International stocks can offer U.S. investors greater diversification and opportunities for growth. Buying shares of overseas businesses might mean exposure to rapidly growing economies. In most cases, it gives a chance to own companies with lower valuation levels. Today, I’ll introduce seven top international stocks to buy.
Academic research and decades of investing evidence highlight that most investors prefer including domestic firms in their portfolios. This phenomenon is known as the “home bias.” Retail investors, as well as fund managers, typically have a preference for geographic proximity.
A study led by Alan G. Ahearne of the Federal Reserve System points out, “When investors contemplate purchasing equity in a foreign company, they must glean from published accounts information that is based on accounting principles and disclosure requirements that may differ greatly from those in their home country.”
In other words, it might be quite difficult for investors to analyze the fundamental metrics of foreign shares, especially if they are not familiar with the countries that these firms operate in. Therefore, our discussion today will also include exchange-traded funds (ETFs) that might decrease some of the uncertainty behind foreign investing. Such funds could help investors gain both geographical and currency diversification.
With that information, here are our seven international stocks for today:
- British American Tobacco (NYSE:BTI)
- Canadian Natural Resources (NYSE:CNQ)
- Global X Copper Miners ETF (NYSEARCA:COPX)
- Invesco Golden Dragon China ETF (NASDAQ:PGJ)
- iShares Global Green Bond ETF (NASDAQ:BGRN)
- Vestas Wind Systems (OTCMKTS:VWDRY)
- WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ)
- 1 Top International Stocks to Buy: British American Tobacco (BTI)
- 2 Canadian Natural Resources (CNQ)
- 3 Top International Stocks to Buy: Global X Copper Miners ETF (COPX)
- 4 Invesco Golden Dragon China ETF (PGJ)
- 5 Top International Stocks to Buy: iShares Global Green Bond ETF (BGRN)
- 6 Vestas Wind Systems (VWDRY)
- 7 Top International Stocks to Buy: WisdomTree Japan Hedged Equity Fund (DXJ)
Top International Stocks to Buy: British American Tobacco (BTI)
52-Week range: $31.60 – $41.14
Dividend yield: 7.41%
United Kingdom-headquartered British American Tobacco is a leading manufacturer of tobacco products (i.e., conventional cigarettes) and reduced-risk products, such as vapor, tobacco heating products, and modern and traditional oral products.
The group released full-year 2020 financial results in mid-February. Adjusted revenue came at 25.78 billion pounds sterling. Profit from operations was 11.66 billion pounds sterling, up 4.8% year-over-year (YOY). Free cash flow after the payment of dividends was 2.55 billion pounds sterling, an increase of 32.7% YOY.
On the results, CEO Jack Bowles cited, “Last year we increased the number of consumers of our non-combustible products by 3m to 13.5m, doubling the rate of consumer adoption in the second half of 2020. We have excellent momentum in New Categories, with accelerating volume and value share gains.”
British American Tobacco shares are around $40, up by 6% so far in the year. Forward price-to-earnings (P/E) and price-to-sales (P/S ratios) stand at 8.88 and 2.55, respectively.
Given its low valuation and high dividend yield, BTI is an attractive consumer and sin stock. A robust balance sheet and dependable financial performance have brought decades of dividend payments to shareholders.
Canadian Natural Resources (CNQ)
52-Week range: $14.85 – $38.10
Dividend yield: 4.03%
Canadian Natural Resources, one of the largest oil and natural gas producers, has a diversified portfolio of assets in North America, the U.K.’s North Sea and offshore Africa. The Canada-headquartered group provides a range of natural gas, heavy crude oil, light crude oil, and bitumen.
Management released first-quarter financial results on May 6. Revenue increased to 6.6 billion CAD in the first quarter. A year ago, it had been 4.5 billion CAD. Adjusted net earnings from operations of 1.22 billion CAD translated into $1.03 CAD per diluted shares. Free cash flow was 1.4 billion CAD.
On the results, President Tim McKay cited, “With our strong measures in place we have minimized impacts on our operations… As the global vaccine distribution increases and crude oil demand recovers, especially in the United States, we are seeing improved commodity pricing.”
Year-to-date (YTD), CNQ stock is up over 45%, and recently saw a multi-year high. Forward P/E and P/S ratios are 10.68 and 2.06, respectively. A potential decline toward the $35 level would improve the risk/return profile.
Top International Stocks to Buy: Global X Copper Miners ETF (COPX)
52-week range: $16.43 – $46.96
Dividend yield: 0.96%
Expense Ratio: 0.65% per year
Our next choice is a fund, i.e., the Global X Copper Miners ETF. It gives access to a broad range of global copper miners. Canadian firms head the list with about 37.7%, followed by China (9.9%), the U.S. (9.5%), Australia (6.4%), and the U.K. (6.1%).
COPX, which has 33 holdings, began trading in April 2010. The top 10 holdings comprise about 54% of net assets of $1.2 billion. Indian natural resources group Vedanta (NYSE:VEDL), Anglo-Swiss commodity group Glencore (OTCMKTS:GLNCY), and Swedish mining company Boliden AB (OTCMKTS:BDNNY) top the holdings.
