking oils have also been increasing in some countries. Countries such as India, China, Thailand and Indonesia are battling with rising food price inflation. With huge populations, India and China are particularly vulnerable if prices escalate further. Agribusiness stocks offers good investment choices for investors now especially since some economists are talking about a double-dip recession. Food stocks tend to offer stable growth and withstand downward pressure in falling markets. While consumers may cut down on discretionary spending, they still have to spend on necessities such as food, utilities, etc.

Top Global Energy Industry-Related Companies

The top global companies in four different areas in the energy industry are listed below. These firms were ranked for 2009 by the consultancy PFC Energy.

1. Top Companies in Exploration and Production

2009 Rank	Company Name	Country
1	Occidental	US
2	Canadian Natural	Canada
3	Apache	US
4	Devon	US
5	OGX	Brazil
6	BHP Billiton Petroleum	Australia
7	Woodside	Australia
8	Anadarko	US
9	XTO	US
10	EOG Resources	US
11	EnCana	Canada
12	Talisman	Canada
13	Cenovus	Canada
14	INPEX	Japan
15	Novatek	Russia

2. Top Companies in Refining and Marketing

2009 Rank	Company Name	Country
1	Reliance	Inida
2	Formosa Petrochemical	Taiwan
3	Indian Oil	Inida
4	Valero	US
5	SK Energy	Korea
6	Cepsa	Spain
7	Nippon Oil	Japan
8	S-Oil	Korea
9	PKN Orlen	Poland
10	Tupras	Turkey
11	Bharat Petroleum	Inida
12	SNP Petrom	Romania
13	TonenGeneral Sekiyu	Japan
14	Neste Oil	Finland
15	Essar Oil	India

3. Top Equipment Makers and EPCI

Rank	Company Name	HQ Country
1	Tenaris	Luxembourg
2	National Oilwell Varco	US
3	Saipem	Italy
4	Cameron	US
5	Keppel	Singapore
6	Fluor	US
7	Technip	France
8	FMC Technologies	US
9	WorleyParsons	Australia
10	Petrofac	UK
11	McDermott International	US
12	Offshore Oil	China
13	Sembcorp Industries	Singapore
14	Jacobs Engineering	US
15	AMEC	UK

4. Top Companies in Alternative Energy

2009 Rank	Company Name	Country
1	Iberdrola Renovables	Spain
2	Vestas	Denmark
3	First Solar	US
4	China Longyuan Power	China
5	EDP Renovaveis	Spain
6	Xinjiang Goldwind	China
7	Renewable Energy	Norway
8	SMA Solar Technology	Germany
9	GCL-Poly Energy Hldgs	China
10	Gamesa	Spain
11	EdF Energies Nouvelles	France
12	Suzlon	India
13	Suntech Power	US
14	Covanta Holding	US
15	Solar World	Germany

The exploration and production winners is dominated mostly by companies from Canada and the U.S.  Many world-class mining and energy-related companies are based in Canada since the country is rich in natural resources. Four companies from the emerging country of India appear in the refining and marketing category list. In the equipment maker category, six US firms are included. Due to government regulations and demand for green technologies, European firms lead the world in the alternative energy industry. Accordingly 8 of the 15 winners in this category are from Europe.

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