Geopolitical risk has reared its ugly head once again. This time, the ongoing crises in Syria and Egypt have rattled the international markets and sent many emerging markets down sharply. All the while, the S&P 500 continues to hold up, posting solid year-to-date gains despite the recent dip.
If you’re a risk-averse investor who doesn’t want to ride out the volatility of international stocks, there are ways to park your cash to ride out the storms. For example, there are stocks within the S&P 500 that derive the vast majority of their sales domestically, meaning these businesses are not in danger of suffering from enhanced geopolitical risk. We’ll take an in-depth look at two of them.
The U.S. serves as a safe haven
As violence escalates across the globe, international markets are beginning to reflect the pervasive sense of fear. In particular, the emerging markets, which were once hailed as the next great growth story, have gotten crushed.
Consider that the iShares MSCI Emerging Markets (NYSEMKT:EEM) exchange-traded fund is down 15% year to date, which stands opposite to the 15% gain on the S&P 500 Index.
Meanwhile, highly profitable U.S.-based businesses continue to hum along, shrugging off any geopolitical concerns. Tobacco giant Altria Group Inc (NYSE:MO) and drugstore retailer Walgreen Company (NYSE:WAG) derive nearly all their sales from the United States. As a result, they aren’t adversely affected by the ongoing international conflicts currently gripping the emerging markets.
Both companies’ recent results are indicative of their reliability.
Altria Group Inc (NYSE:MO)’s Marlboro brand continues to be one of the most valuable in the world, and the company’s financials reflect this. Altria Group Inc (NYSE:MO) booked 5% year-over-year growth in diluted earnings per share in the second quarter and 7% growth in diluted EPS over the first half of the year. For the full year, Altria Group Inc (NYSE:MO) expects adjusted diluted EPS to fall between $2.36 per share and $2.41 per share, representing 7% to 9% growth over 2012.
For its part, Walgreen Company (NYSE:WAG) generated record adjusted earnings in the third quarter of $812 million — a nearly 30% increase year over year. Impressively, Walgreen Company (NYSE:WAG) racked up $1.4 billion in cash flow from operations in the third quarter. The good news didn’t stop there for Walgreen Company (NYSE:WAG): The drugstore giant posted $5.79 billion in sales in June, representing 2.5% growth year over year.
Strong dividends are an additional margin of safety
These stocks’ reliable cash flows and the relative safety of operating within U.S. borders provide some security for investors.
