Tags: Mike Caggeso

Tata's Secret to Success and Three Ways to Profit From it

By , Money Morning •

By Mike Caggeso
Associate Editor

Tata Group Chairman Ratan Tata said he would like to buy a stake in luxury sports car Ferrari, a unit of Torino, Italy-based Fiat S.p.A (OTC:FIATY).

Tata is a Fiat board member and has a marketing and manufacturing alliance with the automaker for his India auto operations.

"I have two passions in my life, cars and aircraft. I have always dreamed of being able to be a fighter pilot. And I confirm the wish to participate in Ferrari's shareholding," Tata told L'Espresso magazine in its latest issue. "Luca di Montezemolo (both Fiat and Ferrari chairman) has invited me to look around in Italy because his country offers a lot of opportunities in the design and luxury sectors."

Tata's intentions are clear - he wants quality and quantity. His flagship automaker, Tata Motors Ltd. (TTM), is weeks away from closing the for luxury lines Jaguar and Land Rover. Meanwhile, the company is owner of the Nano, the $2,500 compact [and we stress the word compact] that was recently the buzz at the Geneva Auto Show.

A more upscale version of the Nano is set to hit the European car market, but a ballpark date hasn't been established.

"The Nano will address global markets in due course but when it will do so has not been decided," Tata told auto show goers, the Times of India reported.

Tata Taps Global Trends

Not only is Ratan Tata's business model exciting to read about, it's exactly the kind that tends to treat investors the most favorably.

Tata Motors Ltd. is one of several "Global Titans," multi-national companies that harvest a hefty percentage of their sales and profits from the foreign markets. Many are based in the United States, but are growing at several times the tepid pace that's being predicted for the U.S. economy this year.

They offer diversification, should the U.S. market falter completely and stumble into a recessionary pothole. At the same time, the U.S.-based firms offer the safety of the much-more-stringent U.S. regulatory oversight.

And Money Morning has identified a portfolio of Global Titans whose quarterly earnings and stock prices are laughing in the face of the gloomy U.S. market.

Profit Play #1:

The Coca-Cola Co. (KO), the world's biggest soft-drink producer, posted net revenue growth in every geographic market in its fourth-quarter and full-year 2007 economic report: 

  • Africa: 25% in the quarter, 16% for the year.
  • Eurasia: 34% in the quarter, 24% for the year.
  • European Union: 15% in the quarter, 14% for the year.
  • Latin America: 24% in the quarter, 24% for the year.
  • North America: 13% in the quarter, 11% for the year.
  • Pacific: 7% in the quarter, 7% for the year.

The company also announced that it plans to repurchase $1.5 billion to $2 billion of its stock in 2008. Last year, it bought $1.75 billion of its stock and paid $3.1 billion in dividends to shareholders.

And that's not the only reason shareholders were happy in 2007. For as tumultuous as last year was for most investors, Coca-Cola shareholders were treated to a 26.3% gain, or $12.79 rise, in the company's stock, far-and-away better than the 3.5% total annual gain of the S&P 500 Index.

Profit Play #2:
The same goes for General Electric Co. (GE), the stalwart conglomerate that - for the first time - saw its overseas growth and revenue account for more than half of its quarterly earnings.

For the fourth-quarter 2007, GE reported earnings of $6.8 billion, up 15% from earnings the previous year, and earnings per share (EPS) growth of 68 cents, up 17%. For fiscal 2007, earnings were $22.5 billion, up 16%, and EPS was $2.20, up 18%.

The surge of international growth was fueled by infrastructure growth, which accounted for 26% of profit growth. Total orders were up 18% to $27 billion.
The company forecasts full-year 2008 continuing EPS of at least $2.42.

GE Chairman and Chief Jeff Immelt said in a statement that the company is built to outperform in an otherwise stagnate U.S. market.

"Our record performance in such a tough environment validates the strength of our strategy and the talent of our team," Immelt said.
Profit Play #3:

Here's an interesting trivia question: What fast-food company is the world leader in terms of total restaurant outlets? Did you guess McDonald's Corp. (MCD)?

Close, but no Happy Meal… McDonald's has 31,045. But Yum! Brands Inc. (YUM): beats that easily, boasting 34,000 global locations - including 20,000 in the United States market.

Yum operates the Taco Bell, KFC and Pizza Hut casual-dining restaurant chains. And though its U.S. operations are respectable, the company is on a tear overseas - especially in China, where operating profit grew 44% in the fourth quarter.

In China, when consumers think of chicken, they think of KFC. When they think of Mexican food, they think of Taco Bell. And when they think of pizza, Pizza Hut springs to mind. KFC is one of the most popular restaurant destinations in all of China.

According to recent reports in food-industry trade journals, Yum says it will open at least 425 new restaurants in mainland China, during the next several years. The move includes 310 KFCs, 85 Pizza Hut "casual dining" restaurants, 20 Pizza Hut "Home Service" restaurants, and 10 East Dawning restaurants.

On the international level, the company has plans to open at least 750 new restaurant sites overall. Those plans include 450 new KFCs, 250 new Pizza Huts and about 15 Taco Bells in at least 50 countries around the world.

And on top of that, Yum announced in January that it will buy back another $1.25 billion of its stock over the following 12 months, the latest part of a $4 billion stock repurchase plan announced last October.

That's a finger-licking vote of confidence.

News and Related Story Links:

  • Dow Jones News Service:
    Yum Brands OKs Additional Share Buyback