The “AAA” Club: Why The Safest Companies Bet The Market

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There are only six companies left with "AAA" ratings from both S&P and Moody’s. The are Automatic Data Processing (ADP), Berkshire Hathaway (BRK), GE (GE), Johnson & Johnson (JNJ), Exxon (XOM), and Toyota (TM).

Wall St. might think that companies with strong ratings would be modest market performers because they make "safe" business decisions. In reality, all of the companies, except Toyota, have out-performed the S&P over the last year. Toyota at least has the excuse that it operates in an industry which has had two brutal years.

The trick for doing well might seem to be that the companies are diversified. But, that is not entirely true, especially with Exxon and ADP. More likely, the firms do extraordinarily well because they have a very large portion of their business coming from outside the US. While the market may be slowing here, it is still robust in some emerging markets and these operations are moving assets to those regions.

The advantages of being global can be overstated. Emerging countries can be politically unstable. But, for the time being, they produce.

Douglas A. McIntyre