Quality Growth Boutique

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

kranson_daniel

Daniel Kranson

Portfolio Manager, Senior Research Analyst

Meet Daniel


| Read | 1 min

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:

2022-03-10-accessing-quality-american-businesses-you-wont-find-in-thes&p-500_chart1


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.

 

 

 

 

1. Source: S&P Global Market Intelligence, Global M&A By the Numbers: 2021 Recap.

Any investments discussed are for illustrative purposes only and there is no assurance that the adviser will make any investments with the same or similar characteristics as any investments presented. The investments are presented for discussion purposes only and are not a reliable indicator of the performance or investment profile of any composite or client account. Further, the reader should not assume that any investments identified were or will be profitable or that any investment recommendations or that investment decisions we make in the future will be profitable.

 

kranson_daniel

Daniel Kranson

Portfolio Manager, Senior Research Analyst

Meet Daniel