Investing in a Borderless World
05/23/2007 12:00 am EST
John H. Christy III, editor of Forbes International Investment Report, told attendees at last week’s Las Vegas Money Show how to find winning international stocks in a world where country of origin matters less and less.
Globalization encompasses a lot of things but for our purposes it means the increased use of technology, the ability of capital to flow freely, especially across borders, to create a more integrated or, if you will, a “borderless world.”
Borderless companies are world-class multinationals taking full advantage of globalization wherever they may be located. These could be US-based companies. In this world that we’re moving into, that’s almost a secondary consideration.
Nokia (NYSE: NOK) is one of my favorite examples. To go from [being based in a little town in Finland] to being the number one player in cell phones worldwide, that’s a borderless company. Nokia’s business isn’t based on how much they sell in Finland; it’s how much they sell around the world.
They aren’t growing as fast as they used to, but you still have an extremely strong company. One of their main competitors, Motorola (NYSE: MOT), is having a lot of trouble and that’s always a good sign. They don’t have any debt, they have tons of cash, it’s a pretty good value, it’s been a good performer: year to date it’s up quite a bit. (The stock changed hands at $26.51 Wednesday, near its 52-week high—Editor.) You should be prepared to hold this for a while.
Another company is Embraer (NYSE: ERJ). They’re a leading maker of small- and mid-sized aircraft and business jets. For example, JetBlue is a very big customer of theirs. This used to be a state-run Brazilian company and they’re still making fighter jets for the Brazilian air force.
We’ve seen in this country how regional travel has really taken off, because it’s not always practical to take a train or a bus somewhere. That’s also the case in Brazil, China, India: wherever you have a big market that has a large geographic footprint, they’re going to need a lot of these kinds of planes and these guys are really the best at doing it.
They’re getting paid in hard currencies, too. If the Brazilian market tanks and the Brazilian currency tanks this will take a hiccup, but the long-term business model is based on selling stuff to the rest of the world, so it should smooth out. (It traded above $47 Wednesday, near its all-time high—Editor.)
I really like Switzerland a lot because there are few cultures more intrinsically global than Switzerland is. You’ve got pharmaceuticals, banks, luxury goods, watches, chocolates. As global wealth expands, those are the new things consumers in India or China are going to want to buy. It’s the same stuff that’s never gone out of style in Europe or the US I like the iShares MSCI Switzerland index (AMEX: EWL) a lot, It’s conservative, you’re not going to triple your money in the next year with this, but you can take advantage of all the stuff we’ve been talking about in a very conservative way. (It traded just above $27 Wednesday, slightly off its all-time high—Editor.)