3 Stocks to Put This Global Crisis in Perspective

Quick, who is the world’s largest exporter? China? Japan? Would you be shocked to learn it is the U.S.? Contrary to the “Made in China” stamps on clothing labels in Wal-Mart (WMT) and on the bottom of McDonald’s (MCD) Happy Meal toys, the U.S. still leads the world in exports. To be a successful investor, we must keep things in perspective.

Despite what the mainstream media would lead you to believe, the U.S. manufacturing sector has not slipped behind all other industrialized nations in the world. Michael Brush in a recent MSN article points out that the U.S. is still far and away the largest manufacturer in the world. Below are some interesting highlights from the article:

• U.S. workers produce 21% of all factory goods made globally, or about $1.7 trillion worth per year
• China is the second-biggest global producer, but doesn’t even come close at 13%
• During the previous economic boom, manufacturing contributed more to U.S. growth than any other sector
• States with the most factory jobs are California, Texas and New York
• Big export categories ($1.3 trillion last year) are heavy-construction equipment, turbines, locomotives, nuclear reactors, aircraft and aerospace equipment.

According to the U.S. Department of Commerce, the largest export markets for U.S. goods in 2008 (with percent increase over 2007) were Canada ($261.4 billion, up 5.0%), Mexico ($151.5 billion, up 11.4%), China ($71.5 billion, up 9.5%), Japan ($66.6 billion, up 6.2%), and Germany ($54.7 billion, up 10.2%). Consider these three prominent U.S. manufacturers:

Boeing (BA) - Yield: 3.77%
BA is the U.S.’s largest exporter, largest aircraft producer in the world and the second-largest aerospace and defense contractor. The company produces civilian planes, military jets, helicopters, missiles, satellites and other aerospace equipment and employs around 135,000 people employed throughout the U.S.

Nucor Corp (NUE) - Yield: 3.35% - Analysis
NUE is one of the few steel companies in the U.S. to remain competitive in its industry. It has streamlined and decentralized its management, and is on the leading edge when it comes to employee relations and their productivity.

Caterpillar Inc. (CAT) - Yield: 4.46% - Analysis
Eventhough CAT has foreign manufacturing facilities, much of the company’s equipment is still made in the U.S. While the U.S. economy sputtered in 2008, CAT’s exports from U.S. plants topped $16 billion, up from $12.6 billion billion dollars in 2007. CAT employs 53,000 people in 28 states.

The U.S. economy is still the largest in the world. At $46,000 per person in 2008, the GDP per capita ranks around number ten in the world. The U.S. economy has enjoyed a stable overall GDP growth rate and a low unemployment rate over the years. Gloom and doom may sell papers and boost ratings, but when it is put in perspective, it is usually not nearly as bad as was originally presented.

Full Disclosure: Long WMT, MCD. See a list of all my income holdings here.

Comments

[captainccs:]

Why worry about manufacturing? The new economy is still computers and Internet

Symbol Market CAP
MSFT..........181.02
GOOG..........127.75
AAPL..........116.67
CSCO..........107.33
ORCL...........95.03
AMZN...........33.68
BA.............32.07
EBAY...........22.57
DELL...........21.73
YHOO...........21.33
CAT............21.06
NUE............12.93

May 26 05:46 PM

[sky2evan:]

I don't see the point of being so US-centric when it comes to Investing. Hasn't it been proven by others that International equities have performed better in the last 10 years, and are expected to perform better than US equities in the future?

Just take a look at the past 3 months since the March bottom.
The author mentions Nucor, I picked Arcelor Mittal (MT, #1 steel producer in the world). MT beat NUE 53% to 17%. Sure, MT's dividend is only 2% compared to NUE at 4%, but who cares when you're getting 53 vs. 17%?

Then the author mentions WMT, which has gone up 3% from $48 to $50. You could have picked Tesco (TSCDY, UK competitor), which has gone up 21%, from $12 to 17, and also sports a dividend of 4%.

If you're going to invest only in American stocks out of some sense of misguided "patriotism", "familiarity", or belief in the "superior American way", you're going to miss a lot of better opportunities & sell yourself short.

Think Global, not Local.

Personally, I am 70% weighted in International stocks (ADRs). I love ADRs - they are slightly less followed, and more undervalued (NUE P/E = 10, MT = 7). I tend to find that they have a lot more room to grow than American Monster Caps. Plus, ADRs act as a small hedge against the weakening USD.

Disclosure: I'm American, & I own MT.

May 26 10:35 PM

[Sunil Shah:]

US might be the largest manufacturer, but I believe the answer to your question, 'who is the world's largest exporter?', is Germany. Check your facts as I will mine....

May 27 04:25 AM

[pftittl:]

Tesco has too many unopened Fresh & Easy markets in California producing absolutely no revenue. Just because Warren Buffett likes it is not a reason to buy... it's benefitted from the Buffett Bump, but it's headed for a tumble...

May 27 08:37 AM

[Fabien Hug:]

sky2evan I agree with your international allocation, you have very good deals abroad and these past months you also made a killing on the currency (which certainly explains a good deal of the difference in relative performance but this is also a risk). However, the purpose of the article is to show that not all things are dead in the US and I think the author is correct. You also have very good investments in the US.

May 27 10:23 AM