Transnational Portfolio Options

By Gregory S. Davis | February 02, 2009 AAA

Layoffs and bailout packages are dominating most headlines, making it easy for investors to ignore large transnational corporations like Unilever (NYSE:UN), Royal Dutch Shell (NYSE:RDS.A) and ABB (NYSE:ABB). Let's take a closer look at how the union of formerly independent companies into the transnationals mentioned above offer investment opportunities.

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The All-In-One
Unilever is a large consumer products maker with established brands like Lipton, Country Crock, Vaseline and Slim-Fast. Along with its established consumer brands, the $61.5 billion Netherlands-based company is also behind the advertising campaign meant to compel men to improve their aromatic appeal with Axe body spray. The combination of its established brands and more recent arrivals has been a formula for success.

For the first nine months of last year, Unilever reported 7.4% sales growth despite increasing business costs and price increases passed along to consumers. The company's earnings per share also increased 26% to Euro 1.38 (U.S.: $1.80) during the period. Unilever reported improving sales numbers in North America and Western Europe along with strong sales growth in developing and emerging markets. The company will report full-year results for 2008 on February 5.

Oil Producer
Easily recognizable from the bright yellow seashell at gas stations, Royal Dutch Shell is involved in the upstream exploration and production of oil and gas as well as the downstream sale of oil products, chemicals and oil sands. The $458 billion Netherlands-based oil producer managed to increase gross profits by 6% to $62.7 billion during 2008, although income attributable to shareholders fell by 16% from the prior year. Operating revenues are led by the company's exploration and production services with 73% derived outside the U.S. Despite low oil demand reflected in its current $40/barrel price tag and a weak global economy, RDS announced a 40 cents per share dividend at the end of the fourth quarter last year. The Q1 2009 dividend is expected to rise to 42 cents per share. (Read our Oil And Gas Industry Primer to learn more about analyzing companies in this sector.)

Power Generation
ABB is a leading provider of automation technology and power control systems. At the end of its Q3 last year, the Switzerland-based $34.4 billion power solutions provider reported double-digit revenue growth and a 25% increase in earnings before interest and tax (EBIT) to $1.3 billion. Although ABB reported a slowdown in large project orders, the strength of orders for power equipment and industrial automation products in all regions helped support revenue growth. Power infrastructure developments in the Americas, Europe, Asia and Middle East all contributed to the increase in revenues. ABB will announce its full-year 2008 results February 12.

Final Thought
The transnationals mentioned have found support from revenues outside the U.S. Unilever may offer the best opportunity for investors looking for less volatility going forward, but all of the companies mentioned are worth a review by investors shopping for global service providers to add to their portfolio.

To learn more about the benefits of becoming a large transnational corporation, be sure to read What Are Economies Of Scale?

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