A good way to get long term exposure to global stocks is to buy high quality multinational companies based in developed markets that have a growing slice of their business wired to consumer spending in high-growth developing economies
First there was BRIC, now there is MINT (Mexico, Indonesia, Nigeria and Turkey).
By exposing their portfolios to global stocks that are heavily exposed to consumer spending in high-growth economies such as China, investors have the opportunity to leverage higher EPS growth over time.
China’s potential market for middle class buyers has gone from 1 million people in 1995 to 37 million today. Goldman Sach’s expects it to grow to 256 million in 2025, at a compound annual growth rate of about 14%.
A similar phenomenon is happening in other parts of the developing world. Jim O’Neill, who coined the acronym BRIC economies (Brazil, Russia, India and China) has recently added MINT to the lexicon (Mexico, Indonesia, Nigeria and Turkey).
However, rather than investing directly in those markets, Insync prefers indirect exposure by owning multinational companies domiciled in the developed markets (particularly the US, UK, Switzerland, Germany and France), where the corporate governance standards and shareholder-return focus are generally higher. The companies typically have strong brands that appeal to consumers all around the world, whether they are shopping in their home countries or are shopping overseas as tourists.
Two sectors that provide good examples are luxury brands and spirits. Companies such as Richemont, Swatch, LVMH, Kering, Burberry, Coach, Hugo Boss and Diageo sell strongly branded products that many consumers around the world aspire to own.
Australian investors who only own Australian stocks are missing out on the wider range of opportunities available overseas.
Marcus Tuck
Head of Research & Sales
Insync Fund Managers
+61 2 9216 2921
+61 (0) 414 776 823
mtuck@insyncfm.com.au