Bespoke's Paul Hickey just appeared on CNBC's Street Signs to discuss pairs trades based on companies that generate their revenues outside versus inside the US. For those interested in the report, subscribe to Bespoke Premium today. With an annual membership, you'll also receive our International Revenues Database, which allows you to track revenues geographically for all Russell 1,000 stocks.
Below is an excerpt from the Bespoke Premium report:
Last week we updated our International Revenues Database, which summarizes the percentage of revenues that Russell 1000 companies generate from international and domestic sources. In a report we sent out to clients, we highlighted the difference in performance between companies that generate all of their revenues in the United States compared to companies that generate more than half of their revenues outside of the United States. The comparison showed that even though stocks may be US based, their performance varies widely based on where they generate their sales.
Since the start of the second quarter, companies that get most of their revenues outside of the United States have underperformed companies that generate most of their revenues in the US. Along the same lines, there are several examples of companies engaged in the same businesses, where the one major difference between them is that one is domestically focused while the other is more exposed to international markets. The table below highlights fourteen pairs from different industries, and shows how each stock in the pair has performed since the start of the second quarter when the crisis in Europe came back into focus.
The best way for investors to use this list is that if you think the dollar will continue to rally, stick to the domestically focused stocks on the left side of the list. But if you are of the view that international economies will improve, causing the dollar to sell off, you would want to focus on the international stocks on the right side of the list. We also provide charts showing the performance of each pair of stocks over the last six months. In each chart, the domestically focused stocks are in green, while the internationally oriented stocks are in blue.