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THE WORLD IS YOUR OYSTER

A surge in corporate efficiency is making for lots of winners overseas

When Sheila H. Coco convenes the monthly meetings of Fiduciary Trust Co. International's Global Investment Committee, the talk inevitably turns to themes as much as it does stocks. What overriding economic, demographic, and political patterns will drive world equity markets in the coming months? As of late, Fiduciary's pros have narrowed their focus to four big stories.

There's the aging of the industrial world's population. With baby boomers saving for retirement and already requiring more medical attention, that's a definite plus for financial and health-care stocks. Another theme is the continuing growth of still-youthful emerging markets. That's a big deal for consumer-goods makers and builders of the infrastructure that the developing world so critically needs. A dominant global theme is the recent wave of technological change, which is creating opportunities for any number of high-tech companies and those they serve. Finally, there is industry consolidation, as the business behemoths of Europe and Japan begin to take a cue from the powerful restructuring of Corporate America.

Not surprisingly, many of Coco's peers overseas and on Wall Street roundly agree with the themes that are guiding Fiduciary's stock-pickers. They are also watching such global trends as cheaper money, falling inflation, free trade, deregulation, and privatization. But where do you begin your search for global winners? With U.S. companies that sell to the world? International companies that operate wherever they can? Or locally oriented firms cashing in on a global trend? One answer is to do as Coco does: pick some of each (table, page 108). While every selection may not pay off, at least you'll have built a collection of stocks that reflects key investment themes from different angles.

A good way to find the best of these companies is to follow the method of Ed Miska and Stephen Lieber, whose Evergreen Global Leaders Fund is a big-capitalization fund largely composed of brand-name stocks. ''We look for three things,'' says Miska. ''Consistent earnings over five years. Earnings growth. And if a company is at the top of its industry or country.'' Miska and Lieber also favor companies with high returns on equity, a sign that they're putting their profits to productive use.

NOT CHEAP. Such a profit-driven approach has led them to Bombardier Inc., the hard-charging Canadian aircraft, rail-car, and snowmobile maker, as well as to Intel Corp., the semiconductor giant that's also a favorite of Fiduciary Trust and nearly every big-cap stock-picker around. They also love General Electric Co., which is the fund's largest holding, with 3% of its assets. ''We like the company's commitment to Asian markets,'' says Lieber. ''And this is a wonderful time for GE Capital,'' especially if U.S. interest rates remain steady.

True, none of these global winners is cheap these days. That's why Lieber and Miska have also gravitated to other, lesser-known global names such as UCB, a Belgian maker of chemicals and pharmaceuticals that recently unveiled an allergy-relief medication called Zyrtec in the U.S. ''Every market it has gone into, Zyrtec has taken over 25%,'' notes Miska, who adds that UCB's profits have been growing at a 20% annual clip.

Because UCB is still relatively unknown, it can be had for a modest price-earnings ratio of 15. In fact, Europe is the home to a number of companies that trade at nice discounts to their American counterparts. Analysts at Zurich's Bank Julius Baer, for example, note that Hilti, a Swiss power-tool maker with healthy profits and cash flow, trades at a p-e of 12, a third less than Illinois Tool Works Inc. fetches. Then there's Bank of Ireland, a residential lender that's also expanding into Britain. With a p-e of 10 despite an expected 20% jump in earnings next year, the Irish bank is still ''relatively cheap,'' says Fiduciary's Coco. But it also falls squarely within her theme of the Old World getting older and needing more financial services. In Ireland, ''half of the country's population is in their 30s, and they're all going for their first home mortgages,'' she observes. ''We see the potential for a lot of growth.''

''A POWERHOUSE.'' A far larger European-based bank group, HSBC Holdings PLC, is an even better buy in many other stock-pickers' eyes. The owner of Hongkong & Shanghai, Midland, and Marine Midland banks, among others, it is firmly planted in the booming economies of Hong Kong and emerging Asia, as well as Britain and the U.S., where it's on the move again after years of standing still.

As a result, HSBC's earnings are expected to rise 11% in 1997 and an additional 17% in '98, estimates Merrill Lynch Vice-President Keith Irving. Yet its stock trades at a p-e of 10, some 20% less than U.S. rival Citicorp, which is targeting many of the same Asian consumers and businesses that HSBC relies on for much of its momentum. ''It deserves a higher multiple,'' Gary Greenberg, deputy managing director of Peregrine Asset Management (Hong Kong) Ltd., says of HSBC. ''It's a powerhouse.''

Financial powerhouses are but one of the standouts in a global portfolio. Technology and telecommunication stocks also deserve to be included. Oscar A. Castro, managing director of San Francisco's Montgomery Asset Management, suggests Finnish cellular-phone manufacturer Nokia and AT&T spin-off Lucent Technologies as two sound bets. Nokia is now coming out of a successful turnaround. And Lucent, Ma Bell's former manufacturing arm, ''is a classic company in a great business with great management that's looking for shareholder value,'' Castro says.

He is also keeping an eye out for European telecom companies. He thinks shares in the recently privatized Deutsche Telekom have already risen out of reach. But France Telecom, Italy's Stet, and Spain's Telefnica de Espaa all plan stock offerings in 1997 and will doubtless merit a look. On average, he estimates, European telecom stocks trade at only 3.5 times cash flow and feature a 5.5% dividend yield. At those valuations, he says, ''you're buying a bargain.''

No portfolio should be without consumer stocks, of course. Eric J. Fry, president of San Francisco money manager Holl International LLC, thinks that one entry also encompassing the themes of emerging markets and growing world trade is Inner Mongolia Erdos. China's leading exporter of cashmere sweaters, it has become a big supplier to Lands' End Inc. in the U.S. and is also boosting its sales to fashion-conscious Chinese consumers. But Erdos' B shares fetch a modest 6 p-e on the Shanghai exchange. Although its shares exploded recently during China's short-lived stock-market bubble, they have since retreated to levels last seen before the boom.

NO LOAFER. A more familiar consumer name drawing rave reviews is Gucci, the Italian maker of high-quality clothing and footwear. Although Gucci's American depositary receipts have doubled this year, Smith Barney Inc. analyst Faye I. Landes thinks the company's 24% estimated 1997 earnings growth rate leaves room for the stock to go even higher. ''We're going from early '90s minimalist fashion to people showing off,'' Landes says. ''Gucci fits squarely into that.''

However, for companies serving consumers with more modest tastes and means, many analysts look first to the U.S. Kevin R. Parke, director of research at Massachusetts Financial Services Co., is especially keen on Gillette Co., the Boston-based maker of shavers, batteries, and other products. Cheaper than high-flying Coca-Cola Co., Gillette ''has one of the strongest franchises in the world, with market shares of 60, 70, even 80%,'' says Parke. What's more, the company is increasingly targeting such emerging economies as India, Russia, and China, where its operating margins can run as high as 30%.

Gillette is only one of a large number of American companies taking global consumers by storm. Angela and Samuel Allen, whose Globalt Growth Fund focuses exclusively on U.S. companies that derive at least 20% of their sales from abroad, are high on cosmetics maker Estee Lauder, toy marketer Mattel, and container maker Tupperware. Recently spun off from Premark International Inc., ''Tupperware has decades of experience in global marketing'' and now sells in 60 countries, notes Angela Allen.

All these American companies, and plenty of ones overseas, embody the themes that money managers are following for 1997. With the world economy poised for another year of respectable growth, many of these ideas are likely to be translated into profits for companies and investors alike.

By William Glasgall in New York



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