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Swiss Investments

Written By Brian Hicks

Posted July 14, 2008

LAUSANNE, SWITZERLAND: "The other European armies just tell us, keep our money safe and we’ll leave you alone." That’s Swiss history according to Luc, a young French-speaking banker I spoke to the other night in front of the city’s 13th century cathedral.

While what’s going on in the States with Freddie Mac and Fannie Mae looks even scarier from abroad, I’m getting a sense of just why Swiss investments are the strongest fortress of any portfolio.

Swiss Investments

Swiss bank accounts are the hallmark of financial safety, and companies like Swiss Reinsurance (OTC:SWCEY) are the final line of defense in the risk management world.

Swiss Re, as it is known, was founded in 1863 in Zurich, and since then it’s become the world’s largest reinsurer.

Just the other day the company announced a 1 trillion British pound venture into managing risk in pension funds, which as you know is a hot topic these days. Swiss Re’s CEO Richard Farr says the pension buyout market is worth a solid 2 trillion pounds in the U.S., and another trillion or so in Holland and Germany.

From Norway to Detroit, retirement fund managers bought up mortgage-backed securities they thought were sliced up thinly enough to eliminate serious risk. That turned out to be a false assumption created by financial wizards who were too crafty for their own good.

So guess who’s going to take the weight? The Swiss.

Swiss Re is trading at under 7 times earnings just below 3-year support at around $63 per ADR share, making it an attractive value buy in an uncertain financial landscape. The company has had to absorb some major writedowns as a result of the global credit market turmoil, and reinsurance rates have come down again after spiking in the wake of Hurricane Katrina.

But Swiss Re is still a gainer for the year, compared to an average drop of around 10% for Bloomberg’s Insurance Index of 500 companies.

And it’s not all about sitting at home and playing backstop to the global financial system in Zurich… There are plenty of Swiss companies that are exerting their influence around the world.

Swiss Companies That Will Stay Strong

ABB Ltd. (NYSE:ABB) is a Swiss and Swedish joint venture that Global Growth Stocks subscribers have ridden to triple-digit gains in the past couple years. Even with the down market, this infrastructure provider is cranking out products like power systems and grid connections while continuously adding to its order log.

Maybe Swiss companies just have a penchant for picking industries that won’t wave in the wind as equity markets drop. It’s not speculation to say that people and companies want a backup plan, and it’s not conjecture to say developing countries want to make their cities and factories perform at a high level.

That’s just what ABB accomplishes, and that’s why it’s been a mainstay of the GGS portfolio.

Silly as it may sound, chocolate is also about as bulletproof of a demand target as you’ll find. That’s why I like Nestle (OTCBB:NSRGY), which makes Crunch bars, bottled water, and even health and beauty products through its Galderma division.

With its diversification, Nestle has turned its headquarters down the road here in Vevey, Switzerland into a bunker against the damage that’s been done to many consumer-oriented stocks anticipating a recession.

There are also big-time pharmaceutical companies like Ciba and Roche based in Switzerland, leading the way with life science advances that are known to deliver great long-term returns as R&D spending turns into successful trials and efficient time to market.

All in all, if you want to bunker down with diversified international blue chips, Switzerland may just be the investment destination you’re looking for.


Sam Hopkins