Eoin Treacy's view I posted a report by K.J. Martijn Cremers from Yale on Friday discussing the outperformance of foreign listed affiliates of various companies. He proposes that the primary reasons for their outperformance and lack of volatility is that they offer access to some of the highest growth markets while benefitting from the corporate governance and improved product offering of their parents. I agree with both these reasons and would like to propose another.

The parent companies of foreign affiliates represent passive holders of the stock. They contribute to a thin trading environment for a number of the shares concerned. This has helped to flatter performance and also contributes to reduced volatility.

Before proceeding to the shares I would like to raise two points. The first is that the performance figures are equal weighted. Such indices generally tend to outperform because they give an additional influence to small companies that tend to be higher beta. For example compare the performance of the S&P500 with the equal weighted equivalent. It would therefore have been more reflective to compare an equal weighted index of affiliates to equal weighted indices. Market caps for the various affiliates vary widely and some are highly illiquid which could make exiting positions rather difficult. Additionally, companies such as Coca Cola, Unilever and Nestle have foreign affiliates in a number of different countries so they receive an additional weighting using this approach.

My second concern is that the report does not include some of the largest, most widely held foreign affiliates such as Siemens and Colgate Palmolive in India, SAB Miller and Richemont in South Africa, Ambev in Brazil or Indonesia's largest company Astra International to name a few. The addition of such important companies could have a material effect on the performance of the group not least because they are some of the better absolute performers globally.

I have added the above mentioned shares to a section of my Favourites and removed India's Hero Motors because it is now independent of Honda.

Here is PDF of a Performance Filter for the constituents where most of the titles are clickable. By clicking on a title, the requisite portion of the Chart Library will open in a new window and you can easily add the share to your own Favourites list.

Following a click through, the countries hosting the most consistent uptrends among the affiliates are India, Indonesia, Malaysia, Brazil and South Africa which is in line with the relative performance of these markets since October. Interestingly, the affiliates that are doing best tend to share a common country rather than sector.