In this article, we will look at 10 best international stocks to invest in. If you want to explore similar stocks, you can also read 5 Best International Stocks to Invest In.
Investors who aim to achieve broad diversification are always on the lookout to identify lucrative investments in international markets. While some find investing in international equities risky, others see value and the potential to generate attractive returns.
BlackRock Thinks International Stocks are Primed to Outperform
BlackRock studied the returns of international stocks and U.S. stocks over the past 50 years, from 1971 to 2021, and compared them. BlackRock found that the U.S. market has outperformed international markets 8 out of the past 9 years, and 10 out of the past 12 years. However, on tracing further back up to the 1970s, BlackRock found that international stocks outperformed U.S. stocks for nearly half of all time periods over the past 50 years. International stocks beat U.S. stocks 94% of the time when the return on U.S. equities was less than 6%, and they beat U.S. equities 100% of the time when their returns were less than 4%. In the long term, over the course of 50 years, international stocks outperformed U.S. stocks 44% of the time, and U.S. stocks outperformed international stocks 56% of the time. BlackRock thinks that with U.S. stocks expected to go down further, now might be a chance for international stocks to make up for their lagging years.
Ken Fisher’s View On Investing Globally
Billionaire investor and founder of Fisher Asset Management, Ken Fisher, is an advocate of investing globally for diversification. Mr. Fisher is active on social media and he shares his insights on a variety of topics related to capital markets on his Youtube channel. Mr. Fisher spoke about the benefits of investing globally in a video he recorded on January 14, 2022. His views are consistent with BlackRock’s findings that in the long term the returns for U.S. equities and international stocks are relatively the same. Here is an excerpt from Mr. Fisher’s video on the benefits of investing globally:
“So for a very long time, I’ve been a big believer in investing globally as opposed to just simply in your own country. Whether it’s America, the biggest and best economy in the world, or any other country. And a lot of people have a hard time with that, they say I don’t know things overseas as well as I know them here in my homeland and why should I do that, and you know that’s been particularly true if you’re in the blessedness of America. But the fact is there’s more outside of any country than inside of it regardless of what country you come from. Therefore you have more opportunities. The countries don’t all move with perfect correlation. Stock market correlations from country to country are relatively positive, but they don’t move perfectly in lockstep and so you get more diversification effect by investing globally. In the very long term, U.S. and foreign returns tend to be pretty similar. You get long periods where one outperforms and long periods where the other outperforms, and if you think you’re really good at timing, that’s fine but if you don’t, thinking globally gives you some of both and therefore a diversification effect. Finally, I want to say that there’s a lot of parsing that has to go into this. But sometimes you can see in a given country where one sector doing really well has dominated the returns of that country relative to not investing in that country over some period of time of a year or two or three. For example, if we look at 2020 most of the effect of U.S. leadership was in growth versus value, and most of that, based on what makes up growth in America is technology primarily big technology because big technology is almost solely a U.S. event. But that flip-flops when technology would do badly in the stock market for a period of time. In other years there’s actually a broad country array where these countries are doing better across the industry sectors and those doing worse, not just sectoral display. And then you actually benefit from the country effect of being in countries that are performing better perhaps when your country isn’t. So more opportunities, individually in stocks in sectors, the opportunity to have more diversification, and in fact, a less volatile equity return compared to whatever country individually you come from because of that bigger more diverse investing universe.”
Some international stocks that Wall Street analysts and investors are bullish on and see upside for include ASML Holding N.V. (NASDAQ:ASML), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Shell Plc (NYSE:SHEL).
Our Methodology
To identify the 10 best international stocks to invest in, we looked for companies that have mature businesses and have gathered a strong consumer base. We first identified major industries around the world and then looked for companies that have established their leading position in those respective industries. Finally, we narrowed down our selection to stocks that had positive market sentiment associated with them and ranked them in increasing order of hedge fund holders.
Best International Stocks to Invest In
10. Deutsche Bank AG (NYSE:DB)
Number of Hedge Fund Holders: 15
Deutsche Bank AG (NYSE:DB) is one of Europe’s largest banks that provides investment, financial, and related products and services to private individuals, corporate entities, and institutional clients worldwide. The company operates through four business segments: Corporate Banking, Investment Banking, Private Banking, and Asset Management. On July 5, JPMorgan analyst Kian Abouhossein revised his price target on Deutsche Bank AG (NYSE:DB) to EUR 13 from EUR 15 and maintained a buy-side Overweight rating on the shares.
On July 27, Deutsche Bank AG (NYSE:DB) released earnings for the fiscal second quarter of 2022. The company reported earnings per share of $0.51 and outperformed EPS expectations by $0.11. The company’s revenue amounted to $6.79 billion and beat Wall Street estimates by $154.89 million. Along with its earnings release, the bank also reaffirmed its 2022 revenue guidance of EUR 26.27 billion and announced that it targets compound annual revenue growth of 3.5-4.5% for 2025.
