Keep an eye on companies where US revenue rules

Updated: Saturday May 10, 2014 MYT 9:17:32 PM

Keep an eye on companies where US revenue rules

NEW YORK: US stock investors are finding the value of staying close to home.

Even as the U.S. economy barely grew in early 2014, companies with a domestic orientation have on balance delivered better first-quarter sales and profit growth than their globally oriented peers.

RBC Capital Markets found that sales growth among companies with a high percentage of their revenue coming from the United States was three times stronger than those with a bigger international sales mix. Earnings growth was six times as robust. U.S.-focused names had bigger upside surprises on both the top and the bottom lines.

“With the U.S. economy vaulting energetically out of its winter cold spell but China looking even more beset by gravitational forces … the two-speed developed market-vs-emerging market global recovery … is growing more clear and present,” analysts at Nomura wrote in a note to clients.

Companies with U.S.-oriented revenue rank among the year’s leading advancers in the S&P 100 Index.

Anadarko Petroleum Corp, which gets more than three-fourths of its revenue from the U.S. market, is up nearly 27 percent in 2014. In its latest quarter, the company’s revenue grew 50.1 percent, representing an upside surprise of almost 50 percent compared with expectations.

Utilities are 2014’s runaway outperformers, with the S&P utilities index up nearly 11 percent. Utilities also have some of the highest U.S. revenue exposure. The stock of Exelon Corp is up 32.2 percent in 2014; in its latest quarter, Exelon posted revenue growth of 17 percent, good for an upside surprise of 28 percent relative to analysts’ forecasts.

Power sector-focused funds have attracted inflows of almost $2 billion in 2014, according to Thomson Reuters’ Lipper, though the sector is also favored as a defensive or dividend play, offering an average yield of 3.7 percent.

Conversely, technology companies have the highest percentage of foreign revenue exposure, according to Standard & Poor’s. The group, which has sold off recently on concerns that valuations are stretched, has had outflows of $1.25 billion this quarter, according to Lipper.

Qualcomm Inc and Broadcom Corp have more than 94 percent of sales coming from abroad and both disappointed in their most recent results, with Chinese growth a major factor.

The week ahead will feature earnings from several companies representing both the domestic-leaning and international camps.

Applied Materials, which gets about 80 percent of its revenue from abroad, will report results next week. Analysts expect the company to post revenue growth of 19 percent.

Deere & Co, which gets 63 percent of its sales domestically, is set to report earnings on Wednesday, while Wal-Mart Stores Inc, the largest of a slew of retailers reporting next week, is due to post results on Thursday. Wal-Mart gets 71 percent of its revenue from the United States. – Reuters

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

<span>%d</span> bloggers like this: