Money Report

Multinationals on the Move

U.S. multinationals that make a big chunk of revenue overseas returned nearly twice the gains of the overall market in 2009, according to Goldman Sachs (GS). Goldman ranked all 10 industry sectors in the Standard & Poor's 500-stock index to get a diversified list of 50 companies with the highest exposure to faster-growing foreign markets. They returned an average 51%, vs. 26% for the S&P.

The median stock in the Goldman Sachs International Sales basket, created in 2006 as a benchmark for money managers, derives 68% of its sales from outside the U.S. The median S&P 500 company pulls in 25% of its sales overseas. The trend may well continue. Goldman strategist David Kostin favors "firms with high sales exposure to Brazil, Russia, India, and China...given the significantly higher GDP growth outlook." Goldman ranks Pfizer (PFE), Coca-Cola (KO), and Merck (MRK) among the largest multinationals with a big portion of sales coming from these countries.

—By Tara Kalwarski

A Turnaround for U.S. Factories

U.S. manufacturers reported the highest expansion rate in more than three years for December 2009, according to a Jan. 4 report from the Institute for Supply Management (ISM). ISM's manufacturing index, which gauges overall economic activity at factories, climbed to 55.9. That's up from a low 12 months earlier of 32.9.

"The recovery in manufacturing is continuing," says Norbert Ore, who chairs ISM's survey committee. "But there are still some industries mired in the downturn."

Among industries that reported growth in overall activity are petroleum and coal, computers and electronics, and machinery. Seven industries were still contracting, including wood, nonmetallic minerals, and plastics and rubber. The Dow Jones industrial average gained 1.5% on the news, while shares of equipment makers Caterpillar (CAT) and Honeywell International (HON) each rose 3%. Investors willing to wager on a broad recovery for the sector can check out Vanguard's Industrials ETF (VIS), which tracks 375 large, midsize, and small U.S. manufacturers.

—By Tara Kalwarski

Morgan Stanley Is Moving On Up

Shares of Morgan Stanley (MS) opened 2010 with a 4.4% increase in price, to 31, as equity analysts at both UBS (UBS) and Credit Suisse (CS) issued upgrades to the stock on Jan. 4. Morgan Stanley shares had traded as high as 91 in 2000. More recently, in June 2007, they peaked at 74 a share.

Glenn Schorr of UBS says that the bank "remains a work in progress" and predicts that near-term growth will be "sluggish." (The company is scheduled to announce fourth- quarter 2009 financial results on Jan. 21.)Even with such a ho-hum prognosis, Schorr says the stock could rise as much as 20% by yearend. "The firm's capital and liquidity positions remain strong," he says.

Credit Suisse analyst Howard Chen also sees the potential for higher earnings, especially given Morgan Stanley's joint venture with Smith Barney. Chen upgraded the stock from "neutral" to "outperform," predicting that its shares could reach 38 over the next 12 months.

—By Tara Kalwarski

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