US companies have many natural advantages, making many of them ideal investments.
The current travails of the American economy are held by many as proof that America is in terminal decline. Some commentators are even saying that America is becoming the new Argentina.
But America has been written off countless times over the years only to rebound stronger than before. Japan's Admiral Yamamoto got it right when shortly after Pearl Harbour he said "I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve." Yamamoto's fears were confirmed some four years later when America had become the global superpower.
Then there's arguably the turning point in the War of Independence when George Washington's rag-tag Continental Army, facing defeat after being driven out of New York, responded by boldly crossing the Delaware and crushing Britain's brutal Hessian mercenaries at the Battle of Trenton.
America's resilience comes from its endless capacity to adapt and reinvent itself. For those investors who are prepared to go against the prophets of doom and gloom concerning the US economy and the dollar, today's America presents many opportunities.
The Other Lucky Country
Whilst Australia claims the title of "the lucky country", America is surely the other lucky country. America has many advantages; abundant natural resources and farmland; a legal system based upon English common law; American culture promotes a strong work ethic; the First Amendment enables ideas to freely circulate and America's government and police are relatively incorrupt.
A further advantage is that having never had a feudal economic system, America's economy is largely free from both the aristocratic disdain for commerce and the class-based envy which infects so much of British life. American businesses also benefit from their huge domestic market which gives them potential economies of scale that British companies can only dream about.
Corporate start-ups of the quality of Apple, Google, Hewlett-Packard and Microsoft routinely emerge from American garages and student dorms. In contrast their European counterparts are starved of capital and are frequently regulated to death. Europe's closest equivalent to these high-tech giants, Nokia, came from the reorganisation of a rubber boot manufacturer founded in 1898!
In the short term you can frequently profit by betting against America, but what about the long-term? Warren Buffett recently said: "I am 100% enormously optimistic about the future of this country all the time. I mean there is no way you can bet against America and win. But in the short term, things are going to be tough for a while".
A Company That Won't Give You Sleepless Nights
My first pick is Berkshire Hathaway, Buffett's insurance-based conglomerate. Berkshire is well covered here and on Fool.com so I won't add much except to say that the days of 20%+ annual share price growth are probably gone for good. Berkshire is now so large that those investments in small and medium-sized companies which produced these returns are too small to have that much of an effect upon the company today.
But Berkshire is an extremely solid company and is currently on a fairly low price to book value ratio of around 1.4. You can sleep well at night owning this stock!
With Great Power Comes Great Responsibility
Company number two is Marvel Entertainment, the comic-book company and film maker which owns Spider-Man, the most recognisable superhero on the planet, together with thousands of other characters such as The Hulk, The X-Men and Iron Man. Marvel came onto my investment radar after seeing the first Spider-Man film; I took the view that the state of computer-generated imagery would enable Marvel's characters to be used in many more superhero films using existing storylines.
Marvel's recent history shows us that it is a business that almost meets Buffett's criteria of being "so good even an idiot can run it." In the early 1990s, having made some extremely poor acquisitions and mishandling the film rights to its major characters, Marvel's management started using different covers for its comics to persuade/trick its customers into buying several copies of the same issue. Ultimately there was a battle for control and Marvel ended up in the hands of its main toy supplier, ToyBiz, in 1998.
Since then Marvel has gone from strength to strength and over the past ten years Marvel's share price has risen by over 1,200% compared with a 22% drop in the S&P500 index. Much of the reason behind this rise is that, in contrast to the average Hollywood loss-maker, Marvel's films have consistently made good profits at the box office.
Unfortunately there's really no point in looking at the numbers for Marvel in any detail since The Walt Disney Company recently agreed to buy Marvel. I'm still to make up my mind about Disney, it's an iconic name but Disney has a lot of television interests and as I've previously written I'm not a fan of television as an investment.
Coke Is It
Company number three is Coca-Cola, the number one brand name on the planet. Virtually every adult in the Western world will at some time have drunk at least one of its products which can be found everywhere, from Mongolia to Mesopotamia. The Coca-Cola Company has been around for over 117 years and has a tremendous record of producing shareholder returns over the long term. Unfortunately Coca-Cola's shares are rarely cheap; they are currently on a historic PE ratio of 20.7 and yield 2.9%.
If you're not put off by all the current doom and gloom then American companies offer you the opportunity to diversify away from Britain and Europe, particularly into businesses such as Google which do not have British equivalents.
More from Tony Luckett:
> Tony owns shares in Berkshire Hathaway and Marvel Entertainment
