Investing Overseas Has Never Been Simpler

5/2/2011


From an investment perspective, the world is getting smaller.

Because of new investment vehicles, it has become increasingly easy to invest in any corner of the globe. And with more than half of the world's equity capital outside the U.S., it makes sense for investors to expand their opportunity set to include overseas investments. The trick, of course, is determining which foreign stocks to target. On this front, our Quadrix stock-rating system can help.

While the bulk of the more than 4,500 U.S.-traded stocks in the Quadrix universe are headquartered in the U.S., roughly 15% are foreign companies. Quadrix provides a robust quantitative tool for evaluating hundreds of foreign stocks.

The table below lists seven foreign companies with Quadrix Overall scores near the top 20% of all stocks in our research universe. Investors who buy these stocks are actually buying American Depositary Receipts (ADRs) traded on U.S. exchanges. Investors buy and sell ADRs just as they buy and sell U.S. stocks. ADRs are quoted in U.S. dollars and pay dividends in U.S. dollars. And those dividend payments, in many cases, receive the preferential tax treatment (currently a 15% maximum tax rate) afforded qualified dividends paid by U.S. companies.

HIGH-SCORING FOREIGN STOCKS
Company (Price; Ticker)
Divi-
dend *
(%)
Yield *
(%)
52-Week
Price Range
($)
Quadrix
Overall
Score
Country
Phone
Number
(800)
America Movil
($57; AMX)
0.52
0.9
59.63
-
44.82
91
Mexico
345-1612
Bancolombia
($65; CIB)
1.35
2.1
69.44
-
42.53
95
Columbia
345-1612
Novartis
($58; NVS)
2.35
4.1
60.07
-
43.48
90
Switzerland
428-4237
Novo Nordisk
($128; NVO)
1.82
1.4
132.88
-
73.16
80
Denmark
428-4237
Petrobras
($38; PBR)
0.28
0.7
42.97
-
31.21
89
Brazil
428-4237
PetroChina
($148; PTR)
3.97
2.7
158.83
-
99.02
93
China
345-1612
Smith & Nephew
($55; SNN)
0.75
1.4
60.35
-
41.26
86
U.K.
345-1612
* Based on trailing 12-month dividends.

You can purchase ADRs via any discount or full-service brokerage. Alternatively, many foreign firms sell their ADRs direct to investors via direct-purchase plans. In fact, all of the ADRs listed in the table above offer direct-purchase plans through which any U.S. investor may buy the first share and every subsequent share of stock directly from the company.

These ADR direct-purchase plans operate much the same as their U.S. counterparts. Investors obtain enrollment information either by calling toll-free numbers or downloading information from the Web sites of the transfer agents companies hire to administer their plans. Leading ADR transfer agents are J.P. Morgan (800-428-4237; www.adr.com/shareholderservices) and BNY Mellon (800-345-1612; www.globalbuydirect.com). Some transfer-agent Web sites allow investors to buy ADRs online.

Most ADR direct-purchase plans require a minimum investment of $200 to $500. To make subsequent investments, you'll usually need a minimum of $50 to $100. Purchases and sales typically cost $5 to $10 plus a per-share fee of up to $0.12.

While none of the stocks in the table above currently qualify for the Forecasts Buy or Long-Term Buy lists, all may appeal to investors who want foreign stocks in their portfolios.

Novo Nordisk ($128; NVO) looks particularly interesting for the long term. The Danish company is a world leader in diabetes care. Per-share profits rose 27% last year on 10% sales growth.

Given the growth of diabetes — the global market for diabetes-management products is expected to jump to more than $114 billion by 2018 from $41 billion in 2010 — Novo Nordisk should continue to see healthy sales and earnings growth. The stock seems somewhat pricey, with a Quadrix Value score of 19.

Novo Nordisk, with an Overall score of 80, is not included on our Monitored List. Current Forecasts recommendations based outside the U.S. — Canada-based Research In Motion ($55; RIMM) and Rogers Communications ($37; RCI) — do not offer direct-purchase plans and must be purchased via a broker. Research In Motion is a Buy and a Long-Term Buy. Rogers is a Long-Term Buy.


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