Tuesday February 16, 2010
By Carl Delfeld, editor Chartwell ETF Advisor
The S&P Global 100 index (NYSE: IOO) is a basket of the world’s largest 100 companies. Given the sharp pullback in global markets this week, the time may be right to begin or increase a position for a number of reasons.
While the broader market may be trading in the high teen price to earning ratios, many megacaps are trading at 11.0x-13.0x EPS. In addition, a number of megacaps offer very healthy dividends
A good example is Kraft Foods, that in addition to its strong brands and balance sheet is acquiring Cadbury PLC, a strategic move that will expand Kraft's product offerings and global reach. More importantly, Kraft's offers a yield of 4.2% and an earnings yield over 7%. Another example isGlaxoSmithKline PLC, whose stock is valued at 13.0x earnings and yields 5%.
Investors in the IOO basket of companies have the chance for significant capital appreciation with limited downside risks, particularly in an environment that may favor consumer staples. These multinational companies also are growing fast in emerging markets. About 32% of P&G’s top line revenue is coming from emerging markets and this is doubling every four years. Unilever has 49% of revenue from emerging markets
Another option is the Chartwell Global 30 that I have managed since 2005 as an alternative to the Dow Jones Industrial benchmark. It is a basket of 30 multinationals equally weighted with about 50% headquartered in the U.S and the rest spread out all over the world. Since inception on May 5, 2005 it is up 46.35% (excluding fees) versus just 1.97% for the Dow and 14.7% for the S&P Global 100. For more information, please call me direct at 719.264.1503.
Catalyst: The catalysts are that mega multinationals are trading at relatively low valuations with nice dividends, strong balance sheets, great management teams and are also growing top line revenue in emerging markets at a brisk pace.
Tip: Think about looking into the S&P 100 basket of companies and picking your favorite names to layer on top of IOO. I call this strategy ETF plus. The risk factor for IOO is medium and IOO makes a great core holding.
Learn more about this financial newsletter at Carl Delfeld's Chartwell ETF Advisor.
