Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Caterpillar Inc. (CAT), Intel Corporation (INTC): A Sneaky Way to Gain International Diversification

Many investors understand the merits of geographical diversification. As the saying goes, you don’t want to put all your eggs in one basket, and spreading your equity investments among stocks across the globe is a great way to diversify your portfolio. Since global economies are connected yet separate at the same time, it used to be that if one global market was doing poorly, chances were another was doing well.

Caterpillar Inc. (NYSE:CAT)

As a result of globalization, that concept is now slightly outdated. In fact, there are many U.S.-based companies who do a majority of their business outside the United States. It’s almost been a consequence borne out of necessity, since the United States is an extremely mature economy whose days of rapid economic growth are likely behind it. Nevertheless, there are a few blue-chip stocks you undoubtedly know well, which happen to be profiting handsomely from their international operations.

Hit the BRICs

The BRIC nations are Brazil, Russia, India, and China, and represent the world’s prominent emerging economies. These are under-developed countries with large populations of people entering the middle class. In turn, the spending power of this new, booming middle class is likely to result in enhanced economic growth for both these specific countries, and the world at large. Corporate America was quick to pounce on this potential and many U.S. blue-chips set up shop in these nations.

Caterpillar Inc. (NYSE:CAT) is a perfect fit for rapidly developing nations, as its namesake earth-moving machinery is all but necessary to a developing economy. To emphasize, Caterpillar Inc. (NYSE:CAT) derived 64% of its revenue from outside North America last year.

Fellow Dow Industrial Average components Intel Corporation (NASDAQ:INTC) and McDonald’s Corporation (NYSE:MCD) also capitalized on emerging market opportunities. As of its last annual report, Intel derived only 21% of its revenue from the Americas, while 55% of its sales came from its Asia-Pacific segment alone.

McDonald’s (NYSE:MCD) is also heavily reliant on international operations, as evidenced by the fact that it derives roughly two thirds of its revenues from outside the United States. Last year, the company reported consolidated operating income growth of 4% in constant currencies, helped in large part by its APMEA segment, which consists of Asia-Pacific, the Middle East, and Africa. Operating income growth in the APMEA segment, in constant currencies, was 3% year-over-year. This was more pronounced than U.S. operating income growth of 2% in constant currencies.

The future is bright

Each of these companies has done an admirable job extending their businesses to profit from international economic development, and as a result, future growth is expected to continue. Caterpillar’s international operations allowed it to post record sales and profits for 2012, and managements expects 2013 sales growth of more than 3% at the high end of its forecast.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.