Our big miners have come in for a lot of flak recently — including from this columnist — and much of it is completely justified.
They expanded when prices were high, blind to the near-certainty that such an advantageous situation couldn't last.
They paid out big dividends — and continue to promise the world in that arena — just as they should be conserving cash. And, frankly, the industry dynamics in a commodity business are just plain unattractive.
But for all of that, our larger miners have succeeded in an area that few others have — taking Australian businesses to the world.
BHP Billiton, 'The Big Australian', sits alongside industrial companies like News Corp, CSL and Cochlear, among others, who can truly say they've been internationally successful.
Others, like NAB, which is still to finally extricate itself from its UK debacle, are the other side of the coin — businesses that tried, and didn't quite make it.
International expansion is risky. More often than not, companies who have been successful in Australia have done so under peculiarly Australian conditions — be that brand recognition, industry structure (think: our banking oligopoly) or simply a deep knowledge of the local market.
Taking that overseas — even to a country that shares similar demographics — is a tough ask. Just ask UK retailer Tesco, which tried to enter the US market and failed. Or Starbucks, which couldn't sustain more than a handful of stores here in Australia.
Needing to grow…
Unfortunately, the problem for many Australian companies is that overseas is the only avenue left, if they want to grow at a material rate. Once a market is saturated — how many more banks or supermarkets do we need? — growth of even the best company must slow. And if it hasn't, it surely will.
That explains at least some of the rationale behind NAB's forays overseas, and ANZ's move into Asia, as well as Woolworths' aborted expansion into electronics in India and reported past interest in an Asian supermarket chain.
… Or meeting a need'
Of course, there are better reasons to go overseas, too — when you simply have a product or service that you believe can do well with the 99% of the world's population that live outside Australia.
A world-leading hearing aid? A knack for giving news consumers what they want? A blood-fractionalisation and immunisation company that can apply its skill and technology, no matter where it is in the world?
These are businesses that can go on to be worth many times what they'd otherwise be valued at, had they just stayed here at home.
Australia is a country of almost 24 million people. In a global community of 7 billion. A company that can successfully export itself can be a very attractive investment opportunity.
Those companies I mention above may well be decent investment opportunities — but just as it's hard to see Australian supermarket companies expanding materially here at home, some of those companies are already butting up against their global limitations.
Look no further
So which companies are the next generation of global success stories? For my money there are a few places to look. Australian digital classifieds businesses like Seek and REA Group (parent of realestate.com.au) are a good start.
Add in companies that are making a name for themselves overseas — in China, in particular — like Bellamy's and Blackmores, and that's another area of opportunity.
And lastly, companies taking local know-how to the world, like mid-cap financial technology company, GBST, travel manager, Corporate Travel Management, or cloud-accounting business, Xero, are yet another example.
Of course, there's a big difference between being able to identify the types of opportunities, and having those opportunities available at attractive prices. Some companies with international ambitions may fall at the first or second hurdle. Others may do well, but never justify the current share price.
But if you can find the right opportunities — and they're out there — the size of the price is far greater than that available in Australia alone.
