Page 6

<< From Page 5>>

THE MOST “UN-AMERICAN” AND “AMERICAN” COMPANY OF THE DOW30

The company in the Dow30 with the most overseas sales is none other than the grand daddy of the microprocessors, Intel. Take a look at Intel’s amazing revenue breakdown.

May2013 Illustration 49

A mammoth 84% of its revenue is derived from overseas customers. Intel is “hardly” an American company (and once again, please don’t get us wrong!). If the US economy contracts 2%, there is hardly any impact on Intel at all if the world’s economy continues to grow.

The following table shows the list of the most “Un-American” of the Dow30.

May2013 Illustration 50

Now, which of the Dow30 company is the most American?
The numbers do not come by easily (or readily accessible); we have to resort to estimation because the companies do not readily publish the breakdown. The winner is the insurance company, Travelers Cos.

May2013 Illustration 51

Up to 96% of its 26 billion revenue is derived from America. Truly an American company!
Since inception, they tried to be an insurance company that is different from others.

May2013 Illustration 52

May2013 Illustration 53

They intelligently avoided the real estate market.

May2013 Illustration 54

The other most “American” companies of the Dow30:

May2013 Illustration 55

TOTAL FOREIGN REVENUE OF THE DOW30 COMPANIES

Now let us stack up all of the Dow30 companies and compare them to their peers in the index.

May2013 Illustration 56

We found that 18 out of 30 of the Dow30 member companies are already collecting more than 50% of their revenue from overseas. That’s two-third of the Index companies. Spend a few minutes to study the chart above and try to track your favorite company and see how they stack compare to their peers.

As we wrote earlier, the total revenue of the Dow30 companies were 3.1 trillion dollars in 2012, and the total foreign derived revenue? It’s 1.4 trillion dollars or 46% of the total revenue. Alas, at least the number is still less than 50%, fortunately. However based on higher growth rate from overseas compare to the US, this number could be flipped over well within nine years.

May2013 Illustration 57

To put the very large revenue of the DJIA component companies, imagine that in the space of only one second, these companies are selling $98,300 worth of products and services. This will amount to 8.5 billion dollars, a day. Almost four billion of it, is from overseas, all within just a day.

The benefit to America is humongous. The share owners of these companies would earn good dividends from the companies, and their workers would be able to have good quality jobs with good pay. No doubt that American workers are having it rough due to competition from cheaper workers in other countries, but this can be overcome by investing into the future, by expanding education, training and other higher end of the spectrum initiatives. In short, by climbing up the ladder further. Of course, Americans cannot compete with cheap labors overseas (who in some places earns about USD300 a year) or the robotics assembly team (who costs “zero” in wages). In addition, consumers always wanted cheaper and cheaper products, thus there is no way for American workers who all wanted to earn sixty thousand dollars a year, to compete. As a consequence, the only way to further improve the income of American workers is by going up the ladder, into places where the overseas workers could not do such as skilled and knowledgeable management, advance engineering, top-notch financial workers, facilitators, rare or special skill workers, entertainment and many others. Well in short, “Knowledge Workers”. This is the future for America and the country must start by improving its education standard.

May2013 Illustration 58

DJIA component companies represent the diverse and very vast landscape of corporate America; however it may not represent all of the big companies out there. There are many more big companies in America, and amongst those that were not included is Apple Inc, who happens to be the largest corporation by market value in the world. At one time, Apple market capitalization is almost 800 billion dollars. Let’s see how Apple is faring, in terms of revenue from overseas. Is it similar to Dow30 component companies? The number is …

May2013 Illustration 59

Apple’s sales are now also, mostly derived from overseas, just like any other big tech companies of America.

CONCLUSIONS

In a globalized and interconnected world, there is an advantage of being big. The playing field is the whole planet and the income potential is very large. It is only natural for many American corporations to venture overseas, and they are becoming very good at it. They are leading the world in many fronts. This brought terrific benefits for America as a whole, and the world at large too.

So the next time you hear an analyst or a journalist make a comment about the Dow and how the Main Street is being left in the lurch, think about the overseas revenue of these corporations before you derive your own conclusions.

To learn how the Dow Jones Industrial Average is calculated daily, head to www.dowjones.com.

FROM THE AUTHORS 

Advertisements