This tax-avoiding haven's luck is running out
Investors used to have luck betting on companies based in Ireland — it was an easy way to get the stock price up and beat the tax man. But lately, this Blarney Stone strategy hasn't been working.
The 10 Standard & Poor's 500 companies based in Ireland with stock histories going back at least three years, including drugmaker industrial company Tyco International (TYC), computer storage firm Seagate Technology (STX) and power management firm Eaton (ETN), are underperforming the markets over the past 12 months, according to a USA TODAY analysis of data from S&P Capital IQ.
Johnson Controls, Tyco merge in tax-avoiding inversion deal
Shares of these 10 Ireland-based companies are down an average of 15% over the past 12 months — which is nearly twice the 8.5% loss of the entire S&P 500. Five of the 10 stocks are lagging the market. Seeing the shares of Irish companies trail the market is an interruption in what's been a lucky strategy for years. These same 10 stocks are up an average of 48.5% over the past three years and 93% over the past five. That beats the S&P 500's 25% and 45% gains in the last three and five years, respectively.
Investors may need to readjust their expectations from shares of companies taking advantage of so-called tax inversions, where U.S. companies essentially move their headquarters to a lower tax domicile. Ireland is a popular choice — including in the nearly $18 billion buyout of Ireland-based Tyco by Milwaukee-based Johnson Controls (JCI) announced Monday. Shares of Tyco, however, jumped $3.56, or 12%, to $34.15 Monday on the news. Shares of Johnson Controls, which plans to move its headquarters to Ireland, fell $1.39, or 3.9%, to $34.21.
Maybe the Blarney Stone is losing its effect?
IRELAND-BASED COMPANIES IN THE S&P 500 ARE LOSING THEIR EDGE
Company, Symbol, 1-year gain %, 5-year gain %
Seagate Technology, -58.7%, 95.6%
Eaton, ETN, -29.5%, -17.8%
Endo International, ENDP, -26.7%, 102.9%
Ingersoll-Rand, IR, -24.5%, -5.1%
Tyco, TYC, -19.4%, 9.3%
Perrigo, PRGO, -5.1%, 44.6%
XL Group, XL, -1.9%, 25%
Medtronic, MDT, -1.6%, 63.1%
Allergan, AGN, 6%, 444.2%
Accenture, ACN, 14%, 96.7%
Ireland company average, -14.7%, 48.5%
S&P 500, -8.5%, 24.9%
Sources: S&P Capital IQ, USA TODAY
Matt Krantz on Twitter: @mattkrantz.