John Birger and Scott Cendrowski from CNN Money point out that the best products have a worldwide customer base. They then go on to recommend companies that have a strong international bias -- including companies based outside the US.
Modern portfolio theory has long advocated diversification with non correlated assets and this is a step in the right direction for stock portfolios which can be somewhat myopic.
The authors mentioned above then go on to recommend five stocks that they believe have this international flavor. This is an interesting angle for those looking to build diversified long term retirement portfolios.
Their recommended stocks are:
- BMW (BAMXY.PK)
- Nestlé (OTCPK:NSRGY)
- LVMH Moët Hennessy Louis Vuitton (OTCPK:LVMUY)
- Teva (NYSE:TEVA)
- Disney (NYSE:DIS)
We entered these funds into our system and then compared them to a balanced portfolio of Dividend producing ETFs.
ETF in Portfolio
|REAL ESTATE||ICF (iShares Cohen & Steers Realty Majors)|
|FIXED INCOME||TIP (iShares Barclays TIPS Bond)|
|Emerging Market||VWO (Vanguard Emerging Markets Stock ETF)|
|US EQUITY||DVY (iShares Dow Jones Select Dividend Index)|
|US EQUITY||VIG (Vanguard Dividend Appreciation ETF)|
|INTERNATIONAL EQUITY||IDV (iShares Dow Jones Intl Select Div Idx)|
|High Yield Bond||HYG (iShares iBoxx $ High Yield Corporate Bd)|
|INTERNATIONAL BONDS||EMB (iShares JPMorgan USD Emerg Markets Bond)|
- 5 stocks for the world's new spenders -- Total of $10K invested equally in each stock
- Retirement Income ETFs Tactical Asset Allocation Moderate -- Above funds using TAA (40% fixed income, 30% for each of the top two asset classes)
- Retirement Income ETFs Strategic Asset Allocation Moderate -- Above funds using SAA (40% fixed income, 12% for each of the five asset classes -- funds selected based on price momentum)
Portfolio Performance Comparison
|5 stocks for the world's new spenders||37%||191%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||15%||162%||4%||17%||6%||25%|
|Retirement Income ETFs Tactical Asset Allocation Moderate||10%||127%||10%||79%||12%||80%|
Three Month Chart
One Year ChartThis is an interesting mix of stocks. There isn't enough history to make any long term conclusions -- the historical returns are limited by the newest stock, LVMUY, which started trading at the beginning of 2010. Also, there has been some worrying volatility, especially in April of this year, despite the strong one year performance.
As we noted above, this portfolio doesn't have enough history so it will be interesting to track this and see how it performs going forward.
Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Disclosure: Author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.