Deutsche Bank AG (NYSE:DB) is undervalued and also a dividend-payer. As of August 3, Deutsche Bank AG (NYSE:DB) has a trailing twelve-month PE ratio of 7.42 and is offering a forward dividend yield of 2.48%.
Hedge funds are initiating positions in Deutsche Bank AG (NYSE:DB). At the close of the first quarter of 2022, 15 hedge funds were bullish on Deutsche Bank AG (NYSE:DB) and held stakes worth $1.42 billion in the company. This is compared to 14 hedge funds in Q4 2021 with stakes worth $1.78 billion.
As of March 31, Hudson Executive Capital’s stake in Deutsche Bank AG (NYSE:DB) is valued at $858.18 million. As of Q1 2022, the fund owns more than 67 million shares of Deutsche Bank AG (NYSE:DB) and is the most prominent shareholder in the company.
9. Barclays PLC (NYSE:BCS)
Number of Hedge Fund Holders: 16
Barclays PLC (NYSE:BCS) is a British multinational universal bank, headquartered in London, England. The company provides various financial products and services in the United Kingdom, Europe, the Americas, Africa, the Middle East, and Asia. The company operates through two business segments: Barclays UK and Barclays International. At the end of Q1 2022, 16 hedge funds were bullish on Barclays PLC (NYSE:BCS) and held stakes worth $121.35 million in the company. This is compared to 11 hedge funds in Q4 2021 with stakes worth $86.80 million. The hedge fund sentiment for the stock is positive.
Wall Street sees an upside for Barclays PLC (NYSE:BCS). On August 1, JPMorgan analyst Raul Sinha raised his price target on Barclays PLC (NYSE:BCS) to 190 GBP from 180 GBP and reiterated a Neutral rating on the shares.
On July 28, Barclays PLC (NYSE:BCS) released earnings for the fiscal second quarter of 2022. The company reported earnings per share of GBP 0.148 and a total income of GBP 13.2 billion, up 16.6% year over year. Barclays PLC (NYSE:BCS) reported that its UK segment reported a 5% year-over-year increase in income and its international segment reported a 21% year-over-year increase in income.
Barclays PLC (NYSE:BCS) is trading at attractive levels and is offering a strong dividend yield. As of August 3, the stock has a trailing twelve-month PE ratio of 5.57 and is offering a forward dividend yield of 4.18%, which the company supports with free cash flows of GBP 70.51 billion.
In the first quarter of 2022, Masters Capital Management raised its stakes in Barclays PLC (NYSE:BCS) by 25%, bringing them to $39.50 million. As of March 31, Masters Capital Management owns 5 million shares of the bank and is the largest shareholder in the company.
Other global stocks that Wall Street views an upside for include ASML Holding N.V. (NASDAQ:ASML), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Shell Plc (NYSE:SHEL).
8. SAP SE (NYSE:SAP)
Number of Hedge Fund Holders: 19
SAP SE (NYSE:SAP) is a German multinational software company that develops enterprise software to manage business operations and customer relations. The company is the world’s leading enterprise resource planning software vendor. At the end of Q1 2022, 19 hedge funds were long SAP SE (NYSE:SAP) with stakes worth $1.42 billion. This is compared to 14 hedge funds in Q4 2021 with stakes worth $1.64 billion.
Analysts are bullish on SAP SE (NYSE:SAP). On July 21, Morgan Stanley analysts named SAP SE (NYSE:SAP) among their top deflation enabler stock picks. On July 22, Deutsche Bank analyst Johannes Schaller revised his price target on SAP SE (NYSE:SAP) to EUR 115 from EUR 120 and maintained a Buy rating on the shares.
On July 21, SAP SE (NYSE:SAP) announced earnings for the fiscal second quarter of 2022. The company registered an EPS of $0.98. SAP SE (NYSE:SAP) reported revenue of $7.67 billion for the quarter, up 12.7% year over year, and beat market consensus by $168.52 million. As of August 3, SAP SE (NYSE:SAP) has a forward dividend yield of 2.21% and trailing twelve-month free cash flows of EUR 4.29 billion.
After announcing earnings, SAP SE (NYSE:SAP) reaffirmed its revenue and free cash flow guidance for fiscal year 2022. The company announced that it now expects its revenue from cloud and software to amount to between EUR 25 billion and EUR 25.5 billion for fiscal year 2022. The company expects to generate a cash flow of above EUR 4.5 billion for 2022.
As of March 31, Fisher Asset Management owns over 8.77 million shares of SAP SE (NYSE:SAP) and is the largest shareholder in the company. The investment covers 0.57% of Ken Fisher’s 13F portfolio.
