However, even with estimate-beating numbers, the market has not cheered results like we saw during 2009’s historic rally. This is likely due to the continued stagnant sales in developed countries where consumers are still in a state of shock following the recession (and continued high unemployment). However, those companies that have a strong presence outside of the developed world, or aren’t exposed to the consumer market, are now in the best position to take advantage of the continued global recovery.

 

Take Coca Cola (KO), for example, which is part of our Growth Portfolio. Yesterday the company announced that its net income had risen 55 percent to $1.54 billion, or 66 cents a share, from $995 million a year earlier. We see signs of the recovery, not so much in the increased net income, but in improvements in its top-line sales. Coke’s net revenues were up 5.4 percent year-over-year to $7.51 billion. Revenue stemming from sales in Eurasia and Africa rose 6.9 percent to $542 million, while revenue from Latin America was up 19 percent to $1.12 billion. The increases in these developing parts of the world offset the decline in North America where sales fell 4.5 percent to $1.89 billion.

 

Another critical measure of performance, in this case, is volume sales. While volume increased by 29 percent in China and 20 percent in India – and global volume was up 5 percent – North American sales volume was down 1 percent. The fastest growth came from the “Pacific” region, which includes China, Thailand, Australia, the Philippines, Korea, and Vietnam. There, sales were up 11 percent.

 

Unfortunately, one drawback for Coke is that margins tend to be tighter in emerging markets than in the more developed countries. Nonetheless Coke was able to boost its gross margin slightly, from 63.9 percent to 64.7 percent.

 

Some of Coke’s gains were the result of a weaker dollar. Adjusting for the decline in the dollar, net income was up only 3 percent. However, our belief is that over the long-term, the dollar will continue to fall, which means we expect the company’s currency exposure to continue to help profits.

 

The stock moved higher on the earnings report, but still only trades at 15 times this year’s expected earnings. With great exposure to the developing world, and income coming from other sources than the US greenback – we continue to recommend the shares.

 

Last week, another member of the Growth Portfolio, Visa (V), reported a strong fourth quarter. Despite finding a home in many wallets, Visa is actually well-insulated from trials of consumer credit and has continued to thrive in these tough economic conditions. This is because Visa doesn’t directly extend credit to consumers; that job rests with the banks that issue the cards that bear the Visa logo. Instead, Visa simply processes the transactions and collects a fee in exchange for doing so.

 

As more consumers may be trying to reduce the amount of debt they have by cutting back on their credit cards purchases (with the help of card issuers reigning in limits), a growing number of them are switching to debit cards. Debit purchases now account for 54 percent of the payment volume in the United States, which is good new for Visa. Along with credit cards, the company is the leading provider of debit cards worldwide. In fact, the company boasts roughly 75 percent market share in the US – easily dwarfing Mastercard, the second larger provider, in this category.

 

This dominance has resulted into strong earnings for Visa. This past quarter the company’s profits rose by 33 percent to $763 million, or $1.02 a share, while payment volume was up 8.5 percent. Total transactions increased by 12 percent, including a 17 percent jump in debit transactions. The company’s revenue rose 13 percent to $1.96 billion.

 

The stock rallied sharply on the news, yet remains attractive. Shares are currently trading at 18 times next year’s earnings, and with earnings growth close to 20 percent – boast a PEG of less than 1. We consider this a bargain, for an utterly dominant company with an few headwinds.