Few Foreign Stocks Make Our Cut

8/1/2016


Of the 4,901 U.S.-traded stocks in our Quadrix research universe, 884 (18%) are foreign. Of those foreign stocks, only 276 (6%) generate enough data points to make us reasonably confident that their Quadrix scores tell a meaningful story.

By foreign, we mean based in a country other than the U.S., and other than the offshore domiciles U.S.-operated firms use to limit their tax liability.

Fundamentally, those foreign stocks for which we have solid data look attractive; they average Quadrix Overall scores of 57, above the average of 51 for U.S. stocks. The foreign stocks average Value scores of 60 and Quality scores of 56, versus 50 and 52, respectively, for U.S. stocks.

At the moment, only 19 of the 185 stocks on our Monitored List are foreign, and just one of those — Irish drugmaker Shire ($194; SHPG) — makes it onto one of our buy lists. Historically, the Forecasts has recommended primarily U.S. stocks, with most of our infrequent foreign recommendations hailing from Canada.

While we don't dislike the idea of owning foreign stocks, going forward we probably won't recommend many, for at least three reasons:

1) Availability: We consider a 75% OK to Rank enough for reasonably reliable Quadrix scores, but prefer 80% for new Buys. Only 38 foreign stocks with an 80% or higher OK to Rank also earn Overall scores above 80.

2) Timely news: When companies in Europe and Asia deliver bad news, it often occurs hours before U.S. stock markets open, leaving American investors unable to react until after foreign investors have had the chance to buy or sell. In addition, plenty of foreign stocks aren't covered well by U.S. media, so even big news may break late.

3) Analysis: We pay close attention to U.S. economic and business trends that may affect our stocks. However, while we also follow big news out of foreign markets, we can't give the situation in Brazil or Spain or India the same attention.

We do keep our eye on some foreign stocks, including a few of those in the table below. Investors seeking foreign exposure should start with these strong scorers, though at the moment we only recommend Shire, which earns a lower Overall score than we typically like but boasts a strong drug pipeline.

FOREIGN STOCKS WITH QUADRIX APPEAL
Only 11 foreign stocks offer Quadrix Overall scores above 80, OK to Ranks of at least 80%, and stock-market values of at least $4.5 billion, our normal cut-off for new Buys.
------------ Quadrix Scores ------------
Company (Price; Ticker)
Stock-
Market
Value
($Bil.)
Momen-
tum
Value
Quality
Overall
OK To
Rank
Country
AerCap Holdings
($37; AER)
7.2
42
97
93
88
95
Ireland
Delphi Auto.
($69; DLPH)
19.2
75
85
90
86
96
United Kingdom
Ingersoll-Rand
($66; IR)
17.1
84
61
68
85
98
Ireland
Jazz Pharma.
($142; JAZZ)
8.9
88
69
98
91
96
Ireland
Magna Int'l
($39; MGA)
15.9
74
97
89
91
100
Canada
Michael Kors
($52; KORS)
9.4
59
94
99
98
94
United Kingdom
NetEase
($207; NTES)
27.5
99
41
99
95
96
China
Open Text
($63; OTEX)
7.6
77
51
81
85
96
Canada
Sensata Tech.
($40; ST)
6.8
69
81
90
81
96
Netherlands
Signet Jewelers
($87; SIG)
6.9
74
89
94
85
99
Bermuda
Taro Pharma.
($138; TARO)
5.9
64
79
99
94
85
Israel
Note: Quadrix scores are percentile ranks, with 100 the best.

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