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3 American Companies Set to Dominate the World

By: Jim Royal

You're about to hear the greatest ways to profit from the trillions in wealth being created by the exploding middle class around the world. And what's more, other investors aren't aware of this massive opportunity.

It doesn't involve putting your hard-earned money on risky Chinese stocks or buying into some unproven technology. In fact, the three companies I'm about to highlight are based in the United States and have some of the most recognizable brands around. And for you dividend hounds, they pay rapidly escalating yields, too.

Invest in companies you know...

You know these companies and see their ads or use their products every day. But many investors are overlooking one thing that is turning these blue-chip companies into growth machines again.

That catalyst for growth: spending overseas.

Fortunately, the oversight by other investors allows you the opportunity to ride the economic growth that's sweeping through emerging markets -- but with the safety of an established and well-run American company.

The opportunity here is absolutely immense. We're talking about trillions of dollars in wealth being created by the world's fastest-growing economies. To give you some idea, though, let's run through the background.

...that are investing abroad

Globalization has been a huge investing buzzword over the last 20 years. Countries such as Brazil, Russia, India, and China -- the so-called BRIC nations -- have been rapidly industrializing, growing incomes at levels that can only be dreamed about by developed economies like the U.S. That's creating trillions in new global wealth.

But that doesn't mean that American investors can't grab a piece of the action.

Take a look at the growth in gross domestic product (or GDP) of the two largest nations (by population) to get a sense of the rapid development that's ongoing. You're already familiar with the largest, China, at 1.3 billion citizens, which has become the "workshop to the world."

Stocks 2012

From 2001 to 2009, China's GDP soared at an average rate of 14.9% annually (as measured in its own currency). That's stunning growth any way you slice it. And it compares more favorably against America's anemic 4% growth over the same period. From 1970 through 2009, China's economy grew 146 times larger, while the U.S. grew just 13.5 times larger.

But you might be less familiar with the prospects for India, which is not far behind with 1.2 billion citizens, but is much less developed. The growth curve looks just as attractive, though:

Stocks 2012

From 2001 to 2008, India put up an astounding 13.5% growth rate (in its own currency). Since 1970, India's economy has grown nearly 140 times its original size, compared to just 13.5 times for the U.S.

Consider this for just a minute: 2.5 billion consumers -- eight times as many as the U.S. -- are only just recently getting access to the Western-style products that dominate American and European markets.

And then there's also further opportunity in Russia, Brazil, Indonesia, as well as the many nations of Africa. While their populations aren't as large, the growth rates are still very enviable.

Those levels of industrialization have spawned an upwardly mobile middle class that is growing at a tremendous clip.

And they want American-style goods and services.

The McKinsey Global Institute estimates the middle class in India at just 50 million people, but projects the number to bloom to 583 million by 2030. Meanwhile, China's middle class is estimated at about 560 million and is expected to climb to over one billion by 2025. That compares to about 200 million in the American middle class.

That's trillions in new revenue that is just waiting to be earned by well-positioned companies.

And you can get a piece of the pie, if you know where to park your cash. The three American companies that I'll reveal to you shortly have only just begun to dig into the opportunities.

Fortunately, they're already on the ground overseas and they're laying down their competitive advantage for the prospect of decades of growth.

They are using their years of product, marketing, and consumer expertise to move swiftly and efficiently into new markets, establishing billions in new revenue streams in the process.

Two Restaurant Stocks Hungry for Growth

You'll know this first company by the golden arches you see across the U.S.

Yes, it's McDonald's.

Investors often mistakenly assume McDonald's is an old economy relic, left behind in the slow-growth U.S. But they couldn't be more wrong. What many fail to realize is the expansive opportunities left for the company in emerging economies.

But it's not the only American restaurant cashing in on massive growth abroad. The same goes for Yum! Brands, the company behind such fast-food staples as Taco Bell, KFC, and Pizza Hut.

Let's hit on these companies' hidden opportunities in China to start. Food from these giants is still seen as something of an affordable luxury, an item of prestige in many places abroad. And remember, these countries have four or five times the population of the U.S. and are growing much more briskly.

You may think of KFC and its fried chicken as the quintessential American fare, but Yum! already generates 85% more revenue in China than it does in the U.S. In fact, the U.S. comprises less than 26% of all the company's sales, as Yum! expands aggressively around the globe.

