Investing in Your Backyard: Ireland

Break out the Guinness and fish'n'chips. It's St. Patrick's Day on Wall Street!

There are many good reasons for researching investment opportunities in a certain geographic area. Today, we look at the Emerald Isle in honor of St. Patrick's Day.

The days of potato famine and mass exodus to the United States are far behind old Eire, where business is booming these days. Dublin and Limerick have come a long way from the Viking settlements they once were, and the 4 million true-blue (or is it green?) Ires play an important part in the European economy today.

If you happen to live in Cork, you already have a few advantages when it comes to evaluating the local market, such as access to local news sources and the word on the street, and a high probability of being a customer or employee of these companies. And if you're not a local resident, you might still want to know whether the weather matches the business climate -- a hot area could be chock-full of undiscovered treasures on their way to greatness.

Without further ado, here are the largest companies headquartered between Bantry and Creeslough:

From the top
That's hardly a bunch of potato farmers. Eire hosts a couple of large banks, a building materials giant, a pan-European airline, and a drug developer that I think belongs higher up on this market-cap list.

But enough about me. What does the CAPS community make of these stock market shamrocks?

Motley Fool Global Gains pick Allied Irish Banks has plenty of fans among our players. I'll let deucegigs speak for the lot o' them: "One of the top three banks in Ireland with more than 20% market share. Solid current yield of 3.2% with a payout ratio of less than 40%. Bank has been very profitable due to operational excellence and tight cost controls. Participating in the strong and growing Irish economy."

Other players bring up a significant market presence in the emerging Polish market, as well as the possibility of a buyout by one of the global mega-banks. And I can't find one harsh word said about Allied Irish in CAPS. The same goes for Bank of Ireland, except that one player is concerned about overvaluation, and this one is more of a pure play on the Irish market alone.

Sandwiched between the financial institutions, CRH is a building materials manufacturer and retailer with solid management and a global expansion strategy. To wit, according to all-star player windwardpete: "CRH's CEO is a former President of the Bank of Ireland. CRH acquires 51% of the stock in building materials companies, to control the industry world wide -- Italy, former Soviet Republics, Russia, Belgium, Chile, Argentina, USA, UK, i.e. all over the world. CRH doubles in size every 4 years."

Not too shabby. As for Ryanair, you've probably seen the name if you planned to make a trip to Europe in the past few years. It's a low-cost carrier with 11 hubs, running mostly short routes across the continent. Toriacht is another all-star CAPS player with a view on Ryanair: "'The low fares airline. Turns all publicity good or bad into positive news to promote itself. Young, hungry, world class CEO. Constantly innovative. The 10 new EU accession states are a goldmine in waiting for Ryanair."

For Elan, I can't resist echoing this week's Dueling Fools with excerpts from our CAPS pitches. Hence, from TMFZahrim (that's me):

"Elan is way more than MS and Tysabri. While that drug will drive sales, profits, and stock price increases for a good handful of years, the more important Alzheimer's drugs are coming down the pipe, looking good every step of the way. You get to invest in improving people's quality of life and dignity, and make good money doing it. And that's not even accounting for the drug delivery technology that's already proven but still taking baby steps. I'm in for the long haul."

On the other side, TMFBreakerBrian (that would be Brian Lawler): "The company won't be profitable for a long long time (I'm talking real profits/cash flow, not future EBITDA profitability that management is so fond of boasting about). Management also is a little bit too loose with the options. How many did they hand out to themselves last year when the stock price was in the doldrums due to their own actions?"

Enough about me again
Elan isn't the only Irish biotech company. Outside the largest businesses on the island, you'll find micro-cap diagnostics expert Trinity Biotech (NASDAQ:TRIB), which has garnered four CAPS stars on the promise of its do-it-yourself AIDS testing kit and focused acquisition strategy. There's also the somewhat larger clinical research shop ICON (NASDAQ:ICLR), which helps the big boys set up complicated drug trials across the globe. Slo1111 thinks it's an important cog in the drug development machine, and well worth its five stars:

"We are on the eve of drug development in ways we are only imagining. Companies like Icon help drug companies handle the logistics of clinical trials, which allows larger pipelines. It is a competitive business and cash flows are nothing to brag about, but Icon has proven itself as a strong outsource partner and will reap the rewards for drug and delivery technology, all of which needs to navigate the process to market."

Irish businesses traded on U.S. exchanges also number a couple of software companies and a commercial aircraft leaser. That's 10 companies on easily accessible markets, with a combined $79 billion market cap, $43 billion in annual revenues, and $6.5 billion of earnings. It's hard to complain about the generous allotment of CAPS stars when they're supported by a marketwide 15% profit margin.

Of course, if you go to the European stock markets, you'll find 46 Irish businesses, but their aggregate net margin is a less-generous 11% on $85 billion of revenues. It looks like we have access to the cream of the crop, the companies generating half of the Emerald Isle's sales but two-thirds of her net income.

Most of these companies are headquartered in Dublin. There are a few outliers in Limerick, Cork, and a couple of small-fry stocks on the Euro exchanges up in Northern Ireland. But Dublin seems to be the clear business center of Ireland.

I've never seen such a bumper crop of CAPS stars -- not in Austin, Minneapolis, nor Seattle. Is it just the luck of the Irish?

Hardly. Ireland sports among the lowest national-debt-to-GDP ratios in the world, after the Celtic Tiger economic boom of the '90s. It's isolated enough to have a unique flora and fauna, but connected enough to export nearly 80% of its gross domestic product. There are good, solid reasons to invest in Eire.

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

Further Foolishness:

• Erin Go Bragh! Investing in Ireland, Anno 2000
• Allied Irish's Fantastic Year

Fool contributor Anders Bylund is an Elan shareholder but holds no other position in any of the companies discussed here. His three most-favorite beers are all Irish. You can check out Anders' holdings if you like. Foolish disclosure is always red-hot.