An "Investor's World"

11/25/2005 12:00 am EST


John Dessauer

President, John Dessauer Investments, Inc.

John Dessauer is a pioneer in international investing, having focused on global opportunities for over two decades. Here, we highlight several of his foreign holdings, offering both domestic and global exposure with the added advantage of being easily bought by US investors.

"Nestle (NSRGY Other OTC) has been a core buy-and-hold position for 15 years. This 130-year old multinational Swiss company has delivered consistent results for decades. Nestle has successfully managed to adapt to a variety of markets and ever-changing competition. Earnings for 2005 are estimated at $4.18, up 11.5% from 2004. Early 2006 estimates are $4.53. At 16 times 2006 estimates, Nestle is cheap. Standard & Poor’s and others rate the stock a strong buy. Nestle is a low-risk investment with above-average potential for long-term gains.

"Our other Swiss holding, Novartis (NVS NYSE) is a top choice for participation in the pharmaceutical industry. Novartis beefed up its generic drug business, is a leader in cancer-fighting drugs, has a diversified portfolio, generates lots of cash, has very little debt and has over $12 billion in cash. Earnings are up 9%, to $2.55, from 2004. Next year’s current estimate is 2.70. The stock traded between $41 and $50 in 2004. The range has narrowed ($46 to $51) this year. The P/E has stayed under 20. Novartis would be much higher except for all the issues depressing some other major drug companies.

"Nokia (NOK NYSE) is also a strong company. It has no virtually debt, $14 billion in cash, pays a respectable dividend and generates significant amounts of cash from operations. This financial strength is one element that makes Nokia far more attractive than Ericsson. Another reason is Nokia’s business mix, which is 62% cellular phones, 21% networks, and the rest multimedia and enterprises. Consumer products deliver a higher long-term profit and generate more revenues. Nokia significantly increased its third-quarter sales and earnings guidance. Not only is Nokia gaining market share, the average selling price is rising as the more expensive 3-G phones become popular. Analysts’ earnings estimates are rising. For this year, the figure is $1.02, rising to $1.16 in 2006.

"Canon (CAJ NYSE) is a new pick for our portfolio. The Japanese firm has prospered in a world full of rough and tough competitors. Today, cameras are digital, and copiers are color. Canon’s profits have been up every year since 1999. Cash flow per share will exceed $6 this year. Earnings will be close to $4 a share. Investors worry about competitive pressure on profits margins as if that were a new problem. As a result, the stock has been in a very narrow trading range since mid-2003. Earnings and cash flows are up, but the stock is not. That makes Canon an attractive investment opportunity. At 13 times earnings, Canon is cheaper by far than shares in the competition. This is a stock that can rise to $75 or $80 and still not be overvalued.

"Philips Electronics (PHG NYSE) is heading for lower earnings in 2005. Overcapacity in liquid crystal displays (LCD) and soft semiconductor sales are dragging earnings down. Lighting and medical equipment are doing well, partially offsetting the drag. Earnings this year are estimated at $1.58, rising to $1.98 in 2006. The historic average multiple is 20, indicating a potential stock price of $40. However, that is not likely until next year when earnings growth visibility is better. The stock now trades at 13.4 times current 2006 estimates. That is the low end of the historic P/E range. Philips is financially strong, cheaply priced, with excellent prospect for long-term gains."

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