The thing is, investors are underestimating the potential in Yum!.

Here's why:

KFC has become a runaway hit in China. Yum! was the first quick-serve chain to enter China, beating even powerhouse McDonald's. The company has just over 5,200 locations there currently, but estimates that it can open some 20,000 outlets over time.

That opportunity has CEO David Novak crowing, "I wouldn't trade our long-term position in China with any consumer company in the world."

But even that may understate what the company can achieve.

In the U.S., Yum! has a restaurant for every 19,500 people. At a prospective 20,000 outlets, China would have a location for every 65,000 citizens, suggesting that the business opportunity may be much, much greater than Yum! is currently willing to project. Maybe three times as great!

And then there's Russia and India, where Yum!'s restaurants are seeing double-digit growth but make up less than 1% of the company's sales. So there's a long runway in these developing nations, too.

And while Yum! may have beaten McDonald's to China, McDonald's has massive growth plans of its own in the Middle Kingdom. It's rolling out its store network faster than in any other country ever (with the exception of the U.S.)

McDonald's currently has more than 1,600 outlets in the nation now, and is shooting for 2,000 locations in 2013. But, again that number looks tiny compared to the U.S. figures, where there's a Mickey D's for every 22,000 consumers. At that rate, the company could put up some 60,000 locations just in China, nearly tripling its total size from today. That's huge!

And like Yum!, McDonald's is only just getting started in India, meaning there's plenty of opportunity left.

Could they fail?

Some worry about McDonald's and Yum! succeeding in India and elsewhere because of cultural taboos against beef.

But that misses a central point about their businesses: McDonald's and Yum! are not just hamburgers and fried chicken. These companies are massive food distributors that can tailor their offerings to each market, so they can repeat the same formula for success they've used elsewhere in the world, creating food for the middle class.

For example, in India McDonald's has adopted an entirely beef-free menu and debuted the Maharaja Mac, which uses chicken instead. The company has also developed a wealth of non-meat options to meet the needs of the country's many vegetarians.

Despite such phenomenal growth opportunities ahead, solid earnings, and growing dividends, many investors still overlook McDonald's and Yum!

But profits at these companies will continue to explode over the coming decades, and there's still time for you to secure your piece.

One brand that just does it

The worldwide ambitions of our third dominator -- Nike -- are no less grand. The shoe maven is already in the third year of a five-year plan to increase sales by 40%, to $27 billion. And it's expecting profit to grow by about 15% annually until 2015.

But the most exciting part is Nike's plan to expand abroad. To reach its growth target the company will have to tap into burgeoning international markets like Brazil and China.

It has effectively used its marketing and consumer insights to gain the advantage over rivals. Nike is already the frontrunner in the Chinese sportswear market with a 19% share. But it does face tough peers in Adidas at 15% -- and targeting market leadership by 2015 -- and homegrown rivals such as Li Ning and Anta, at 11% and 9%, respectively.

While Nike currently leads, it expects plenty of growth in the future, too. Management estimates the Chinese middle class to more than quadruple in the next ten years. Already China is Nike's second-largest market after the U.S., and it's gaining quickly.

And Nike has another huge tailwind in China.

Chinese citizens prefer the prestige of a global brand like Nike over domestic rivals, much as they like the cachet of eating at McDonald's or KFC. Nike is a luxury brand for upwardly mobile Chinese, and that's helping Nike increase sales at around a 15% clip there over the last three years.

So far the company has really only penetrated Tier 1 cities -- the biggies -- and it has room for further growth in Tier 2 and 3 municipalities, where the domestic brands are stronger. But it's already established a strong foothold and will continue to expand deeper into China.

And China is just the largest of the huge opportunities.

Nike expects other developing markets such as Brazil, India, and Central and Eastern Europe to show double-digit sales increases until at least 2015, adding on another $3 billion to $3.5 billion in revenue.

Nike's also expanding further into retail, allowing the company to capture higher margins and to obtain faster feedback on the most popular and profitable apparel styles.

That's all part of the massive depth of Nike's bench of marketing and consumer expertise and why the business will be able to take advantage of the massive wave of globalization that's still under way.

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