. Last Updated: 07/27/2016

Going Global by Staying Home

NEW YORK -- While other mutual funds may venture into the remotest new stock markets of the world, one New York manager seeks to invest in global economic growth without ever leaving home.


At the little ($9 million) U.S. Global Leaders Growth Fund, George Yeager invests in the stocks of about two dozen multinational companies -- familiar names like Coca-Cola and Microsoft.


All of them are U.S. based or have American depositary receipts or other securities traded in the United States.


With investments in those companies, which derive an average of about 40 percent of their revenues and profits from overseas, Yeager hopes to reap the benefits of worldwide economic growth, while avoiding or minimizing many of the usual international investing hazards.


Yeager has no quarrel with the enthusiasm behind today's global, international and emerging markets funds, which send investors' money to financial centers outside the United States.


"We want to capitalize on the best global investment environment that has been since this century began," Yeager said at his Manhattan office.


"The question is, what's the best way for the man-in-the-street investor to participate in this," he said. "We would assert that it's the multinational companies that have developed dominant global franchises."


By operating through these big, liquid, U.S.-traded blue chips, he argues, investors avoid the political and economic risks -- and high costs -- of investing directly in foreign stocks.


They don't have to worry about fluctuations in foreign currency markets, which can have a big impact on returns (although currency swings also often affect the quarter-by-quarter earnings of multinational companies).


Yeager's strategy amounts to investing in businesses that carry much of the burden of operating globally themselves.


The idea has some limitations as well. As a lower-risk approach, it plainly lacks the potential for sky's-the-limit rewards some enthusiasts envision as they look at the frontiers of foreign investing.


Lawrence Speidell, an international fund manager at Nicholas-Applegate Capital Management in San Diego, says that, "Despite the globalization of these companies, their stocks behave much like the U.S. market. U.S. multinational companies do not provide effective global diversification."


For its part, U.S. Global Leaders says the stocks it has bought since it began last fall make up only about 15 percent of Standard & Poor's 500-stock composite index, the most popular standard for measuring the U.S. market as a whole.


Yeager says one hazard to his approach is if blue-chip multinationals become so popular that their stock prices get out of line with other investments.


But he maintains that isn't the case right now. The stocks in U.S. Global Leaders' portfolio now trade at about 22 times estimated 1996 earnings, he says -- not far above the average price-earnings ratio for all stocks.


Yeager offers this concluding thought: "The Dow Jones industrial average and the S & P 500 are looked at today as indicators of the health of the U.S. economy. I would assert that increasingly they will be looked at as indicators of the health of the global economy."