The U.S. recovery engine has been humming along for the better part of a decade. The combination of tax cuts, infrastructure spending and a synchronized global recovery promise to push the U.S. economy into high gear over the next three-to-five years. Against this backdrop, it pays to be exposed to the world’s largest economy.
One of the best ways to capitalize on the U.S. recovery is to invest in American companies that generate all their revenues from the domestic market. By Q1 2018, corporate America was expected to generate its strongest year-over-year earnings growth since 2011, according to research firm FactSet. Among these stocks are solid blue-chips that exclusively serve the American market.
An escalating trade war with China has also shined the spotlight on companies with exclusively American earnings. A declining U.S. dollar also means that global revenues are repatriated at lower conversion rates, which could impact earnings for U.S.-based firms with substantial operations outside of the U.S. This makes companies with pure U.S. exposure interesting in terms of investment potential.
Let’s take a look at some of them in the next section.
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While history has demonstrated that the best-performing stock markets are located outside the United States, international exposure is no guarantee of success. Investing in domestic stocks has numerous advantages, including the avoidance of exchange-rate volatility, ease of research and general familiarity with national laws and regulations. Now is a particularly beneficial time to invest locally given the Trump administration’s pro-growth agenda targeting banking deregulation, infrastructure spending and tax cuts.
What’s more, emerging markets like China do not offer the same returns they once did given their ongoing transition into consumer-oriented commerce. Oil-rich emerging markets, such as Brazil and Russia, have also been extremely unsettled given the recent downturn in commodity prices.
Below is a look at ten companies with all-American earnings.
Lockheed Martin (LMT )
President Trump’s pledge to boost military spending plays directly into the hands of Lockheed Martin, one of America’s largest defense contractors. Not only does the company enjoy a favorable position in the $600 billion annual military budget, it has shown steady progress on the dividend front. Lockheed has put up huge gains over the past year, but still trailed the aerospace & defense industry average. However, over the past five years, its trailing returns have exceeded the broader industry average.
The company has boosted its payout in each of the last 15 years with an average yield that’s twice as high as the industrial goods average.
UnitedHealth Group (UNH )
As one of America’s largest healthcare companies, UnitedHealth is unaffected by geopolitical headwinds and a declining U.S. dollar. Rather, it focuses all its energy on the dynamic U.S. healthcare industry, which gives it a strong competitive advantage. In terms of trailing returns, UNH has steadily outperformed other healthcare industry players as well as comparable benchmarks going back 15 years.
While not the strongest dividend play, UNH has still managed eight consecutive years of growth and is well positioned to capitalize on the Boomers’ transition to retirement over the next two decades.
Verizon (VZ )
Global telecom is a complex and competitive terrain, but Verizon has focused all its energy on the domestic market. This has allowed it to become one of America’s largest telecom providers. In doing so, it has avoided all the bottlenecks of expanding its telecom infrastructure outside national borders.
A dividend history of 11 years and a strong yield of nearly 5% puts Verizon on the map for all-American stocks.
Like other telecom companies, Verizon’s share price has struggled for gains in recent years. More recently, VZ has also been steadily outperformed by the SPDR S&P Telecom ETF (XTL) since the third quarter of 2016.
U.S. companies with international exposure face an uncertain geopolitical climate. Read Five Companies With Downside Revenue Exposure to Chinese Yuan to learn how certain companies are being impacted negatively by Beijing’s currency policy.
Anthem (ANTM )
Anthem, formerly known as WellPoint, is one of America’s leading health benefits company. It also happens to be the largest for-profit managed healthcare provider in the Blue Cross and Blue Shield Association. Exposure to the American healthcare market gives Anthem plenty of room for growth, regardless of geopolitics and foreign exchange rates.
Although the company only yields 1.32%, that’s still higher than the healthcare sector average. Anthem also increased its dividend nearly 8% last September. Another positive point is that Anthem’s share performance has gradually outpaced the iShares U.S. Healthcare Providers ETF (IHF) since the so-called Trump reflation rally began. Share prices more than doubled between November 2016 and the height of the bull market in January of this year.
