So you want some global exposure in your ISA investments, do you, but you’re wary of investing money in other countries with currency risks and incomprehensible foreign taxes and the like?
Well, you can get international investment here at home, with so many of our top FTSE 100 companies having their fingers in pies all around the globe.
Diversity
Take Standard Chartered (LSE: STAN) (NASDAQOTH: SCBFF.US), for example. It’s a FTSE 100 company, but it does most of its business in Asia — and only 4% of its profits came from Europe and the Americas in 2012.
That kept it largely immune from the Western credit crunch, and shareholders did not suffer the eye-watering losses endured by some.
So how has Standard Chartered been performing? Here’s a five-year summary together with forecasts for the next three years:
| Dec | EPS | Change | P/E | Dividend | Change | Yield | Cover |
|---|---|---|---|---|---|---|---|
| 2008 | 169¢ | +1% | 8.4 | 65.5¢ | — | 4.6% | 2.6x |
| 2009 | 180¢ | +7% | 14.1 | 66.0¢ | +0.8% | 2.6% | 2.7x |
| 2010 | 197¢ | +9% | 14.7 | 70.0¢ | +6.1% | 2.4% | 2.8x |
| 2011 | 198¢ | 0% | 11.9 | 76.0¢ | +8.6% | 3.2% | 2.6x |
| 2012 | 225¢ | +14% | 11.7 | 84.0¢ | +10.5% | 3.2% | 2.7x |
| 2013* | 204¢ | -10% | 10.5 | 87.5¢ | +4.2% | 4.0% | 2.3x |
| 2014* | 226¢ | +11% | 9.4 | 94.5¢ | +8.0% | 4.3% | 2.4x |
| 2015* | 248¢ | +9% | 8.6 | 103¢ | +9.0% | 4.7% | 2.4x |
* forecast
Now, as a long-term investor, that’s what I like to see — well-covered dividends being raised each year ahead of inflation. It’s the kind of share I’d hope to put away for a couple of decades without having to be bothered with any day-to-day happenings.
Buy and forget
And that’s exactly the way I think our ISA allowance should be used — and it will be raised to £11,760 come April. Our gains are protected against tax, and it makes little sense to me to fritter away any of them in needless buying and selling transactions — use as much of your allowance as you can each year, putting the cash into long-term stable companies, and the chances are you’ll have a well-funded retirement.
But if Standard Chartered is such a good prospect, why has the share price fallen this year? In fact, it’s lost around 30% over the past 12 months, falling to 1,244p today — and that’s the cause of those low P/E valuations over the next few years.
Crunch time for China?
Perhaps ironically, it’s that global diversity that’s the cause. China is suffering from a bit of a credit boom itself, and its property market is overheating a little — and we’ve seen the effect of those two combined nasties in the West. There are, then, fears that banks like Standard Chartered would suffer in a Chinese slump.
And they would, but Standard Chartered is much better capitalised now than the bad banks were a few years ago — and the Chinese have a habit of just keeping going whenever the bears start growling.
It’ll work out in the long run
And over 20 years or more, we’re sure to see economic cycles come and go, but shares in good companies will come out ahead — even Barclays shares have multiplied five-fold since 1988, and we’ve had 26 years of annual dividends on top of that.
