The trade deficit is large and growing -- we consume far more than we produce.
You already knew that. But how does this trend affect
The Millionaire Zone
I believe effects of the deficit problem on the U.S. economy are just now becoming more visible and are starting to accelerate: slower U.S. consumer spending, slower job growth and a weakening dollar.
The American consumer is tapped out and can't afford any more, especially more expensive foreign goods.
Unless, of course, the U.S economy sells more overseas to balance the equation.
In fact, we're starting to see that happening. Exploding growth persists in the BRIC countries -- Brazil, Russia, India and China. Again, this isn't news. But the rest of Europe, in the doldrums seemingly forever, is starting to pick up too. Asia and even Canada -- our largest trading partner -- are prospering.
In fact, Goldman Sachs predicts that the world economy will expand some 4.2% in 2007, twice the pace of the U.S. economy's growth. That's good, especially as the weak dollar makes our goods more competitive.
So to cash in on this growth, you can invest in foreign stocks. But foreign companies are difficult to research, and differing accounting standards and business climates bring risks I've never been that comfortable with.
If you've read my columns, you know that my favorite way to play overseas growth is to buy U.S. companies doing a lot of business overseas. Now, more than ever, looks like the right time to do that.
The February selloff sent a large shock through all markets, U.S. and overseas. But guess who's led the recovery? U.S. retailers? Consumer staples? Nope. In fact, retail has been in the doldrums ever since. The star performers have been the so-called large-cap stocks, just as everyone predicted.
I believe export sales are the reason why. And I always like to have a reason why.
OK, if you subscribe to this model, fine, but how do you identify large companies with strong export sales? Not too easily, as it turns out.
Click here for the video version of this story from Jennifer Openshaw.
Overseas sales aren't shown in common investment portals, nor Value Line, nor anywhere else. Do a Google search, and you won't come up with specific companies.
But the information is out there. In fact, Standard & Poor's lead index analyst Howard Silverblatt has made a lot of headlines by calculating that today, some 48.6% of total
revenue is from overseas, up from 30% in 2001. That's nice to know, but in which companies? This isn't available, unless you are a paying S&P customer.
Or, there are annual reports. But reading annual reports is a tedious way to build a stock list.
I searched high and low for this article's material. Happily, I came upon a study done by a brand-new private investment research firm known as
Bespoke Investment Group.
Bespoke has analyzed S&P 500 exporters and compiled a list of 91 companies (out of 500) with overseas sales exceeding domestic sales. The company graciously shared it with me (and more, which I will discuss in future articles).
So here's the list. First, I eliminated companies like semiconductor firms (and there are a lot) that export mainly to Asia, only to have their products re-exported back to the U.S. In my book, that doesn't really count. Next, I picked companies with more than 60% of revenues from overseas and in a diverse set of industries:
- Coca-Cola (KO) - Get Report: Fully 70.9% of revenues come from overseas. (Procter & Gamble (PG) - Get Report, at 56.8%, is another steady consumer export star.)
- Avon Products (AVP) - Get Report: 68.7% of sales come from overseas. Surprising? Yes, I thought so, too.
- Agilent Technologies (A) - Get Report: 65.9% of revenue from overseas, mostly in capital goods to make all that tech stuff. You can't ignore corporate ancestor Hewlett-Packard (HPQ) - Get Report at 64.8%, either.
- International Flavors & Fragrances (IFF) - Get Report: Also 65.9%, makes stuff that makes stuff taste and smell good -- a great business.
- 3M (MMM) - Get Report: 62.4% overseas revenue, with a particularly strong China business.
So, load those containers, ship those goods and watch those profits grow.
Jennifer Openshaw, a passionate advocate for helping Americans improve their finances and build their personal fortunes, is CEO of
The Millionaire Zone and America Online's personal finance editor. In addition to appearing regularly on TV shows such as "Oprah" and "Good Morning America" and on CNN, Openshaw is host of ABC Radio's "Winning Advice" and serves as an adviser to some of America's top corporations. Her new book,
"The Millionaire Zone," will hit bookstores in April 2007.