The Winners for an Export-Driven America

Economist Tyler Cowen, a professor at George Mason University, recently published a piece pointing to three shifts that will lead the United States back to being an "export powerhouse":

  1. Manufacturing that depends less on cheap, overseas labor and more on artificial intelligence and computing.
  2. The large amount of shale oil and natural gas in America that could make it the "new Saudi Arabia of energy markets."
  3. A wealthier developing world that will demand more luxury, including America's top exports of automobiles, aircraft, computers, medicine, and entertainment.

First, let's dive deeper into Cowen's predictions. Then we'll look at how investors can align their portfolios to such an outcome.

More computers, fewer people
China's Foxconn, the oft-criticized supplier to most major electronic brands, reported last year that it would be employing 1 million robots in three years, up from 10,000. These robots "will be used to do simple and routine work such as spraying, welding, and assembling which are now mainly conducted by workers," according to Xinhua. Foxconn couldn't be a better bellwether for where industry is headed, with an estimated 50% market share and being the producer of some of the most technologically advanced products that humans make.

Of course, manufacturing won't be alone in the push toward more robots and fewer humans. We've already seen self-checkout at the grocery store, more and more coffee robots, and even robots taking over distribution warehouses. As Fool Alex Planes notes:

Robots never eat, never sleep, never ask for raises, never get injured or suffer nervous breakdowns. Robots never jump off buildings and cause public relations headaches. Eventually, all manufacturing will be robotic from beginning to end.

And with more industries going automated, the benefits of cheap overseas labor disappear.

More American energy
Last year, for the first time since at least 1990, fuel was the United States' biggest export measured in dollars. Yes, part of the reason is the increasing cost of oil, but the volume of American fuel exports is also rising. By volume, exports in 2011 increased more than 292% versus 2001. However, estimates for just how much energy is trapped in America's shale resources change wildly. As Fool Aimee Duffy explains:

In 2011, the EIA estimated that there were 827 trillion cubic feet of natural gas in U.S. shale. In 2012, that number dropped to 482 Tcf. The agency also commented specifically on gas trapped in the Marcellus Shale. Once pegged at 410 Tcf, the EIA now estimates that number is really closer to 141 Tcf, a 66% reduction.

Even with the uncertainty surrounding just how much energy is actually sitting under America, Cowen points out that the U.S. is better positioned than other countries because it has embraced fracking and its potential, whereas Europe has pushed back against the potential environmental consequences.

More developing world demand
While the greatest proof of reversing roles may be that Chinese tattoo artists are now getting more requests for tattoos in nonsensical English, let's take a look at past trade with the BRIC countries: Brazil, Russia, India, and China.

It appears imports have a long way to catch up with exports. But note that much of this trade deficit, or gap between imports and exports, is attributable to China. In fact, more than 40% of the total U.S. trade deficit is to China, although this number is disputed because of the distribution of value of items manufactured in China not being represented well in trade statistics. And the trend over the past few years has shown U.S. exports to China growing faster than U.S. imports from China:

If this pattern continues, even a potentially overstated trade deficit could shrink.

The stocks to target
Cowen says these changes will happen over a few decades, but there are plenty of opportunities available now.

First, look to the companies positioned to feed, clothe, and entertain the developing world. Yum! Brands (NYSE: YUM  ) plans to open about 600 restaurants in China, for a total of 1,500 new restaurants overseas. CEO David Novak is clearly focused on emerging markets, writing "We have about 58 Yum! restaurants per million people in the U.S. and only have fewer than 2 restaurants per million people in the top 10 emerging markets."

Additionally, if you don't finish your taco, fried chicken, or pizza, where are you going to put it? Tupperware (NYSE: TUP  ) suprisingly has 90% of its sales outside of the U.S., with incredible revenue growth abroad. For example, in India revenue grew 66%; in Brazil, 61%; in Indonesia, 47%; and in China, 24%.

If you're looking to bet on energy in the U.S., but questionable estimates on energy reserves unnerve you, check out the companies in charge of the pipelines. You'd be hard-pressed to find a more patriotically named company than Plains All American Pipeline (NYSE: PAA  ) . With more than 30% revenue growth and a new pipeline coming online next year, it stands to benefit from increased U.S. energy production. Enterprise Product Partners (NYSE: EPD  ) is also expanding operations, with a new pipeline being built from Pennsylvania to Texas and a new crude oil facility in Houston. Both companies also pay out around a 5% dividend yield.

