5 Popular Stocks With Major Exposure to Asia
The world economy is on two different tracks.
On one track, the developed world is experiencing economic contraction and stagnant growth. Countries throughout Europe have stumbled into recession due to austerity measures, with plenty of tech stocks, Dow stocks, consumer-goods stocks, and pharmaceutical stocks having significant exposure there. Meanwhile, Japan persists on its decade-long path of lackluster growth. And the U.S. economy, while rebounding, continues to underperform its potential, recording growth of only 2.2% in the first quarter of 2012.
On the other track, the developing world is recording robust economic growth. Spurred by the twin tailwinds of easy external financing and a dramatic uptick in commodity prices, output from Latin America grew by 6.5% in 2010 and 4.5% last year. And the emerging markets in Asia continue their dramatic upward ascent, led by China and India, which are expected to record growth rates this year of 8.2% and 6.9%, respectively.
The corporate poster child of this two-track system is Yum! Brands (NYS: YUM) , the U.S.-based proprietor of Pizza Hut, Taco Bell, and KFC. In 2011, the company's same-store sales declined by 1% in the U.S. but grew by 19% in China. More than 70% of its operating profit is now generated abroad. Its shares have outperformed those of its principal competitor, McDonald's (NYS: MCD) -- which derives a full 40% of its revenue from Europe -- by a staggering 28 percentage points over the last five years.
With this in mind, it should be no surprise that the world's smartest investors are choosing companies with less exposure to the developed world and more to emerging markets. Earlier this week, I identified five Dow stocks with major exposure to Asia. Below, I provide a list of five more companies with similar exposure.
(percent of net sales)
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|General Motors (NYS: GM)|
|Nike (NYS: NKE)|
|Ford (NYS: F)|
Source: All geographic sales figures other than General Motors' and Ford's are from the respective companies' most recent annual reports. General Motors' and Ford's are from the companies' most recent quarterly reports. Market cap data is from Yahoo! Finance. Yum! Brands' sales are from China alone. McDonald's sales figure includes revenue from Africa. General Motors' sales are recorded under its GMIO division.
As you can see, besides Yum! Brands and McDonald's, these companies each get less than 15% of their respective revenues from Asia. While this may at first seem like a weakness, in reality, it may work out to their advantage, as it means they have more room to grow.
Take Ford and GM as examples. In the first quarter of this year, Ford opened a new assembly plant in the southern Chinese city of Chongqing, expanding its production capacity there by a third. And its recently launched pickup, the global Ford ranger, seeks to compete with the Toyota Hilux, a truck that's famous throughout the third world.
With respect to GM, as my colleague John Rosevear noted recently, it's China's largest-selling automaker -- and once again the world's largest, as well. At the beginning of May, the company reported that it had set a domestic sales record in China by selling 227,217 vehicles there in April alone, up 12% from the year before. And believe it or not, its Buick unit accounted for nearly a quarter of these.
Foolish bottom line
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At the time this article was published Fool contributor John Maxfield does not have a financial position in any of the companies mentioned above. The Motley Fool owns shares of Ford.Motley Fool newsletter serviceshave recommended buying shares of General Motors, Ford, Nike, McDonald's, and Yum! Brands, as well as creating a diagonal call position in Nike and a synthetic long position in Ford. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.