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New York - US stock investors are finding the value of staying close to home.
Even as the US economy barely grew in early 2014, companies with a domestic orientation have on balance delivered better first-quarter sales and profit growth than their globally orientated peers.
RBC Capital Markets found that sales growth among companies with a high percentage of their revenue coming from the United States was three times stronger than those with a bigger international sales mix.
Earnings growth was six times as robust. US-focused names had bigger upside surprises on both the top and the bottom lines.
"With the US economy vaulting energetically out of its winter cold spell but China looking even more beset by gravitational forces ... the two-speed developed market-vs-emerging market global recovery ... is growing more clear and present," analysts at Nomura wrote in a note to clients.
Companies with US-orientated revenue rank among the year's leading advancers in the S&P 100 Index.
Anadarko Petroleum Corp, which gets more than three-fourths of its revenue from the US market, is up nearly 27% in 2014. In its latest quarter, the company's revenue grew 50.1%, representing an upside surprise of almost 50% compared with expectations.
Utilities are 2014's runaway outperformers, with the S&P utilities index up nearly 11%. Utilities also have some of the highest US revenue exposure. The stock of Exelon Corp is up 32.2% in 2014; in its latest quarter, Exelon posted revenue growth of 17%, good for an upside surprise of 28% relative to analysts' forecasts.
Power sector-focused funds have attracted inflows of almost $2bn in 2014, according to Thomson Reuters' Lipper, though the sector is also favoured as a defensive or dividend play, offering an average yield of 3.7%.
Conversely, technology companies have the highest percentage of foreign revenue exposure, according to Standard & Poor's. The group, which has sold off recently on concerns that valuations are stretched, has had outflows of $1.25bn this quarter, according to Lipper.
Qualcomm Inc and Broadcom Corp have more than 94% of sales coming from abroad and both disappointed in their most recent results, with Chinese growth a major factor.
The week ahead will feature earnings from several companies representing both the domestic-leaning and international camps.
Applied Materials, which gets about 80% of its revenue from abroad, will report results this week. Analysts expect the company to post revenue growth of 19%.
Deere & Co, which gets 63% of its sales domestically, is set to report earnings on Wednesday, while Wal-Mart Stores Inc, the largest of a slew of retailers reporting next week, is due to post results on Thursday. Wal-Mart gets 71% of its revenue from the United States.