Finally, more machines and computers mean more data. Data that needs to be stored, sorted, analyzed, and used to improve business processes. One company with the happiest customers in its industry is Teradata (NYSE: TDC  ) . No matter where the robots go to work, Teradata can help them work smarter, with only 56% of its revenues coming from the U.S.

The Foolish takeaway
The stocks above are poised to perform well even if Cowen's predictions turn out wrong, but if correct, there's plenty more upside to owning them. If you're interested in more American companies that are set to dominate in selling to emerging markets, check out our free report that further makes the case for Yum! Brands and two other potential picks.

Fool contributor Dan Newman looks forward to having a robot secretary, but not a robot boss. He owns no shares of the companies mentioned above. Follow him @TMFHelloNewman.

The Motley Fool owns shares of Tupperware Brands. Motley Fool newsletter services have recommended buying shares of Enterprise Products Partners, Yum! Brands, and Teradata. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (8) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 11, 2012, at 7:45 PM, xetn wrote:

    The real thing that will trigger a new American exporting economy is for the government to eliminate all the so-called "fair trade" issues, eliminate export-import restrictions; in short, free trade. Their is no such thing a fair trade, except as it depends on which side is getting the "fair treatment".

    Most of the trade agreements are designed to protect certain industries (eliminate competition, protect union wages, etc.).

  • Report this Comment On April 11, 2012, at 8:01 PM, xetn wrote:

    Another thing that would eliminate the constant money creation of all the world's central banks, in an attempt to be the low cost currency for international trade, would be a return of the gold standard. This would eliminate the need to constantly devaluing one's own currency. Gold would be the ideal settlement currency because it cannot be contrived. The downside of using gold is that it would then rest on the competitiveness of each country in the production of goods and services. I don't believe this is a real downside as it would evolve that certain countries would become the "low-cost" provider of certain goods and a return to more of a division of labor system which would ensure that consumers truly benefited from competitive advantage.

  • Report this Comment On April 11, 2012, at 9:05 PM, dgmennie wrote:

    The discussion here of robots and manufacturing really misses something significant. How so? Well, just look at the New York City subway system, Since the 1990s its revenue-collection methodology has evolved from cash and tokens to unmanned MetroCard vending machines that take (mostly) credit cards working in concert with fare-collection turnstiles in every station that accept MetroCards only. Naturally, the thousands clerks that once sold tokens and made change 24 hours a day have been decimated. However, the human worker population (and thus wages) needed to keep the subways running has not disappeared, and the total cost in salaries may even be increasing. Why? Well, who do you think writes the software, debugs the computers, and maintains the complex equipment needed to sustain an all-MetroCard fare-collection system? Legions of engineers and technicians who I expect get much better pay than yesteryear's token booth clerks. Yes to "more computers, fewer people" but the money required to keep everything running properly will most likely increase (not decrease), especially if system growth is expected.

  • Report this Comment On April 12, 2012, at 4:59 AM, ManmohanManu wrote:

    Great article on factors influencing US exports and good to read about the projected growth in exports which will lead to economic stability in the US. Read an informative whitepaper on Manufacturing and exporting 'Success within reach A guide to exporting ' , with related information you may find useful @ http://bit.ly/HdWo1R

  • Report this Comment On April 12, 2012, at 7:35 PM, CaptainWidget wrote:

    Great article

  • Report this Comment On April 13, 2012, at 12:28 AM, TMFHelloNewman wrote:

    @xetn

    There are also argument that true free trade would help the very poorest countries out of poverty.

    @dgmennie

    No doubt there will be plenty of jobs created to service the machines. But as Cowen writes, "America is using less labor in manufacturing, but China is too, even as its manufacturing output is rising."

    @ManmohanManu

    Much appreciated. The white paper makes an excellent case that the future success of companies depends on their ability to go global.

    @CaptainWidget

    Thanks for reading.

  • Report this Comment On April 13, 2012, at 1:59 AM, aacole wrote:

    @dgmennie What you point out is good news if you happen to be a computer programmer or engineer. It's bad news for those who don't have the specific education and work experience to keep up. The "left-behind" population can even be college educated, highly literate people, but when the cheese moves, many are left behind. Perhaps our key strategic advantage vis-a-vis the rest of the world is our relative ability to reinvent our economy more quickly. This is good for those of us who own equity, yet bad for those who can't adapt.

  • Report this Comment On April 13, 2012, at 9:43 AM, ScubaStClaire wrote:

    You must have heard about the factory that only employs one human and one dog. Everything was completely automated, the human was there to feed the dog, and the dog was there to keep the human away from the machines.

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