YTD, COPX returned around 48% and hit a multi-year high in early May on a year-to-date basis. Those investors who want to buy global copper miners might regard a decline toward $37 as a better entry point.
Invesco Golden Dragon China ETF (PGJ)
52-Week Range: $48.08 – $85.90
Dividend Yield: 0.17%
Expense Ratio: 0.7% per year
China is the fastest growing economy worldwide. Our next fund, the Invesco Golden Dragon China ETF, gives access to companies deriving a majority of their revenues from China. They are typically headquartered in the country, but are publicly-listed on U.S. stock exchanges. The fund began trading in December 2004 and net assets stand at $247 million.
PGJ, which has 86 holdings, is based on the NASDAQ Golden Dragon China index. In terms of sectors, consumer discretionary has the highest slice with 45.4%. Next in line are communication services at 27.16%, information technology at 9.67% and industrials at 5.57%.
Among the leading names are gaming group NetEase (NASDAQ:NTES), e-commerce leaders Alibaba (NYSE:BABA), JD.com (NASDAQ:JD) and Pinduoduo (NASDAQ:PDD), and the Internet and AI giant Baidu (NASDAQ:BIDU). The top companies make up close to 60% of the ETF.
YTD, PGJ is down about 9%. However, over the past year, the fund has returned nearly 22%, hitting a record-high in February. Although a further decline below the toward $57 could still happen, buy-and-hold investors who want exposure to China might consider investing around these levels.
52-Week Range: $53.93 – $56.34
12-month Yield: 0.76%
Expense Ratio: 0.2% per year
Many investors are using environmental, social, and governance (ESG) criteria as they set standards for the companies and funds they invest in. Recent metrics highlight, “ESG funds captured $51.1 billion of net new money from investors in 2020, a record and more than double the prior year.”
The iShares Global Green Bond ETF gives exposure to investment-grade green bonds issued to fund environmental projects worldwide. Since most of the bonds have A to AAA ratings, credit risk is low.
To reduce currency risks so that returns are more stable, the fund is U.S.-dollar hedged. Since its inception in November 2018, net assets have grown to $214 million.
BGRN currently has 568 holdings. The top 10 issuers make up about 33% of the fund. Bonds issued by governments of France, Germany, Belgium, the Netherlands, Italy and the European Investment Bank are among top names. Close to 20% of the bonds come from France. Next in line are Germany (14.04%), the U.S. (9.66%), supranationals (9.53%), the Netherlands (7.52%) and others.
The effective duration is slightly over eight years. In other words, if interest rates rose faster than expected, the price of BGRN could come under pressure. Duration is an important concept for bond buyers. For instance, a bond fund with a 10-year duration will decrease in value by 10% if interest rates rise 1%. Thus, as a bond’s duration rises, the interest rate risk also increases.
Over the past 12 months, BGRN is down 1.5%. It could be regarded as a fund to park cash that an investor who is interested in ESG projects might need in the near future.
Vestas Wind Systems (VWDRY)
52-week range: $6.56 – $17.47
Dividend yield: 0.15%
Our next international stock could also appeal to ESG investors. Denmark-based Vestas Wind Systems manufactures and installs wind turbines. It is the global market leader of onshore wind turbine installations.
In early May, Vestas released first-quarter financial numbers. Revenue was 1.96 billion euros, a decline of 12% YOY. The bottom line was in the red as the company posted a 57 million euro loss.
CEO Henrik Andersen cited, “Although we have started the year a bit slower than expected, we remain positive we will catch up throughout the rest of the year by maintaining a strong focus on executing our 2021 goals and mid-term strategic priorities.”
The company’s 2021 revenue expectation is in the range of 16 billion euros to 17 billion euros compared to the 2020 figure of 14.8 billion euros.
VWDRY stock is down 20% so far this year. Forward P/E and P/S ratios are 33.56 and 2.13, respectively. Any further decline toward the $11.5 level would improve the margin of safety for long-term investors.
Top International Stocks to Buy: WisdomTree Japan Hedged Equity Fund (DXJ)
52-Week Range: $44.63 – $62.93
Dividend Yield: 2.23%
Expense Ratio: 0.48% per year
Our final choice is another ETF, namely the WisdomTree Japan Hedged Equity Fund. It invests in a range of dividend-paying Japanese shares while hedging exposure to fluctuations between the Japanese yen and the U.S. dollar. The ETF hedges against depreciation of the yen, one of the most widely-traded currencies.
DXJ, which has 404 holdings, began trading in June 2006. In terms of sectors, industrials have the highest weighting with over 20%. Next in line are consumer discretionaries, financials and IT. About 32% of the funds are in the top 10 stocks. Net assets stand at $1.95 billion. Toyota (NYSE:TM) and Mitsubishi UFJ Financial Group (NYSE:MUFG) top the list.
Since the start of the year, the ETF is up about 12% and hit a record high in June. Potential investors could regard a drop toward $60 as a better entry point into the fund.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
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