Which international stocks are the best bet for a US investor right now?
I've read at least 3 articles this week telling people to diversify out of U.S. equities and into international stocks. I've also seen a couple of questions on TickerHound related to international investing - a question about the Vietnam Index comes to mind. So, for all of you international investors out there: where should US investors look to put their money now and why?
Best Answer
2709 points
Oldman answered one year ago …
IMHO, LatinAmerica, and particularly, Brazil. With an appreciating real, and a commodity base, most Brazilian Financials, Telephone and raw material producer/converter companies are good growth and income plays: CPL, TSP, SID, PBR and many others including Banco Bradesco and regional telecoms. I would research the "recent news" about any of these possibilities, because some have had a run up on speculation about megamergers (Rio Tinto) and the EWZ (index etf) is much more expensive than the ILF, in terms of P/E.
In Argentina, there are conversions of estancia (large cattle ranches) into grain farms, some of which have foreign corporate backing, but the weather may have more effect on grain than cattle, so it's iffy, unless you want to buy a "ranchette" and lease it out. In Chile and Peru, more miners are investing in desalination plants, because Andean aquifers are running dry, and farmers need the remaining water for food.
You can look at the listing of ADR's/ADS' by country at BONY and Citi's websites.
Answers
3678 points
MNSL answered one year ago …
Best bet for US investors right now are less known markets such as frontier markets.
In addition there are stocks listed in other developed countries but their businesses are situated in countries like China, Malaysia, frontier markets such as Peru etc. We must try to enter at the early stage by selecting correct stocks to get above average return in the long run.
For example when there was a financial market and currency collapse in East Asian Countries including Korea, Intelligent investors not only from USA but also from oil rich countries invested in Korean Market. Their decisions made them to become some of the richest investors in the world. Similarly well informed institutional investors including top investors through out the word invested their money in countries like New Zealand, Australia, Brasil,UK, India, China, Malaysia, Indonesia, Vietnam, Philippines, Some middle east countries etc at the early stage of commodity, stock and real estate bull market. They made unbelievable return due to bull market until last year. I think some of these markets are over valued now. It is better to avoid now. You have to be very selective when you buy stocks in these countries including in USA.
I think we can’t purchase stocks directly in some frontier markets. There are ETFS listed in countries like UK some of them are exposed to agriculture including soft commodities and animal production in emerging countries and frontier markets. According to analysts they have a bullish outlook for Asian frontier markets in 2008 and 2009. Similarity some analysts and fund managers see bullish outlook not only for Asian Frontier markets, but also for east European countries, Some African Countries and some South American countries. Some frontier markets are:
Vietnam
Pakistan
Bangladesh
Sri-Lanka
Kenya,
Nigeria
Qatar
Peru
Mongo... ... lia
Mauritius
Ukraine
UAE
Bahrain
Tunisia
Croatia
Slovenia
However we must be very careful in selecting stocks in these countries. It is better to do research before buying stocks. Some foreign funds including hedge funds operate on short term basis and their activity can make big difference to the market. In addition to this some research house have bias recommendation towards their stocks. After accumulating stocks by well informed investors and some hedge funds once stock price appreciated by more than 200%, there will be publicity on the media as well. So individual investors always buy at higher prices. So their return is low and sometimes they actually make loss.
I think we must apply Peter Lynch Method to select stocks in frontier markets to get above average return. We must try for hidden gems in those countries by doing research our selves. We must not buy just because investment funds and research houses recommend us. For example most of top investment houses never recommended soft commodities exposure to Malaysia and some frontier markets. Only few identified potential of this sector at the early stage of Bull Run. Instead they recommend pricy blue chips companies in some frontier markets.
However there are good research reports published by some small Stock Brokers. Generally they are not bias. Currently there is a good demand for soft commodities including animal production due to demand from China, India and other emerging and frontier markets. This sector was neglected by many instead they went after telecom sector. Some companies exposure to soft commodities and animal production now make consistent earnings and has long-term potential due to predictability and reliable earnings in the fugue. Here also we have to be careful in selecting stocks. We must select companies with outstanding management with innovative ideas, predictability, consistent future earnings, with reliable existing customers and good market share for their product band, with less or no debt, availability of low cost materials for their businesses, with huge potential for their product in export market including expansion of their business. In addition there is huge potential in the financial sector in these countries. Still some of frontier markets are at the early stage in financial sector. Currently China and India gradually expanding their investment into some of these frontier markets.
Pl see following website for further information:
http://www.forbes.com/markets/feeds/afx/2008/02/04/afx4609531.html
Smaller Asian markets seen offering equity outperformance this year
http://jetfinvestments.blogspot.com/2008/01/barings-says-asian-frontier-markets-to.html
Baring says Asian frontier markets to dominate investment opportunities in 2008
http://www.credit-suisse.com/news/en/media_release.jsp?ns=40657
Frontier Markets - the Developing Economies of the Future
Investing in frontier markets allows investors to exploit the advantages of early market entry over the long term and thus participate in economic growth
Zurich, January 28, 2008
http://www.mscibarra.com/products/indices/fm
However we must not totally avoid countries like USA, Brasil, India, China, Canada, Australia, and New Zealand and Korea etc. There will be outstanding opportunities for intelligent investors in next five years. There are long term investment opportunities in these countries.
127 points
WilliamYoung answered one year ago …
I agree that several foreign markets can pick up the growth slack that we appear to be losing here in the U.S. But there is one market that seems not to be discussed even though it is growing at a very high growth rate and is one of the commodity countries. The country has lots of oil and gas as well as other mined comodities and that is Russia. The perception seems to be that China is a more stable place to invest but in my experience that has never held true for communist countries. Russia under PUTIN has become a juggernate for investors. You may not agree with his tactics but you have to agree he has strengthened the Russian economy by 100 fold and it is as safe as most foreign countries such as Brazil and perhaps safer then others such as China. This is a country where there truly are middleclass today and not sometime in the future and that has all occurred since the political change.
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WilliamYoung answered one year ago …
Oh and I forgot to mention you can take advantage of Russian growth merely by purchasing the Russian ETF.
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