Den geografiske spredning tæller, og derfor bør investorer lægge vægt på, hvor selskaberne får deres indtjening. Er de stærke på vækstmarkeder eller ikke? Europæiske virksomheder har været forholdsvis afhængige af udenlandske markeder, og derfor har de klaret sig relativt dårligt i år, hvor samhandelen næsten er gået i stå, men den samme afhængighed af fjerne markeder kan give dem en fordel i forhold til amerikanske under det ventede opsving.
Geographic Exposure Matters.
Diversifying by Country of Domicile Only Gets You So Far.
As we have written at length in the past, traditional diversification methods—whereby investors allocate funds according to country of domicile—can be misleading and, at times, inefficient when it comes to portfolio diversification.
Instead, investors should diversify according to companies’ revenue exposures to different consumers around the world. Whether it’s a U.S. automaker selling cars in China, a British pharmaceutical company developing products for the U.S. market, or a Swiss bank providing financial services for Asian investors, the geographic exposures of multinational companies are much more complex than traditionally thought.
Exhibit 2 gives a more complete and telling picture of various equity indices’ geographic exposures. Based on revenue exposure, European indices are highly globalized. Take the German DAX, for instance, comprising 30 of the largest publicly traded German stocks.
According to the latest figures, these German multinationals generate more revenue in the United States than in Germany, with China a distant third. Meanwhile, companies in the Stoxx 600, a broader measure of European equities, make 21% of their revenues in the United States.
By contrast, U.S. corporate revenues, measured by the S&P 500, are
more domestically focused, with just 40% of revenues coming from foreign markets.
Given Europe’s outsized dependence on foreign revenue sources—juxtaposed against a strained global trading environment and collapse in global demand—it becomes more clear why European equities have lagged year to date.
However, as the global backdrop improves and trade rebounds, European shares could be among the largest beneficiaries.
