The Real Growth is Happening Abroad... Here's How to Get Your Piece of the Action
The United States is unlike any other nation on the planet. It's
. It's home to the world's most innovative entrepreneurs. But the
simple fact is that the headiest days of our growth are behind us.
It's simply the
law of large numbers
With an economy in excess of $15 trillion, growing more than a few percent each year is a major undertaking.
Think back on what we've seen over the past few years. The U.S. government has spent trillions in an effort to stimulate the economy. The Federal Reserve has spent trillions more. Interest rates have been slashed to zero.
And yet, the U.S. economy grew a meager 2.8% in 2011. Not bad, but nowhere near the top of the list when it comes to gross domestic product (GDP) growth.
Qatar topped this list with 17.0% growth. Panama saw a 7.4% rise in GDP ... South Korea, 4.5%... Poland, 3.8%... and Chile boosted its GDP at a 5.9% annual rate.
But to me, GDP numbers alone don't tell the entire story. I prefer to know what companies are actually seeing. To investors like you and me, that's the real story.
For example, in a recent quarter, Apple (Nasdaq: AAPL) saw sales in North America soar 63% year-over-year... but abroad, sales were up 95%.
It's the same for credit card giant MasterCard ( MA ) . The company saw the amount charged on its cards rise 9.9% in the United States, but 19.9% abroad.
Even McDonald's ( MCD ) saw sales up more than 12% in its international markets during a recent quarter, compared with less than 3% growth at home.
Just imagine what companies focused solely on international markets are doing...
Take AmBev ( ABV ) , for instance. This company's business couldn't be simpler -- it distributes beer and soda in Brazil and throughout South America. It's actually the fourth-largest beer producer in the world.
During the past five years, sales have grown 101% and profits have risen 301%. That's led to a surge in the share price. In just five years, AmBev's shares have returned more than 400%... and more than 1,600% in the past decade.
Compare that to the S&P 500's gain of just 8% (dividends included) during that same period.
What does all of thismean for investors?
Itmeans U.S. investors have a great opportunity to profit handsomely by investing in foreign stocks.
The good news is that investing in foreign markets is easier than ever. You don't even have to leave U.S. exchanges like the New York Stock Exchange.
The easiest way is to own American companies with strong exposure abroad. In my Top 10 Stocks Portfolio, for example, I own shares of MasterCard, which generates 60% of its revenue abroad. Another holding generates 60% of revenue from Asia alone.
But if you own just U.S. companies, then you're ignoring some of the world's greatest opportunities. Like AmBev, which I mentioned above, many of the world's best companies literally don't have any operations in the United States.
That doesn'tmean they are off limits...
In recent years, large fund companies like Fidelity, Eaton Vance and others have expanded their international options by launching dozens of new mutual funds , exchange-traded funds (ETFs) and closed-end funds. In doing so, they've given U.S. investors an easy way to invest in foreign markets.
Here's how it works...
These fund companies access foreign markets and buy stakes in dozens or even hundreds of businesses. They then package these securities into funds, and they sell the fund's shares here in the United States. When you purchase one of these funds, it gives you direct exposure to a basket of foreign stocks.
For example, the Aberdeen Chile Fund ( CH ) holds a stake in about 20 Chilean companies. It would be impossible for U.S. investors to purchase most of these 20 companies directly. But with the Aberdeen Chile Fund, buying and selling couldn't be any easier. You can buy it just as easily as you would a share of IBM ( IBM ) .
There's also another way to own foreign companies without starting a new brokerage account... worrying about currency conversions... and without leaving U.S. markets...
You can buy shares of American depositary receipts (ADRs). The name sounds complex, but I assure you that ADRs are very easy to understand. ADRs trade right here in the United States just like any other stock. You can buy them just as easily as you would a share of Wal-Mart (WMT) or General Electric (GE) .
Not every company elects to have their shares trade as ADRs on the U.S. markets. But because of the liquidity found here, it is attractive to many.
According to Bloomberg , 1,722 international companies currently trade in the United States. This includes some of the world's largest companies -- like PetroChina (PTR) and Vodafone (VOD) .
Risks to Consider: Even though, as I mentioned, owning shares of foreign companies either through funds or ADRs is easier than ever, it doesn't come without risks. Like any investment, you should think about country-specific conditions as well as the broader global economic climate. Some foreign companies also carry potential currency risk , as most will report their earnings in a foreign currency. That said, it shouldn't stop you from investing in what I think is a fantastic opportunity for investors to make money from foreign companies..
Action to Take --> Simply put, if you don't own shares of quality foreign companies through either funds or ADRs, then you're seriously limiting yourself. I have a decent amount of foreign exposure in my Top 10 Stocks Portfolio, and I suggest you do the same.
-- Paul Tracy
P.S. -- In my latest research -- "Top 10 Stocks for 2012" -- I've uncovered several more investments that are similar to Philip Morris in that they dominate their markets, pay increasing dividends, and repurchase billions in stock. To learn more about these ideas, including several names and ticker symbols, I invite you to visit this link.
Paul Tracy owns shares of MA.StreetAuthority owns shares of MA, ABV in one or more if its real-money or investment portfolios.