Investing in Your Backyard: Bermuda and the Caribbean

There are many good reasons for researching investment opportunities in a certain geographic area. This week, we're looking at Bermuda and the Caribbean. It's not all pina coladas, deep-sea diving, and fun in the sun -- plenty of businesses have incorporated in these areas over the years. The region is now a major force in banking and insurance operations, with a generous helping of technology and services businesses registered in the seas between North and South America.

Without further ado, here are some of the largest companies headquartered between Trinidad and Grand Bahama Island and what investors participating in Motley Fool CAPS think about them.

Company

Market Cap
(millions)

HQ

CAPS Rating
(out of five stars)

Bull Ratio

Tyco International (NYSE: TYC  )

$62,530

Bermuda

****

87%

Accenture (NYSE: ACN  )

$21,850

Bermuda

*****

95%

ACE (NYSE: ACE  )

$19,070

Bermuda

*****

100%

XL Capital (NYSE: XL  )

$12,450

Bermuda

***

96%



A couple of years ago, this list would have included insurance giant AIG (NYSE: AIG  ) with its $185 billion market cap, but that company moved its headquarters back to New York for filing purposes after facing an accounting probe in Bermuda.

But that's hardly the end of the Bermudan insurance industry. ACE and XL Capital are two counterexamples, and if you look outside the top five, you'll find Montpelier Re (NYSE: MRH  ) , a dual recommendation of our Motley Fool Stock Advisor and Motley Fool Hidden Gems newsletter services. And a whole lot of other insurers, too. The Bermuda Chamber of Commerce boasts of being the largest reinsurance market in the world, surpassed only by New York and London in overall insurance premiums.

Why do all of these insurers set up Bermudan domiciles? There are a few reasons, starting with no taxes on corporate or personal income. Bermuda law has no currency-control statute for expatriates, and foreign antitrust laws don't apply here. And of course, the location can help your recruiting efforts.

These are great businesses in their own right, though. Listen to all-star CAPS player jcm56 waxing poetic about Montpelier Re, for example:

"Little doubt in my mind this price is an aberration and market-thumping performance from here is a foregone conclusion. Watch Wall Street realize how badly they overreacted last year."

CAPS player zindallas explains why fellow insurer XL Capital looks good:

"Surprisingly unknown reinsurer -- market cap of $12 [billion]. Like the rest of this sector, got beaten down post-Katrina and Rita. These companies are known for their choppy earnings -- strong in most years, with a big loss in the few years that a catastrophic event occurs. Short-term bumpy ride for sure, but hold on and the long haul will be rewarding."

Bermuda is also the home of soon-to-split conglomerate Tyco, for example. Yes, the Dennis Kozlowski Tyco of scandalous infamy and Inside Value pedigree. The real center of operations may lie in Exeter, N.H., but for accounting purposes, Bermuda shorts count as business-casual attire.

Then there's Accenture (nee Andersen Consulting), a five-star CAPS stock in its own right. It's recovering from the fallout of serving Enron back when it mattered in a bad way, and CAPS player Anony67890 lays out Accenture's advantages for us:

"This company has a youthful workforce [and] a strong client base and has demonstrated strong double-digit growth in multiple consumer markets. As it continues to develop and grow, it will continue to find ways to add value for its clients."

Enough about Bermudan insurers!
The Cayman Islands, playing second fiddle, host companies such as Garmin (Nasdaq: GRMN  ) , among a plethora of banks and other financial services. The nation doesn't tax its people or businesses, and nobody needs to report income or ownership of any kind to the government.

The Cayman Chamber of Commerce says that 40,000 companies of all sizes call the islands home, compared with "only" 25,000 in Bermuda. Consider that the population of Bermuda sits at about 66,000 today, and the Caymans have 58,000 people aboard, and it adds up to a lot of purely theoretical headquarters.

All the rest
That's it, really. My screen found a total of nine publicly traded companies based in the Bahamas, the British Virgin Islands, or the Netherlands Antilles -- the rest are lounging in the two locations already covered, with the overwhelming majority in Bermuda. And it's generally an excellent collection of businesses. Out of 63 companies on my list of Caribbean companies on the major U.S. exchanges, 29 carry either four or five CAPS stars. Only four of their peers have a solitary star, and 19 have yet to earn a CAPS rating.

The CAPS community simply loves Bermudan and Caribbean stocks. Is it because they give unfair advantages over land-based peers? Or does the environment simply attract great companies? Either way, it's a whole bunch of winners, and you'd be remiss not to have a closer look.

Do you agree? Disagree? Feel free to weigh in on the Bermudan and Caribbean market -- or on any stocks at all, really -- by joining Motley Fool CAPS and blasting away with your ratings and commentary pitches. And if Aruba isn't your 'hood, maybe we'll come around where you live the next time.

Further Foolishness:

Six out of 63 Bermudan and Caribbean stocks have made their way into Motley Fool newsletters. Not a bad ratio. That includes Stock Advisor selections Garmin and Montpelier Re -- which is also a Motley Fool Hidden Gems pick -- and Inside Value recommendations Tyco and Accenture.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, but he did experience some island living while writing this article. OK, a luau covers the wrong set of islands, but it's the thought that counts. You can check out Anders' holdings if you like. Foolish disclosure is always red-hot.


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