In the decade coming to an end US multinationals invested heavily in foreign expansion. Although companies such as 3M have been tied into foreign economic growth for decades more US multinationals are increasing their stakes in not only China and India but Brazil and Russia as well as Canada, Mexico, and Central America. As economic growth picks up across the world US multinationals stand to make more foreign profits. Realistic estimates are that in coming years 40 percent of profits of US multinationals will come from “overseas.”

The US multinationals with substantial foreign exposure are looking for long term profits. However, there are risks associated with “overseas” investments over and above the usual market and credit risks associated with doing business at home. There are also huge opportunities as foreign markets such the “G4,” namely India, China, Brazil, and Russia prosper.

History is full of nationalizations of foreign industries. US oil companies lost stakes in the Middle East in the 1970’s although they still control delivery and refining outside of the Middle East oil patch. Mr. Chavez in Venezuela has not great love for US companies and presents a risk to any foreign company operating in his domain.

There are financial failures such as the mess in Dubai showing us that not all presumed success is real.

The point of all this is that US multinationals investing overseas are smart and will likely see excellent long term growth. There are risks to operating in a variety of economic and cultural environments. The market will anticipate success or failure and the market will be taken by surprise by success or failure. Thus stock prices will respond to a variety of determinants and present the smart day trader with unending opportunities.

As with most issues in day trading homework is the key. Having an idea of what drives an economy, the politics of nations, a nation’s foreign debt, and the general economy will give you an idea of how the stocks of US multinationals are expected to do. A little more homework will put you in a position to more accurately predict how the investments of US multinationals will fare in a variety of foreign economies and cultures. Thus you will be able to buy and sell with more knowledge than the mob and profit from the mistakes engendered by the herd mentality of many investors as well as other traders.

Knowing what the technical skill base of a country is or how large its labor pool will help you anticipate how much competition US multinationals will receive from local businesses. More to the point it will tell you if US multinationals can expect high tariffs on their imported products or tariff protection for their foreign factories against Asian imports.

Economic growth outside of the US is likely to outpace economic growth at home. Economic growth in large nations such as China, India, Brazil, and Russia is likely to become a major factor in years to come. US multinationals with stakes in these countries may do well and may have their ups and downs due to local politics and economics. Trading the foreign profits of US multinationals may be profitable for the day trader for years to come.

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