5 Blue-Chip Stocks Highly Vulnerable to Eurozone Weakness

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It’s tempting for investors to think of the European economy as its own distinct entity with its own distinct problems. But in today’s day and age that’s simply not true — companies coexist in a global economy, not independently in a vacuum.

us dollar euro chart
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 And while it seems counterintuitive, some of the biggest-name blue-chip stocks in the stock market also happen to be the most vulnerable to the woes of the eurozone. Why?

It all centers around the Euro/U.S. dollar exchange rate, illustrated by the chart to the right. Right now, the Euro is weak relative to the dollar, which means one Euro buys fewer greenbacks than it used to. With America’s economy chugging along nicely and the European Central Bank mulling quantitative easing, the Euro may get even weaker.

This chart is awful news for U.S. companies with lots of European revenue, since American companies report financial results in US dollars. So beware the following five U.S. blue-chip stocks: Each one relies heavily on European sales, and could pollute your portfolio if Europe’s woes continue.

Vulnerable Blue-Chip Stock #1: General Electric Company (GE)

General Electric company GE stock blue chip stocks eurozoneMarket Capitalization: $256 billion
European Revenue (FY 2013): $25.3 billion
% of Total Revenue (FY 2013): 17.3%

General Electric (GE), one of the most diversified and vast conglomerates in the world, does everything from technology to finance to aerospace to household products. GE is actually trying to get less diversified, spinning off segments like Synchrony Financial (SYF), formerly GE’s retail finance business. (SYF stock went public on July 31).

Despite modestly rising earnings and revenue, GE stock is down about 9% this year, and could go lower if the eurozone enters crisis mode.

Vulnerable Blue-Chip Stock #2: Ford Motor Company (F)

Ford motor company stock blue chip stocks eurozoneMarket Capitalization: $54 billion
European Revenue (FY 2013): $27.9 billion
% of Total Revenue (FY 2013): 20%

Ford (F) stock is probably one of the most distinctly American blue-chip stocks you can think of. But as the auto industry has gone global and industrial titans like Ford have been forced to look abroad for growth, the automaker isn’t as All-American as you think.

Increasingly susceptible to headaches like the eurozone and currency fluctuations, a falling Euro has been one of the factors sending F stock on its way to 10% losses in 2014.

Vulnerable Blue-Chip Stock #3: General Motors Company (GM)

general motors company gm stock blue chip stocks eurozoneMarket Capitalization: $48.5 billion
European Revenue (FY 2013): $20.1 billion
% of Total Revenue (FY 2013): 12.9%

General Motors (GM) stock, like Ford, is far more geographically diversified than you’d think. In fact, in the 2013 fiscal year a whopping 71.3% of GM’s retail vehicle sales volume came from outside the U.S. Thankfully, only about 13% of its sales came from Europe in dollar terms (most came from Asia and South America), so a weakening Euro doesn’t threaten GM stock as much as some other blue chips on this list.

That said, GM stock has its own problems, and has plunged about 25% year-to-date as the company’s extensive recalls put a strain on the automaker’s financials.

Vulnerable Blue-Chip Stock #4: The Coca-Cola Co (KO)

the coca-cola co ko stock blue chip stocks eurozoneMarket Capitalization: $178 billion
European Revenue (FY 2013): $4.6 billion
% of Total Revenue (FY 2013): 9.9%

Beverage giant Coca-Cola (KO) takes the crown as the company with the least reliance on Europe in this article, but KO still gets 10% of its sales from the continent, which isn’t peanuts. Coca-Cola is actually fighting a more ominous trend than the strengthening U.S. dollar: the unpopularity of carbonated beverages in general.

Although KO stock remains one of Warren Buffett’s largest holdings, ol’ Warren’s getting up there in the years, and he may not have his fingers to the pulse of consumers as firmly as he once did. With KO issuing a profit warning just last week, investors should tread carefully around this behemoth in an out-of-favor industry.

Vulnerable Blue-Chip Stock #5: McDonald’s Corporation (MCD)

mcdonalds corporation mcd stock blue chip stocks eurozoneMarket Capitalization: $90.5 billion
European Revenue (FY 2013): $11.3 billion
% of Total Revenue (FY 2013): 40.2%

McDonald’s (MCD), of the five stocks surveyed, is far and away the blue-chip stock with the heaviest reliance on Europe, relying on the struggling continent for a remarkable 40% of annual sales. No small wonder, then, that MCD stock is in the red for 2014, a year in which the Euro has lost major ground relative to the U.S. dollar.

Not a single one of the five blue-chip stocks on today’s list has earned investors a positive return this year. Coincidence? Doubtful. And if current trends continue, MCD stock isn’t likely to soar anytime soon. McDonald’s can’t even get U.S. same-store sales in order, so unless that number turns positive and the Euro regains some strength, I’d avoid MCD stock.

As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid.


Article printed from InvestorPlace Media, https://investorplace.com/2014/10/blue-chip-stocks-to-sell/.

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