Buy U.S. multinational companies directly or through funds

Wall Street strategists have started to issue their 2015 forecasts. And if a report by Goldman Sachs is any indication of the forecasts to follow, you might want to forget about earning double-digit returns from U.S. stocks in 2015, and settle for mid-single digits instead. But whatever the forecasters say, we continue to think you should have some exposure to U.S. stocks.

In particular, you should have exposure to U.S. multinational companies, either directly through stocks, or through an equity fund that invests in such large, blue-chip corporations. That’s a view we’ve held for a long time. For U.S. multinationals are one of your best bets for profiting from global economic growth and liberalization over the long term.

These companies fit the investment criteria we’ve advocated all along in our sister publication The Investment Reporter. They’re big and well established. They have proven their ability to survive in trying times and prosper anew when conditions improve. Then too, they offer advantages that North Americans take for granted.

The concept of fair play

Despite the periodic corporate scandals that surface from time to time, North American companies still operate in a legal jurisdiction where the concept of fair play for outside investors is well established. This gives you at least some protection against trading on inside information, against corporate transactions that favor insiders and their associates, and against official corruption that hurts a company or favors its competitors.

Meanwhile, North American multinationals can profit not only from their domestic operations, but their businesses around the globe. The General Electrics, IBMs, Microsofts and Procter & Gambles of North America can spot and deal with the many legal, cultural and language problems that exist in foreign investments.

The case for multinational funds

Of course, we also encourage you to diversify your portfolio across the globe by owning international or global equity funds. The latter will likely give you some exposure to U.S. multinationals, but U.S. equity funds will give you even more exposure.

Among our recommended mutual funds, PH&N U.S. Equity and TD U.S. Index-e are two funds that give you excellent exposure to U.S. multinationals. Take PH&N U.S. Equity, for example. Its top holding is Apple Inc., which accounts for 4.3 per cent of the fund’s assets. This household name is one of the world’s largest makers of personal computers and consumers products such as the iPod digital music player and the iPad tablet. Not only does the company operate in the U.S., but in 162 international markets.

 

Money Reporter, MPL Communications Inc.
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