By Alexander Ragir(Bloomberg) -- The financial crisis triggered in the U.S. is proving to be a bigger problem for the rest of the world, based on a tally of the world's largest companies.
Wal-Mart Stores Inc., Procter & Gamble Co., Johnson & Johnson and Berkshire Hathaway Inc. vaulted into the top 10 biggest companies by market value last quarter as investors sought profit growth, data compiled by Bloomberg show. Emerging- market energy producers OAO Gazprom and Petroleo Brasileiro SA dropped out after falling by more than half on a plunge in oil.
``Everybody's focused in on steady Eddies, which haven't been the darlings of momentum investors and performance chasers,'' said Lincoln Anderson, who helps oversee about $150 billion as chief investment officer LPL Financial in Boston. ``Risk-aversion is super high so they look like much better bets than owning some oil company in Russia or Brazil.''
Demand for some of America's biggest household names helped the Standard & Poor's 500 Index outperform stocks in Europe and Asia as slower global growth extended the worst year for global equities since at least 1970. The S&P 500's 38 percent drop compares with declines of more than 42 percent for Europe's Dow Jones Stoxx 600 Index and the MSCI Asia Pacific Index. MSCI's Emerging Market Index lost 59 percent this year.
Wal-Mart, the world's biggest retailer, climbed to third in the rankings by market capitalization from 11th at the start of last quarter, according to data compiled by Bloomberg. P&G, the world's largest consumer goods producer, leapt 10 steps to No. 7, while J&J, the biggest health-care products maker, rose to ninth from 20th. Warren Buffett's Berkshire climbed to sixth.
Gazprom, Petrobras
At the same time, Gazprom, Russia's largest energy producer, fell to 37th from third on May 19, when the MSCI Emerging Markets Index reached its peak for the year. Petrobras, Brazil's state- controlled oil company, dropped to 38th from sixth. The companies' market values rose more than ninefold as emerging- market equities surged four times as fast as the S&P 500 during the five-year bull market that ended in 2007.
``In the midst of the U.S. collapse people have been moving to things more defensive,'' said Phil Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees $334 billion. Gazprom and Petrobras ``had a huge ascent and collapsed just as quickly.''
Markets around the world erased $30 trillion in value this year as the decline of the U.S. housing market stunted the economy, froze credit markets and saddled financial firms with more than $660 billion in mortgage-related writedowns and credit losses. World economic growth is projected to slip for a third straight year in 2009 to 3 percent, according to the International Monetary Fund in New York.
Export Economies
Brazil and Russia, whose economies are dependent on commodities exports, led the MSCI Emerging Markets Index's 59 percent drop from its May peak as the price of oil, copper and soybeans plunged on concern that demand will fall.
Wal-Mart, Procter & Gamble, J&J and Berkshire have a history of beating the market during stock sell-offs. When the so-called dot-com technology bubble burst, the S&P 500 lost 34 percent from March 24, 2000, to Oct. 9, 2002. Wal-Mart slipped 8.6 percent in that time, while Procter & Gamble jumped 56 percent, J&J gained 58 percent and Berkshire climbed 24 percent.
All four companies rose in the third quarter, defying an 8.9 percent decline in the S&P 500. P&G gained 15 percent, Berkshire climbed 8.2 percent, J&J added 7.7 percent and Wal-Mart increased 6.6 percent. They're down an average 11.7 percent this quarter, compared with a 22 percent drop in the S&P 500.
Higher Profits
Wal-Mart, based in Bentonville, Arkansas, reported second- quarter profit growth of 17 percent, exceeding analysts' estimates. Wal-Mart said Oct. 8 that sales increased 2.4 percent in September as consumers burdened by credit-card bills and mounting job losses bought discounted groceries and $4 medicines.
Procter & Gamble, based in Cincinnati, gained the most among non-financial companies in the third quarter. Earnings increased 33 percent in the three months ended June 30, beating analysts' estimates, as higher prices for Cascade dishwashing detergent, Iams pet food and Gillette razors helped counter rising costs, the company said.
J&J, based in New Brunswick, New Jersey, said on Oct. 14 that its third-quarter profit jumped 30 percent, beating analysts' estimates, as international sales rose and consumers continued buying contact lenses, allergy pills and mouthwash amid the economic downturn.
``Given the seriousness, the depth and the breadth of the crisis, people are buying very defensive names,'' said John Praveen, Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers LLC, a unit of Prudential Financial Inc., which oversees $638 billion. ``Rich or poor, you have to eat and spend money on buying some medicine.''
Buffett's Buying
Omaha, Nebraska-based Berkshire agreed Sept. 18 to buy Constellation Energy Group Inc. for about $4.7 billion, snapping up the largest U.S. power marketer at less than half its value prior to that week. Goldman Sachs Group Inc. and General Electric Co. sold Buffett a combined $8 billion in preferred shares that pay a 10 percent dividend, allowing Berkshire to earn $800 million unless the companies collapse.
``Berkshire has bought up a lot of things on the cheap,'' Praveen said. ``Their earnings are also more stable and the stock rises less in a bull market so it falls less in a bear market.''
Petrobras more than doubled in the year before its May 21 high after making the Western Hemisphere's biggest oil discovery in three decades. It has since tumbled 57 percent as crude plunged from $149.47 a barrel in July to $69.23.
Gazprom, based in Moscow, sank 76 percent since its May high this year after natural-gas prices fell by more than half since July and Russia invaded Georgia.
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