U.S. Multinationals: International Investing Without Leaving Home

With the recent decline in the U.S. dollar, investors are thinking more about international diversification. This can be accomplished by many different means, such as buying a foreign stock, buying an ADR of a foreign company or investing in an international fund. However, one method that is often overlooked is buying a large U.S. multi-national company.

As a result globalization, many large U.S. companies now realize a significant percentage of their revenue from foreign markets. Companies that are diversified across several economies offer a real diversification benefit to their investors. They often can reallocate resources from slowing national economies to areas in the world that are enjoying more robust growth.

Below are five U.S. companies that have more than 50% of their sales revenue generated outside the U.S. base on their latest 10K:

Colgate-Palmolive Co. (CL) – 77% Non-U.S. Revenues
CL is a consumer products company, whose products are marketed throughout the world. Colgate’s Oral Care products include toothpaste, toothbrushes, oral rinses, dental floss and pharmaceutical products.

Chevron Corporation (CVX) – 56% Non-U.S. Revenues
CVX is a global integrated oil company that has interests in exploration, production, refining and marketing, and petrochemicals.

McDonald’s Corporation (MCD) – 66% Non-U.S. Revenues
MCD is the largest fast-food restaurant company in the world. Its restaurants serve a varied, yet limited, value-priced menu in more than 100 countries around the world.

The Coca-Cola Company (KO) – 75% Non-U.S. Revenues
KO is the world’s largest soft drink company. It engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates, fruit juices and syrups worldwide.

3M Co. (MMM) – 64% Non-U.S. Revenues
MMM is a diversified technology company with a presence in various businesses, including industrial and transportation, healthcare, display & graphics, consumer and office, safety, security and protection services, and electro and communications.

As always, with rewards comes risks. Doing business in countries with different economic and social values can sometimes lead to undesirable results. In the past, U.S. companies have lost facilities to hostile foreign countries when the politics turned against the U.S. When the dollar is weakening, currency exchange works for the company, but it works against the company when the dollar is strengthening. As always, you must weigh the risks versus rewards prior to investing.

Disclosure: Long CL, CVX, MCD, KO, MMM.

Comments

[Stargazer:]

D4L, as usual your articles are interesting and much appreciated.

You made a great point in the fact that when a company is diversified across many economies it can re-allocate resources from one economy to another as needed. That is a great advantage for any company. The military taught me that mobility is a key to survivability. I would say the same strategy applies to the economic world as well.

The worlds economies will not recover at an equal rate from the current situation. If a company could focus on faster recovering economies that should imply that it will recover economically faster.

Also if a company is diversified across many economies and one of them has a major natural disaster or civil upheaval/war; though such a company would suffer a loss, it will hopefully only be a small percentage of its overall cash flow.

I am basically re-stating what you wrote in your article D4L. However, the point you made is so important that I felt it was worth the time to reply and make this point: diversification is a main form of protection for any long-term (i.e. dividend) investor and that diversification can exist at many levels and forms in a investment strategy.

Again, your articles are much appreciated. Thank you for taking the time to write them.

Long: KO, MCD.

Oct 21 07:43 PM