Buy American? A Factor-Based Look at Domestic Exposure Amid Global Trade Uncertainty
Author:
Senior Director, Head of North American Client Success
Since the onset of heightened tariff tensions, markets have been shaken by volatility reminiscent of the early days of the COVID crisis and even the Global Financial Crisis (GFC). While policy outcomes remain uncertain, one strategic angle that is especially relevant to asset managers and fund selectors is investing in companies with low exposure to foreign revenue. In other words, "Buy American" isn't just a slogan — it may be a factor worth examining.
Identifying Domestic Exposure: A Factor Approach
To explore this strategic angle, the Client Services team at Confluence used Style Analytics to identify U.S.-based companies with minimal foreign revenue. Regional revenue breakdowns, often buried in company 10-Ks, were extracted and normalized to calculate the "% of Foreign Sales" factor across large-, mid, and small-cap segments.
Below is an example of how this is calculated: Intel's latest annual 10-K showed that only 24.47% (e.g., $12,994 billion/$53,101 billion) of its revenue came from U.S. customers. That means more than 75% of its business is export-driven.
Figure 1: Intel's 10-K shows significant foreign sales exposure.
Figure 2: Intel's “Foreign Sales” on the Confluence Style Analytics Enterprise platform.
Portfolio Construction Using Style Analytics
Using Style Analytics Markets Analyzer, sector-neutral portfolios of U.S. companies with low foreign sales were created. These were then analyzed in Portfolio Analyzer to validate factor exposures and style profiles.
Figure 3: Factor exposures of a Large-cap U.S. portfolio with minimal foreign sales exposure.
As expected, the portfolio has a significant negative tilt to foreign sales.
Indicates full focus on U.S.-domiciled companies based on current portfolio composition.
Shows sector-neutrality across the 11 GICS sectors by design
As expected, these portfolios tilted away from foreign sales, maintained U.S.-only exposure, and avoided many of the mega-cap "Magnificent Seven" names that dominate the broader indices. The result was a distinct composition of smaller, more value-tilted companies with greater domestic orientation.
Similyzer and Peer Insights: Who’s Already Aligned?
Similyzer was used to compare all portfolios in the eVestment universe against the custom-built low foreign sales portfolio to identify institutional portfolios that mirrored this domestic footprint that have been analyzed against the Russell 1000 Index at any point over the last 36 months. Each portfolio is scored from 0 to 100, with 100 being the most similar and zero being the most dissimilar to our factor portfolio. We further refined this list to only Large-cap US funds, those with at least 95% of their investments in the region, and portfolio data available as of March 2025.
Figure 4: Similyzer ranking of portfolios based on similarity to low foreign sales Large-cap strategy.
Style Analytics Peer Insights was then used to analyze these portfolios further, revealing a distinct profile: they were generally cheaper, slower-growing, lower-volatility, and smaller-cap versus the Russell 1000.
Interestingly, the graphic below shows the knock-on impacts from portfolios focused on more domestically oriented companies.
Figure 5: Style traits of low foreign sales peer portfolios compared to the Russell 1000.
Portfolios that, in aggregate, exhibit lower exposure to foreign exports
Generally cheaper
Slower growing
Smaller cap
Lower Volatility
This recent performance struggle was more than likely due to being on the wrong side of the mega-cap “risk on” trade since 2022, where Large-cap equities generated returns more than 25% in each of the last two calendar years, driven by outsized gains from magnificent seven stocks like Nvidia and Amazon.
How Deep Is Domestic Exposure?
Within one representative fund, 29% of holdings had less than 5% foreign sales exposure, and 45% had less than 25% — a stark contrast to the Russell 1000.
Figure 6: Cumulative portfolio weight by % foreign sales threshold.
Sector Examples
Figure 7: Wells Fargo’s revenue distribution by geography.
Expanding the Analysis: Mid and Small Caps
The exercise was repeated for mid-cap and small-cap universes. An interesting contrast here is that there isn’t as much of a style footprint as the Large-cap group of funds. Performance was mixed, as was the portfolio’s exposure to value, growth, and volatility factors.
Figure 8: Mid-cap portfolio Peer Style Analysis.
The same type of analysis was used for the small-cap end of the market cap spectrum. A Markets Analyzer sourced factor portfolio was created. It emphasized domestically oriented companies among small-cap companies. Similyzer ranked ordered portfolios across the eVestment Small Cap Value, Small Cap Core, and Small Cap Growth peer groups using the low foreign sales portfolio. Style Analytics Peer Insights in Figure 9 analyzed those portfolios with the highest scores.
Figure 9: Small-cap Peer Style Analysis.
Conclusion: Factor Insights in Action
It's important to note that this analysis does not factor in the imported raw materials used to make the final products sold domestically.
Whether or not the global trade environment stabilizes in the near term, Style Analytics offers a structured framework for analyzing domestic vs. foreign exposure as a key factor within the US market. Through portfolio construction, peer analysis, and style evaluation, it becomes evident that domestic orientation carries implications not just for volatility and valuation but also for participation in the recent mega-cap-led rally.
While the future of tariffs and trade remains uncertain, this case study illustrates one approach to quantifying and comparing portfolio exposure to foreign revenue. With the right tools, fund selectors and asset managers may be better equipped to position portfolios with greater precision, either to insulate against geopolitical shocks or to lean into risk-on rebounds.
Note: All data and screenshots are sourced from Style Analytics modules, including Markets Analyzer, Portfolio Analyzer, Similyzer, and Peer Insights.
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About Confluence
Confluence is a global leader in enterprise data and software solutions for regulatory, analytics, and investor communications. Our best-of-breed solutions make it easy and fast to create, share, and operationalize mission-critical reporting and actionable insights essential to the investment management industry. Trusted for over 30 years by the largest asset service providers, asset managers, asset owners, and investment consultants worldwide, our global team of regulatory and analytics experts delivers forward-looking innovations and market-leading solutions, adding efficiency, speed, and accuracy to everything we do. Headquartered in Pittsburgh, PA, with 700+ employees across North America, the United Kingdom, Europe, South Africa, and Australia, Confluence services over 1,000 clients in more than 40 countries.
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