Over the course of few weeks, I have been intrigued by the geographical diversification of my portfolio holdings. Simply looking at the domain of a company where the stock is listed does not provide us with the full picture, and since we live in a global economy with multinational companies, I was curious to find out how much each of the companies I own draws its revenues from various geographic regions.This post details the revenue diversification of my holdings. In previous posts, I have discussed the importance of diversification of investment and income.
A lot of the companies have operations around the world and and as shareholders, it is good to know where companies generate their revenues. This exercise gives us a better understanding of the holdings.
Note that diversified revenue can be a double-edged sword. While it is good for the company to have its income diversified to avoid wars, recessions or economic storms in one country or geographic region; the diversified operations may cause issues such as taxations, currency conversion issues etc. A classic example to illustrate this point is Apple (AAPL). Apple is a money-making machine and generated $182B in revenue over the past twelve months. However, Apple’s revenue in US is only 38% and majority of that cash is held overseas. It has been discussed in the past by countless commentators about how Apple does not want to bring that cash back to the US in order to invest, pay debt or return it to shareholders via dividends or buybacks – as Uncle Sam would take a big cut out of the cash. Apple has resorted to selling bonds to raise the cash in order to fuel its buybacks – which I think is not all to bad considering that they are able to raise money for such low rates. The conundrum still remains for Apple, and countless other firms, to figure out how to return that cash to shareholders.
The following table lists the details of revenue diversification of my my holdings.
Unfortunately, I was not able to find any details on Wells Fargo & Co (WFC) for their geographical revenue diversification. If you are aware of any such info or sources, I would appreciate if you could share it with me.
Based on the dollar amount invested in each equity, my personal geographical revenue diversification stands at 38% from USA, 41% from Canada, 4.5% from Europe, 6% from Asia-Pacific and 9.8% Other International regions.
I believe this chart gives me the real picture of how my investments are diversified – rather than simply looking at which country the stock is listed in. As expected most of the mega cap blue chip names are well diversified across the globe and are well able to weather storms such as wars or recessions in each region.
Full Disclosure: Long AAPL. My portfolio is available here.