One way to profit from growth in emerging markets is to invest in US companies that derive a significant portion of their business from these markets. Using this strategy one avoids the problems with the time consuming task of identifying, researching and selecting high-quality foreign companies.
While investing in foreign stocks directly is a better option, it is always not possible to invest in them. This is because many companies in emerging markets are not public as they are controlled by business families who do not want to share the profits with others. In addition, accessing information and finding ways to easily invest in the publicly-traded emerging market firms can get difficult. Hence, for some investors the simplest way to access emerging markets (EM) may actually be investing in domestic companies with large EM exposure.
Identifying U.S. companies that generate a large part of their earnings from emerging markets is not easy. Despite the high level of transparency in reporting financial information by US firms, more than half of the S&P 500 companies do not report their earnings by country. The following is a list of companies with high EM exposure:
|S.No.||Company||Ticker||Sector||Dividend Yield as of December 23, 2010|
|3||Air Products and Chemcials Inc||APD||Chemical Manufacturing||2.16%|
|5||Amgen||AMGN||Biotechnology & Drugs||N/A|
|7||Coca Cola||KO||Non-alcoholic Beverages||2.68%|
|8||Colgate-Palmolive Co||CL||Personal & Household Products||2.63%|
|9||Honeywell||HON||Aerospace & Defense||2.26%|
|10||International Business Machines Corp||IBM||Computer Services||1.78%|
|11||Johnson & Johnson||JNJ||Drugs||3.47%|
|12||Procter & Gamble Co||PG||Personal & Household Products||2.95%|
|15||Qualcomm Inc||QCOM||Communications Equipment||1.54%|
|16||The Dow Chemical Co||DOW||Chemical Manufacturing||1.74%|
|17||Yum Brands Inc||YUM||Restaurants||2.01%|
|18||General Electric Co||GE||Conglomerate||3.10%|
|19||Deere & Co||DE||Construction & Agricultural Machinery||1.68%|
|20||The Boeing Co||BA||Aerospace & Defense||2.58%|
|21||PepsiCo Inc||PEP||Non-alcoholic Beverages||2.92%|
|22||Alexion Pharmaceuticals Inc||ALXN||Biotechnology & Drugs||N/A|
|23||NII Holdings Inc||NIHD||Communication Services||N/A|
|25||Mettler-Toledo International Inc||MTD||Scientific & Technical Instruments||N/A|
Note: This list was compiled from many sources.
Investors can use the above list of stocks as a starting point for further research.
The first 21 stocks are S&P 500 Index constituents. Praxair (PX) and Mettler-Toledo International (MTD) earn about 35% of their revenues from emerging markets. Alexion Pharmaceuticals (ALXN) earns 50% of its revenues from outside the U.S. and about 43% of wireless services operator NII Holdings’(NIHD) revenues come from Brazil.
Disclosure: No positions