The global list of Multi-National Companies(MNCs) are dominated by American and European firms. These mega corporations have revenues in the billions and employ thousands of workers in countries outside of their home countries. Based on revenues some of the firms are bigger than the economies of small and medium size countries. In the global marketplace firms compete fiercely against one another to gain market share. Competition is especially high between U.S. and European multinationals as they try to take a bigger slice of the global market for their products. In this post let us compare five American firms from five different industries to their European peers.

1. Consumer Goods:
Based in Cincinnati,OH Procter & Gamble Co (PG) was founded in 1837 and operates in about 180 countries. P&G owns hundreds of brands including Ariel, Dawn, Downy, Duracell, Always, Bounty, Charmin, Pampers, Crest, Gillette Mach3 to name a few.Currently the stock has a dividend yield of 3.16%. The five-year price return (excluding dividends) is 27% and the 10-year return is 50%. PG had a 2:1 stock split in 2004 when the price was about $111.00. Today the stock closed at $81.39. A $10,000 invest five years ago would be worth $15,737 according to S&P data.

Unilever PLC (UL) is one of P&G’s competitors based in the UK-Netherlands. Though Unilever also trades as UN for its Dutch version called the Unilever NV I have used UL due to the 0% foreign dividend withholding taxes for US shareholders. Founded in 1885 Unilever also owns a multitude of brands some of which are Dove, Rexona, Axe, Lux, Sunsilk, Lipton, Magnum, Cif, Domestos, Persil, Omo and Surf.Unilever’s brands are much more popular in many of the former British colonial countries than P&G’s brands due to historical connections.Currently UL has a 3.44% dividend yield.The five-year price return and 10-year price returns are 43% and 97% respectively. A $10,000 invest five years ago would be worth $17,977. UL had a 9:5 stock split in 2006.

Though this is a single example, in this case Unilever’s stock has yielded better returns for investors than P&G. So investors may want to consider owning foreign multinationals than simply going with domestic multinationals.

2.Chemicals:
US Multinational: The Dow Chemical Company (DOW)
Current Dividend Yield: 3.51%
5-year Price Return: 61%
10-year Price Return: 1%

European Peer: BASF SE (BASFY)
Current Dividend Yield: 3.89%
5-year Price Return: 58%
10-year Price Return: 194%

3. Food:
US Multinational: Mondelez International, Inc (MDLZ)
Current Dividend Yield: 1.69%
5-year Price Return: 15%
10-year Price Return: 6%

European Peer:Nestle SA (NSRGY)
Current Dividend Yield: 3.20%
5-year Price Return: 47%
10-year Price Return: 183%

4. Oil:
US Multinational: Exxon Mobil Corporation (XOM)
Current Dividend Yield: 3.24%
5-year Price Return: 25%
10-year Price Return: 47%

European Peer: Royal Dutch Shell plc (RDS-B)
Current Dividend Yield: 5.83%
5-year Price Return: 8%
10-year Price Return: -2%

5.Tobacco:
US Multinational: Altria Group Inc. (MO)
Current Dividend Yield: 3.86%
5-year Price Return: 156%
10-year Price Return: -19%

European Peer: British American Tobacco PLC (BTI)
Current Dividend Yield: 4.39%
5-year Price Return: 60%
10-year Price Return: 187%

Please note that countries such as Switzerland, Germany and Netherlands have high dividend withholding taxes. However they can recouped if stocks are held in a regular account. If those stocks are held in retirement accounts such as IRA or 401Ks then the dividend tax will be lost forever.Since I illustrated the sample stocks with ADRs any foreign currency issues do not apply.

This simply exercise shows that it is possible to earn higher returns by venturing beyond the U.S. shores. Though it is only a small sample size similar returns can be found with many other foreign stocks.

Note: Dividend yields and returns noted above are as of Mar 11, 2015. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: No Positions

One of the topics I have written before many times is about investors trying to time the market.You can some of find those articles here and here and here and here. This strategy is never a good idea and always leads to investors losing out on returns. Investing in equity markets involves the risk of losing money due to a variety of factors outside of an investors’ control such as a stock becoming worthless when a company files for bankruptcy. However there is another risk that is even worse.And that is investors’ reacting to their own emotions. For example, when markets are in correction mode, some investors get scared and sell out their holdings fearing further losses. Such investors hope to get back into the market after further declines and usually try to identify the bottom and buy back their stocks in order to amplify their returns. However the chances of executing such a maneuver for any human is almost zero. This is because it is not easy to spot the bottom and also there are not many people who will be brave enough to buy when the whole market is crashing day after day. So the idea of timing the market fails every time.

Stephanie Flanders of JPMorgan Asset Management, UK talked about the danger of timing the market in a recent article. From the article:

Don’t try to time the market

We’re all human, so when the market slumps, it’s easy to make decisions based on emotion, rather than fact. But returns on the S&P 500 index from the last 20 years show that six of the 10 best days in the stock market occurred within two weeks of the worst 10 days.

If you sold US stocks after the market took a tumble in October 2014 your return for the year would have been just 2.4 per cent. If you stayed in until the market dipped again in mid-December, your return was a much healthier 8.85 per cent.

But the last two weeks of 2014 were among the strongest of all for the US market. The annual return for investors who stuck it out to 31 December was nearly 14 per cent.

Source: Four themes and three rules that matter most for Isa season, Mar 5, 2015, Money Observer

We can also see the problems with timing the market using the example of the DAX, the German benchmark index. The DAX plunged to as low as 8,354 last October. This month it reached a record high of 11,600 and closed at 11,550 on Friday. This year alone the index is up more than 15%. So anyone who panicked in October and sold out their German holdings missed the huge rally since then. It is unlikely that those that sold in October got back in time to catch the upside move. In September 2011 the DAX index was under 5,000. From that level it has more than doubled now. It went down as low as 3,588 during the global financial crisis in 2009.

Timing the market also adversely impacts the lost returns due to the effects of dividend reinvestments. For instance, when one sells out their stocks, they lose out on the dividends that they would have received and if they reinvest those dividends the also lose out again on the opportunity to pick up additional shares cheap when prices are low.

So instead of trying to time the equity markets investors should have a long-term horizon and buy-and-hold high quality stocks. This strategy will not only lead to higher returns but also one can go to sleep peacefully at without the stress and worry about day to day market movements.

Some of the companies that investors can consider for long-term investment are: Unilever NV (UN), Nestle SA (NSRGY), Safran SA (SAFRY), DBS Group Holdings Ltd (DBSDY), Diageo PLC (DEO), Westpac Banking Corp (WBK), Nordea Bank AB (NRBAY), Colgate-Palmolive Co (CL), British American Tobacco PLC(BTI), etc.

Disclosure: No Positions