The Wall Street Journal-20080113-SmartMoney- Foreign Revenue Counts
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SmartMoney: Foreign Revenue Counts
The U.S. economy looks shaky, but savvy stock selection can make you money even when there's trouble at home. So for 2008, SmartMoney looked for companies that can benefit from a healthy world economy outside the U.S. We also picked two beaten-down financial stocks that seem ready for a rebound.
AGRICULTURE
Bunge (BG, $129)
Deere (DE, $89)
As people in emerging markets earn more, they tend to eat more meat. More cattle, hogs and chickens mean more cornand soybeans to feed them. Bunge is one of the world's largest soybean processors, buying and refining beans into meals and oils. To harvest those crops, farmers need equipment, and they are buying top-of-the-line John Deere tractors and combines.
ENERGY SERVICES
Diamond Offshore (DO, $125)
Ion Geophysical (IO, $14) This year, firms that help extract oil will have their hands full helping keep pipelines flowing, regardless of oil's price. Energy- production firms are paying dearly to secure Diamond Offshore's 44 offshore rigs, some of which can drill for oil in water up to 10,000 feet deep. Ion Geophysical doesn't drill, but its equipment and software help big firms cut down on drilling in the wrong places.
CENTRAL EUROPE
Erste Bank (EBKDY, $31)
Central European Media Enterprises (CETV, $106)
The economies of countries such as Romania and Ukraine have been growing fast, creating disposable income for millions of people. Austria-based Erste Bank started buying banks in central Europe several years ago. Now 75% of its profit comes from the 30% of assets in its new markets. Central European Media Enterprises, which operates 16 TV stations from the Czech Republic to Ukraine, has seen a jump in money from advertisers trying to reach Central Europe's emerging middle class.
WIRELESS COMMUNICATIONS
Telefonica (TEF, $99)
Philippine Long Distance Telephone (PHI, $74) The bulk of the more than a billion mobile phones sold last year went to Latin America and Asia. Spain's Telefonica has more than 144 million wireless customers around the world. Philippine Long Distance is nowhere near as big, but it dominates the island nation, providing basic and wireless telephone service.
U.S. CONGLOMERATES
General Electric (GE, $35)
United Technologies (UTX, $72) Large U.S. companies have diverse product lines and a world-wide customer base, lessening the possibility that a slowdown in one region will take down the whole company. Almost half of General Electric's $172 billion in annual sales comes from outside the U.S. GE's smaller, fierce rival, United Technologies, makes everything from helicopters to air conditioners. Much like GE, its revenue is being propelled by growth in emerging economies.
FINANCIALS
Wells Fargo (WFC, $28)
Genworth Financial (GNW, $24) Wells Fargo has seen profit growth hurt by the housing market, but it has increased reserves, which should cover loan losses. Genworth Financial sells life and long-term-care insurance, but it is revenue from mortgage insurance that has hurt the stock. Still, Genworth manages its underwriting conservatively, and it is still making money in the U.S. mortgage-insurance business.
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