The Secret Growth Hidden in These 5 Blue Chips

We're constantly barraged by headlines telling us how slow the U.S. economy is growing. Or that we're spending too much and saving too little, that foreigners are squirreling away oodles of money and have blisteringly fast-growing markets. But there's little reason to lament those facts. Instead, take advantage of them in the safest possible way without investing in foreign companies.

That's right. You can get safe exposure to developing markets by investing in U.S. blue chips. Many investors miss this key point.

A fast boat to China
Below, I highlight three reasons why you need to have exposure to foreign markets in your portfolio. In fact, you might own an American company that derives more of its sales outside the U.S. than from inside; many of the best companies do.

1. Developing markets are growing -- fast!
It's hardly news to say that developing markets are on a hot streak now. Rising economies are posting some seriously heady growth rates, numbers that dwarf what the U.S. is putting up. Just take a look at the chart below:

Source: Tradingeconomics.com.

And it's not just the usual suspects such as China and India recording the gaudy numbers. Less-ballyhooed countries such as Argentina, Chile, and Peru are seeing eye-scorching growth as well. The rise of the middle class in these places is increasing demand for American-style products, from Big Macs to Tide detergent to Marlboro cigarettes.

2. Foreign savings are much greater than U.S. savings 
And the fact that foreigners in developing markets save more than the U.S.? It's true, but you can turn that to your advantage, too. Low savings rates in the U.S. mean that Americans can't increase consumption very quickly. But high savings in developing countries mean that those consumers have the disposable income to keep revenue growing for the U.S. companies that have the foresight and ability to build their businesses abroad.

3. A weak dollar is good for American blue chips
Many investors think a weak dollar is inherently a bad thing, but that's certainly not the case for American companies that generate substantial sales abroad. Since a euro (or pound or renminbi) becomes worth more dollars, a weak dollar translates into higher sales and more dollar-denominated profits, and that's great for American investors.

With the government running substantial deficits and consumers saving very little, superinvestor Warren Buffett believes the weak dollar will be the status quo for some time to come. But that's great for American blue chips, which is exactly where Buffett has been stuffing his cash.

So where are those five blue chips?
To take advantage of these trends in the safest possible way, look for American blue chips that have substantial sales in foreign markets -- that's the secret growth embedded in the five rock-solid stocks below.

Source: Capital IQ, a division of Standard & Poor's. *Sales for North America.

In each case, foreign growth exceeds that of the U.S., often by almost twice as much. The opportunities abroad are immense, and these consumer companies have been turning them into quickly growing dividends for investors.

McDonald's and Yum! still have massive opportunities in the world's most populous nations, India and China. In China, McDonald's will boost its store count to 2,000, or by 50%, over the next two years. But that level of penetration means just one location for every 650,000 Chinese -- still way below the level in the U.S. at one per every 22,000.

The story's the same for Yum!, which is enjoying a huge hit with its KFC franchise in China. With just 4,000 stores currently there, the company envisions some 20,000 outlets. And that has Yum! CEO David Novak crowing: "I wouldn't trade our long-term position in China with any consumer company in the world." And I haven't even begun to get into the opportunity in India, where both companies have only a marginal presence as yet. That's the type of growth that has me calling McDonald's a dividend play for a lifetime. And don't worry about that negative U.S. sales figure above for Yum!; the company has been refranchising its stores, leading to lower, but higher-margin, sales.

While Wal-Mart and Costco are stalwarts in the U.S., their forays abroad are still relatively modest. Costco is just now making its way to Australia, where it's enjoying some initial success, but the vast majority of its stores are in America and half the remainder are in Canada. Even where Costco does have a presence abroad, it's severely underpenetrated, and the company doesn't have a presence in China yet, leaving massive opportunities there.

Wal-Mart has maintained double-digit sales growth in the Middle Kingdom over the last four years and quadrupled store count, to more than 300. The company is looking to take advantage of an expected 14.5% industrywide sales growth in China and is focusing on lower-tier cities where it can rapidly expand. Wal-Mart is also moving into Africa in a big way.

Colgate also provides an opportunity to ride the growth of the middle class around the world. In the oral care market it punches well above its weight class against peers such as behemoth Procter & Gamble (NYSE: PG), and has enviable positions in some of the world's fastest-growing markets: toothpaste share of more than 70% in Brazil and more than 80% in Mexico, among dominant positions in many other markets. The company has seen strong results in Asia as well.

And one more bonus pick that derives all its income overseas but is 100% American: Philip Morris International (NYSE: PM). The name behind Marlboro owns seven of the world's top 15 tobacco brands and has maintains about 27% global share, excluding China, where only the government-owned business is allowed to operate. The strong share, solid overseas growth, and weak dollar have combined to send dividends soaring in the three years since the company was spun off from parent Altria.

Foolish bottom line
So when you're prospecting for potential investments, don't forget that blue chips still have massive growth opportunities abroad and cash cow operations in the U.S. If you're looking for another stock with massive global growth, selling an iconic American product, and having the support of one of America's most successful businesses, then you'll definitely want to check out our special free report "The Hottest IPO of 2011." To get the name of this special opportunity, just click here.