Majority U.S. vs. Foreign Revenue Performance Among S&P 500 Members

Includes: IVV, SPY
by: Bespoke Investment Group

Hickey and Walters (Bespoke) submit: Last week we highlighted how companies with a greater percentage of their sales coming from outside the US had a higher likelihood of beating their consensus top and bottom line forecasts.

Following up on that idea, we created two indices of S&P 500 stocks based on each company's percentage of international sales. Companies with more than half of their sales coming from outside the US (91) were divided into one group, while the remaining 409 stocks made up the other group. The performance of each group was then calculated and plotted in the chart below giving each stock an equal weight.

Surprisingly, stocks that get more than half of their sales in the US are actually outperforming stocks with greater international exposure over the past year.

click to enlarge
s&p by revenue

While the results are somewhat surprising, one factor which skews the results is the starting date of May 3, 2006, which coincided with the global equity sell off that had its most negative impact on the materials and energy sectors. These two sectors, along with technology, also happen to have the greatest sales exposure to foreign markets.

In the chart below we plotted the spread between the two above series (green line) along with the US dollar (gray line). As the chart details, over the last year, the two series have moved relatively in tandem with each other, although most recently, the stocks with greater international sales do not appear to have rallied by a similar magnitude as the decline in the US dollar.

spread between majority/minority u.s. revenues