The US is booming and here's how you can profit
Imagine for a moment that you are a very wealthy Martian who has just arrived on earth. Intending to settle here, you are now wondering where to invest your money.
Assuming that you want your capital to be safe and to grow, your first decision will be to choose a country in which to invest. For many reasons I believe that the US is the obvious answer.
1. America thoroughly deserves its safe haven status. As well as having a sound economy, the US spends more on defence than any other country. It could undoubtedly defend itself in case of need.
2. The land area of America is the third largest in the world, with abundant resources bridging several climate zones.
3. The US has a vast consumer market of more than 700 Americans together with access via free trade agreements to another 425 potential customers for American goods and services.
4. American workers are, comparatively speaking, well educated, productive, innovative and mobile.
5. In all economies, an efficient banking system is essential as the engine of growth. American banks are in far better shape than their counterparts in Europe, Japan and most other countries.
6. The US university system is one of the best in the world, helping to keep America ahead in technology and boding well for future commercial research and development programmes.
7. Corporate governance in American stock markets is of the highest standard.
8. The establishment of intellectual property is encouraged and well protected.
1. Although the fall in the oil price helps America less than countries such as Germany and Japan, which have no oil, the Americans are well known for their gas guzzling tendencies. The recent fall in the oil price will be a terrific boost for their economy, equivalent to a massive tax cut.
There is already plenty of evidence that American consumers are beginning to spend some of their new found wealth growth in the third quarter of last year reached an annualised rate of 5pc, the highest in more than a decade, and the leading index of consumer sentiment is at its highest level since 2007.
2. Another important factor is the strength of the currency professional investors have not failed to notice that the US is the best place to invest the funds under their control, so the flood of money into the country is causing the dollar to appreciate rapidly. Over the last few years the dollar has been weak because of quantitative easing and low interest rates. However, QE has now stopped and it looks likely that interest rates will rise in 2015. Currently, the US is the only economic bloc in the G10 group of leading nations with commercial data that is constantly improving. A rising dollar creates a great tailwind for dollar investments.
3. The next potentially helpful factor is more intangible. The third years of US presidential terms have usually been very bullish for the American stock market. Seventeen of the 20 presidential terms since 1932 had positive results in the third year.
My favourite US funds
If you decide that America is your country of choice, your next decision is whether or not to invest in a collective fund with a spread of American shares. If you favour this approach I suggest an exchange traded fund (ETF) called SPDR S US Dividend Aristocrats, which hold shares with a good record of paying dividends. Another excellent fund is the Vanguard S 500 ETF, which seeks to track the S 500 index g dragon nike shoes and has been making a very good job of it. [More: cheapest tracker funds]
and my top US share tip
I prefer to choose my own shares, so I have searched for an outstanding leading company with an excellent record that will be a major beneficiary of the coming surge in American consumer spending.
If you like this idea, the share I recommend to you is one that I have been buying recently. Home Depot is the world largest home improvement retailer and the second largest retailer in the US. The company has more than 2,200 stores, including 180 in Canada and a growing presence in Mexico. Home Depot range covers every conceivable product for home improvement and is very like B in the UK but on a grander scale.
So, now let us look at the numbers and check the record to see whether the shares are attractive at the present price of $106.
First, the five year record of growth in earnings is one of the best I have nike shoes that light up seen. For the financial year ended in January 2010 growth in earnings per share was 14pc, followed in the years 2011 14 by 30pc, 23pc, 22pc and 25pc. A truly remarkable record and the music is still playing, with a consensus forecast among analysts of 19pc for 2015 and 16pc for 2016.
The price to earnings (p/e) ratio for the coming year is just under 20, which is attractive in relation to the company astoundingly strong and reliable growth rate. A great growth company such as Nike, for example, has a prospective p/e ratio of 25 for the coming 12 months. nike shoes 10.5 Over the last five years Nike has increased its earnings per share by 55pc not bad but pale in comparison with Home Depot 140pc.