To William Roach Jr., president of Atlanta-based Globalt Inc., the whole world is his oyster-that is, if the companies he invests in are based in the U.S. and derive at least 20% of their revenues from overseas.
Although the name of Roach’s firm is a shortening of “global investment alternatives,” it doesn’t purchase foreign securities. Roach reasons that domestic firms are more globally interconnected now than even 10 years ago, particularly since the explosion of the Internet “has forever transformed the global economy,” he says. As a result, U.S. companies with great exposure to foreign markets-as high as 80% of revenues from overseas-should have greater growth rates than firms with a more “local” business model, he says.
In addition to that criterion, Globalt’s 12-member investment policy committee analyzes quantitative, fundamental and technical data to determine strong global growth opportunities.
He likes JDS Uniphase (Nasdaq: JDSU), a San Jose, California-based maker of fiber optic telecommunications components. Specifically, the company makes laser subsystems which increase the bandwidth of a host of communications devices, some for the Internet. He calls JDS “the Cisco of its [counter]part of the technological space” and a beneficiary of the growth of the Net. Furthermore, the company derives 40% of its earnings from overseas, with its biggest market in Europe.
EMC (NYSE: EMC), a Hopkinton, Massachusetts, manufacturer of computer hardware and software storage devices, is “the largest unknown tech company,” says Roach. He maintains EMC is the leading player in the storage industry-an important niche as firms need more space to handle the ever-increasing traffic to their Websites. The company gets about 38% of its revenues from overseas.
While the market has been unkind to healthcare stocks, Roach is betting on Medtronic (NYSE: MDT) to buck that trend. The Minneapolis-based medical equipment company manufactures implantable devices to control chronic conditions such as irregular heartbeats and incontinence. About 25% of its revenues come from Europe, 11% from Asia, and 2% from Latin America.
Roach’s final picks are AES (NYSE: AES) and Honeywell International (NYSE: HON). Arlington, Virginia-based AES, an independent power supplier, suffered some weakness as it rushed to acquire other utilities, but Roach says the takeovers should add to future earnings growth. It derives a whopping 72% of its revenues from foreign markets, with Latin America alone contributing 38%.
Honeywell, a Morristown, New Jersey, manufacturer of electronic control systems for industries ranging from aerospace to specialty chemicals, continues to benefit from its recent merger with Allied Signal and obtains 39% of its revenues from foreign markets, with Europe representing the lion’s share.