The Bush-proof Portfolio

Illustration by Marc Boutavant

For years, if you asked me if you should put money overseas, I would have scorned the proposal. America had the best companies, the biggest growth opportunities, and, more important, a government that was so pro-capitalism you couldn’t afford to invest elsewhere. It didn’t matter who was president—Reagan, Bush Senior, Clinton. Our government was responsible enough and our president reasonable enough that foreign investors either paid no attention to the White House or welcomed its policies, and therefore sought the safety of U.S. securities.

Not any longer. This president has made our nation an investment pariah. The government wants to claim that burdensome regulations are making us less attractive (ironic given that this administration backed those rules), but frankly it is the repulsive way that President Bush has handled foreign affairs, coupled with his profligate spend-and-don’t-bother-to-tax fiscal stance, that has alienated those with euros, rupees, pesos, rubles, yuan, and just about every other currency. International investors hate Bush, and now the dollar is being clobbered as the perception grows that we have lost control of our budget because of Iraq. The “surge” proposal and the lame State of the Union address didn’t help.

Bush’s policies are now loathed to the point that I have to recommend the unthinkable: You’ve got to diversify into other countries, perhaps as much as 20 percent, and you must do it now, before the damage this president’s doing to our stocks accelerates. You won’t be alone. We’ve seen unprecedented net flows of capital out of our country in the past few years. International purchases of U.S. stocks and long-term assets fell this past November to $68.4 billion, from $85.3 billion in October. And U.S. investors bought a record $21.2 billion of foreign stocks that month. Preservation of capital and simple prudence demand that you put some money offshore yourself.

Which countries? Which stocks? I’ve got ten ideas that span the globe, ten stocks whose American analogs simply can’t measure up, in markets that should handily outperform ours. You will be headed to bourses where the stability of the government is not only not in question, but the government’s financial policies seem far more sane than those of our own government. I’m going to give you ten stocks, from ten different industries, all of which trade here (on the NYSE and nasdaq), so you don’t have to mess with foreign currencies.

Bank of Nova Scotia. Doesn’t Castro have to die eventually? When he does, look for this once-sleepy Canadian bank to dominate what will be a great growth market. In the past five years it has invested more than any other bank, as a percentage of assets, in the Caribbean and Central America. For many Latin Americans who are just discovering credit cards and mortgages, BNS is the only bank in town.

China Mobile Limited. While AT&T (né Cingular) and Verizon Wireless slug it out to win customers in our country, CHL’s signing up millions upon millions of Chinese without competition. CHL, which already controls 65 percent of the Chinese wireless-phone market, is now expanding to rural areas, where two-thirds of the population lives. I can see this $47 stock reaching $60 this year without being overvalued long-term.

Diageo. This steady British 3.6 percent yielder dominates the fast-growing premium-liquor market with Tanqueray, Smirnoff, Guinness, and Johnnie Walker. Diageo has brilliantly marketed ultra-high-end brands like Johnnie Walker Blue that sell for close to $200 a bottle, and now the company’s going to China, where the demand should push it well past its current 10 percent annual growth rate.

Infosys. When Lou Dobbs rails against those offshore companies that steal our jobs, he’s talking about companies like Infosys, one of India’s largest consulting firms and among the biggest thieves out there. The offshore trend saves American companies too much money for them to back off just to seem politically correct. Infosys isn’t cheap, but it’s the best of the breed and could hijack thousands upon thousands of jobs in 2007 alone. If you can’t beat ’em, join ’em.

Homex. Now that Mexico’s President Calderón has joined the ranks of leaders who believe in a government of, by, and for the corporation, you have to scoop up some Homex, the home builder for the emerging Mexican middle class. Calderón recently committed billions to new housing, in part to stem the migration to America of his best workers and in part to quell restiveness from a newly invigorated left. Homex will get more than its fair share of those government contracts. Oh, and unlike here, homes are still appreciating in value there.

Total. Any diversified foreign portfolio needs exposure to energy. We could pick Royal Dutch or BP, but the former is running out of oil and not replenishing it, while the latter is tarnished by environmental and operational problems. That leaves Total, the French oil company that is the Foreign Legion of oil companies—willing to go anywhere to find oil, including Russia, Iraq, Iran, and Venezuela. Here’s an oil outfit that isn’t tainted by a U.S. legacy and therefore has been able to get rights and favorable concessions from nations on the Bush Bad List. It’s got a better-than-3-percent yield, and with today’s oil prices, it’s coining money.

NTL Inc. The stocks of Comcast and Time Warner have been roaring ever since they introduced the triple play of voice, data, and cable to bargain-hunting users of both Verizon/AT&T and the cable companies. NTLI, Britain’s cable company, is just now introducing the same product under the Virgin nameplate, because of Richard Branson’s investment in the company. NTLI’s a stock that’s been stuck in the twenties seemingly forever. If it gains only a fraction of the performance Comcast has logged, the stock sees mid-30s in 2007.

Companhia Vale do Rio Doce. Brazil-based CVRD may be the greatest natural-resources company you’ve never heard of—unless you are a huge buyer of nickel or iron ore. The Chinese need all sorts of minerals to keep their growth humming, and CVRD is the Whole Foods of raw materials. It’s also a great hedge against inflation, something that we’ve begun to generate with Bush’s reckless spending.

Sony. The once-dominant consumer-electronics colossus has sunk into oblivion despite still having huge revenues and decent brands. This will be the year that CEO Howard Stringer sees the futility of managing so many disparate parts, including a large insurance company, and splits Sony into its much more valuable pieces. The stock, which sells for $47 as a whole, could be worth mid-60s after a breakup.

Toyota. There’s only one way to save Ford and GM: Make them smaller, more efficient, and more profitable. Toyota will be there to pick up the market share. Toyota’s hiring more Americans than any big U.S. company. It has a full-size pickup coming this year, and it actually makes money selling cars, not on the financing of them, as GM and Ford do. Toyota probably spends less money on windshield wipers for its cars than GM spends on Viagra for its aging workforce.

James J. Cramer is co-founder of He often buys and sells securities that are the subject of his columns and articles, both before and after they are published, and the positions he takes may change at any time. E-mail:

The Bush-proof Portfolio