Kroger Company (KR )
National retailer Kroger is one of America’s most recognizable brands. Founded in 1883, the company generated more than $122 billion in revenue in 2017. While Kroger isn’t impacted by global events, it is highly sensitive to the American consumer. That said, the company has managed to hold its own in the face of sliding retail sales.
KR has also successfully converted revenue into profit, leading to a nine-year streak of dividend growth. However, the company’s share prices and trailing returns have languished in the face of the multi-year downturn in retail. Returns have declined at a comparable rate to other grocery store retailers over the past three years. The share price has also severely underperformed the Market Vectors Retail ETF (RTH) over the past 12 months.
Wells Fargo (WFC )
Wells Fargo is an interesting company: it is one of America’s largest financial institutions but only has exposure to the national market. While this may limit its upside potential, it also provides a greater sense of certainty in a sector that is often extremely volatile.
The stock yields 3.03% with annual growth running six consecutive years. Recent scandals have depressed the company’s revenue, but this shouldn’t limit its appeal for investors seeking all-American exposure. That said, WFC’s share price has failed to grow in three years, compared with 40% returns for the Fidelity MSCI Financials Index ETF (FNCL).
Walgreens Boots Alliance Inc. (WBA )
Walgreens has emerged as one of America’s safest dividend plays with 42 consecutive years of reported growth. The company yields 2.45%, which is significantly higher than the service sector average. The company has reported solid dividend growth in the face of cyclical downturns and even recessions. As a domestic pharmaceutical, it tends to outperform during periods of heightened uncertainty overseas.
However, it must be noted that the WBA stock has been a negative performer for the last three years, putting it on par with funds like the VanEck Vectors Pharmaceutical ETF (PPH).
Tractor Supply (TSCO )
Tractor Supply is a home-improvement retailer catering to America’s rural sector. Though lesser known than some of its larger dividend-paying counterparts, the company has grown its payout for seven consecutive years. Its DARS rating is also highly desirable for investors looking to take advantage of specialty retailers not beholden to global forces.
However, In terms of share performance, TSCO has been a huge underperformer over the last three years, with losses exceeding 30%. In contrast, the SPDR S&P Retail ETF (XRT) has declined by only a fraction of that amount over the same period.
Flowers Foods (FLO )
Flowers Foods is another lesser-known gem that generates all-American sales in an industry that is highly resistant to domestic downturns and geopolitical developments abroad. FLO generates billions of dollars in sales across nearly 50 operations nationwide. It was founded in 1919, which means it has the staying power investors look for in a dividend-paying stock.
With a yield of 3.06%, it vastly outperforms the consumer goods sector. With 12 consecutive years of dividend increases, the firm has been paying dividends since the early 1990s.
Unlike the First Trust Consumer Staples AlphaDEX Fund (FXG), FLO shares have steadily outperformed the market this year. However, both FLO and FXY have vastly underperformed the S&P 500 Index amid the latest bull rally.
Marathon Oil (MRO )
Houston-based Marathon Oil is a natural gas exploration company that has managed to overcome the multi-year downturn in commodities. The oil price collapse has rendered its dividend profile virtually obsolete, but like others in the industry, a strong recovery is afoot.
Marathon may have national exposure, but it is also impacted by developments abroad. The coordinated effort by OPEC and Russia to rebalance the oil market will have a direct impact on Marathon. However, this is likely to be for the positive as higher price points allow efficient U.S. producers to ramp up their capacity.
The oil price collapse weakened MRO’s stock considerably, but stability is slowly returning now that crude markets are on their way up. While MRO has trailed the United States Oil Fund LP (USO) over the past year, it has still managed double-digit returns percentage-wise.
Still interested in All-America investments? Read the following article for more tips and resources.
The Final Word
In addition to all-American stocks, exchange-traded funds (ETFs) also offer broad exposure to the world’s largest economy. Some of the best all-American ETF options include PowerShares Build America Bond Portfolio (BAB), iShares Dow Jones U.S. Aerospace & Defense ETF (ITA) and the PowerShares 1-30 Laddered Treasury Portfolio (PLW).
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