Accessing Quality American Businesses You Won’t Find in the S&P 500

What do Tiffany jewelry, Gerber baby food, and Milwaukee power tools have in common? They are all iconic American consumer brands owned by non-US based companies. You won’t find them in the S&P 500®, Russell 2000®, or Nasdaq 100 indices.

While there are many well-known reasons to invest in foreign equity markets – to hedge currency risk, expand industry exposures, and access dominant international companies – a much less obvious reason is to own strong American brands that are now owned by international businesses.

As the world shrinks and globalization intensifies, foreign companies are increasingly investing in the United States. Consider the following:

• 2 of the top 10 largest global M&A deals in 2021 were U.S. businesses bought by foreign companies for a total of $80.3 billion¹.
• Foreign direct investment in the U.S. is an annual average of $314.4 billion, with acquisitions of existing businesses accounted for a large majority of total expenditures.

In our view, US index funds and active managers that invest only in US-based companies are missing out on some American gems. Here are a few examples:

We are not suggesting that investors look to international strategies for exposure to the US – many of the American businesses mentioned are just one part of those international companies. More to the point, there are a number of great American brands we see and use every day that are not available through US investments. By diversifying internationally, investors have the opportunity to access world-leading non-US businesses and gain exposure to attractive and growing US businesses that are no longer part of US indices.