global color

As we’re aware, capital markets are prone to diverse changes in a globalized economy. Hence, prudent asset allocation necessitates investors to diversify their risks across asset classes, markets and currencies with low correlation. Such an asset allocation not only compliments investor’s portfolio, also helps manage the risk & volatility significantly. One such international offering that can potentially address this need is Nasdaq100 Index.

 
Launched in January 1985, Nadaq100 Index consists of the top 100 global non - financial companies like Apple, Google, Microsoft, Intel, Facebook, Starbucks etc. generating revenue of over 1.4 trillion USD, making the index, the 13^th largest economy globally.
 

In USD Billion	Revenues	Profits	Networth	M - Cap
>50 bn	8	0	5	12
>25 bn	17	1	10	27
>10 bn	30	5	18	58
>5 bn	50	8	37	95
>2.5 bn	77	16	61	100
>1 bn	97	33	92	100
>0.5 bn	100	61	97	100

 

The index comprises companies across major industry groups including technology, hardware, software, pharma, health care, media & telecommunications & retailing. These companies are growing by developing new products, targeting new customer segment & new geographies. As a consequence, revenues generated by these companies are far more diverse and stable. Over the last 10 years, the index delivered a strong sales growth of 10% CAGR and an impressive EPS growth of 22% CAGR
 
Even during the recent global financial crisis, the index companies demonstrated strong growth momentum. Unlike Nifty constituents, Nasdaq100 companies are debt free since CY 2002 and enjoy a healthy free cash flow.

Per share CAGR growth (USD)	Nasdaq100 Index – CY – CY11	CNX Nifty FY – 08 -11
Sales	11.3%	6%
EBITA	17.3%	3.3%
Earnings	19%	-1.2%
Book value	11.8%	8.2%
Cash flow	16.7%	-1.4%

 

Nasdaq100 index delivered an incredible performance across time periods and outperformed most of the domestic & global indices (performance as on 25-07-2013)

 

Tenor	Absolute returns
1 Year	20.10%
2 Years	26.30%
3 Years	63.26%
5 Years	65.80%

 

 
Despite an attractive EPS growth of (1yr forward estimates) 20%, the index is just trading at PE multiple of 15.68 (one year forward) providing investors a huge upside. With RBI allowing resident Indians to invest up to 200000 USD in overseas investments, investors should lap it up to give their portfolio a tinge of global color.

Disclaimer: No content on this blog should be construed to be investment advice. You should consult a qualified financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments. Table source : Bloomberg. Returns expressed are in USD