Conal Gregory: US is becoming a land of opportunity once again

Two-thirds of companies quoted on the London stock exchange either conduct most of their business in the US or are dollar denominated, with many also having dual listings with New York. They include such pharmaceutical firms as AstraZeneca and GlaxoSmithKline, defence giants such as BAE Systems (formerly British Aerospace) and cruise line operators such as Carnival.

Confidence in the US will assist Yorkshire firms such as Strulch which offers an innovative garden mulch and peat substitute. Based at Burley-in-Wharfedale, they can export their intellectual property rights.

Leeds-based insurance brokers and risk managers Bartlett, which already has an office in Philadelphia, should find more demand for their services as corporate America recovers from a period of very low capital spending. Already inventory expenditure is recovering.

As emerging markets – notably China and India – provide such a compelling investment story, the US has slipped down the investment news agenda. Yet it continues to offer excellent investor opportunities with a growing population, abundant natural resources and a democratic political system that enshrines intellectual freedom and encourages technological innovation.

In the Association of Investment Companies' annual poll of fund managers, only four per cent last year selected the US as likely to be the best performing region compared to 28 per cent in 2008. Valuations have not looked this attractive in recent memory: the broader market Standard & Poors' index of top 500 companies is currently trading at just over 12 times projected earnings for the next year, while over the previous eight earning cycles, the average actual earnings figure has been 15 times.

The US National Bureau of Economic Research announced that the American recession ended in June last year. Any fears still of a future downturn will not therefore be regarded as a double-dip following the 2007 fall but as a new recession. Such concerns are still weighing against many good stocks. Instead of predicting the exact moment to invest, a drip-feed monthly subscription reduces volatility in the market.

Savers here should take this chance to increase their exposure to the US market as it holds some of the world's highest quality companies and strongest brands. US corporations have succeeded in reducing costs during the downturn, leading to strong cash flows and strengthening capital structures.

Corporate America may be back to peak profit levels by the end of 2010 – only four years after the prior peak. This is in stark contrast with the 12 years taken after the Great Depression.

Small companies with niche opportunities could be the right avenue. Their "current valuations are at levels usually only seen in a crisis, which is not where we think the sector is at present", declares Robert Siddles, manager of F&C US Smaller Companies Trust.

Microsoft, of course, was a small company which grew. It had the right entrepreneurial skills at the right time. The US is an innovative nation and profit is not a dirty word.

Obama will continue to grapple with high levels of unemployment and mortgage debt. The electoral knock did not restrain him from pouring money into the economy – despite former US Federal Reserve chairman, Paul Volcker, advising earlier this week: "When money is too easy for too long, we will have more asset bubbles." This is a clear warning that further "quantitative easing" may spark inflation.

Healthcare should continue to grow even though Obama's package may be diluted. A Yorkshire winner in this field should be Surgical Innovations in Leeds, designers and manufacturers of innovative devices for minimal invasive surgery. Already the US is their top export market.

US firms with strong export brands form another dimension. From the iPhone by Apple and mobile phone with Qualcomm's patented technology to McDonald's and YUM! (the globe's largest restaurant company), consumers love to spend money on recognised brands.

While banks are often not helping expansion by over restricting credit, high branded companies should generate sufficient cash to benefit from the exceptionally low interest rates. The US central bank has promised repeatedly to maintain rates at zero to 0.25 per cent for a "prolonged period".

The strong ballot for "small government" and "less intervention" is not likely to help housebuilders, property prices or the 11.2 million homeowners – 24 per cent of mortgagees – who are in negative equity. Obama is likely to have to reduce public subsidies in this sector as he struggles to balance the budget.

A collective fund that holds a fair proportion in housing related stocks – as well as in banking and technology fields – is not likely to show growth.

Instead, a well-managed one that selects those fields that are under-valued and emerging could be a good long-term investment. Look particularly for stocks in manufacturing and transport, commodities (agriculture and coal), aerospace and defence, broadband data, insurance and energy infrastructure.

Read Conal Gregory in the Yorkshire Post every Saturday.

Conal Gregory is the Yorkshire Post's personal finance correspondent.