Polen Capital mentioned SAP SE (NYSE:SAP) in its “Polen Global Growth Fund” first-quarter 2022 investor letter. Here is what the firm had to say:
“In our opinion, SAP is demonstrating that their cloud transition and RISE with SAP strategy are working. We added to our position upon evidence that CEO Christian Klein’s strategy is bearing fruit, and the stock trading down to an attractive valuation during the quarter. The strategy and sell-off are connected, and we believe it provided an opportunity for long- term shareholders. The company recently reported weak 2022 margin and FCF guidance. This was expected if cloud growth accelerated – which it has. Current cloud backlog has accelerated to a mid-20% growth rate, and the S/4 HANA Cloud Backlog and Cloud Sales have accelerated as well. Cloud, which tends to be a very sticky business with high recurring revenue, is now a >$10bn business and represents roughly 40% of sales.
Our research shows this should only increase over the next five years. If management continues to successfully execute its strategy, the transition should create a mechanical lift to margins and greater levels of FCF. We believe SAP is a durable business led by capable management that is poised to deliver high-quality mid-teens earnings growth over the next five years.”
7. TotalEnergies SE (NYSE:TTE)
Number of Hedge Fund Holders: 20
TotalEnergies SE (NYSE:TTE) is a French multinational integrated energy and petroleum company and one of the seven supermajor oil companies in the world. The company operates through four segments: Integrated Gas, Renewables & Power, Exploration & Production, Refining & Chemicals, and Marketing & Services. Wall Street is bullish on the company. On August 3, Berenberg analyst Henry Tarr revised his price target on TotalEnergies SE (NYSE:TTE) to EUR 63 from EUR 66 and reiterated a Buy rating on the shares.
On July 28, TotalEnergies SE (NYSE:TTE) reported earnings for the fiscal second quarter of 2022. The company reported earnings per share of $3.75 and outperformed EPS estimates by $0.19. The company’s revenue for the quarter amounted to $70.45 billion, up 69.20% year over year, and beat Wall Street consensus by $9.87 billion.
In the first quarter of 2022, Fisher Asset Management raised its stakes in TotalEnergies SE (NYSE:TTE) by 5%, bringing them to $1.31 billion. As of March 31, the fund owns 26.05 million shares of TotalEnergies SE (NYSE:TTE) and is the largest shareholder in the company.
At the end of Q1 2022, 20 hedge funds were long TotalEnergies SE (NYSE:TTE) and held stakes worth $1.77 billion in the company. This is compared to 17 positions in the previous quarter with stakes worth $1.58 billion. The hedge fund sentiment for the stock is positive.
International stocks that Wall Street is positive on right now include TotalEnergies SE (NYSE:TTE), ASML Holding N.V. (NASDAQ:ASML), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Shell Plc (NYSE:SHEL).
6. Vale S.A. (NYSE:VALE)
Number of Hedge Fund Holders: 27
Vale S.A. (NYSE:VALE) produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking in Brazil and internationally. The company is one of the world’s largest iron ore producers and operates through two segments: Ferrous Minerals and Base Metals. At the close of Q1 2022, 27 hedge funds disclosed ownership of stakes in Vale S.A. (NYSE:VALE). The total value of these stakes amounted to $2.37 billion, up from $1.71 billion in the previous quarter with 25 positions. The hedge fund sentiment for the stock is positive.
On July 28, Vale S.A. (NYSE:VALE) reported earnings for the fiscal second quarter of 2022. The company reported earnings per share of $0.94 and beat expectations by $0.14. The company’s revenue came in at $11.16 billion. Vale S.A. (NYSE:VALE) reported that in the second quarter of 2022, the company’s iron ore production increased by 17% quarter on quarter to 74.1 megatonnes, primarily due to solid performance in its southeastern and southern facilities.
Vale S.A. (NYSE:VALE) is trading at a bargain right now and is also paying an attractive dividend. As of August 3, the stock has a trailing twelve-month PE ratio of 3.14 and is offering a forward dividend yield of 10.55%, which the company supports with free cash flows of R$ 11.72 billion.
On June 29, Deutsche Bank analyst Liam Fitzpatrick revised his price target on Vale S.A. (NYSE:VALE) to $20 from $22 and reiterated a Hold rating on the shares.
As of March 31, Fisher Asset Management owns more than 28.68 million shares of Vale S.A. (NYSE:VALE) and is the largest shareholder in the company. The fund’s stakes are valued at $573.45 million which covers 0.33% of Ken Fisher’s 13F portfolio.
Grantham Mayo Van Otterloo & Co. LLC, an asset management firm, mentioned Vale S.A. (NYSE:VALE) in its first-quarter 2021 investor letter. Here is what the firm had to say:
“Let’s look at Vale (NYSE:VALE), the world’s largest iron ore producer, as a case study for how shareholders can be rewarded. Vale’s stock price is about where it was at the beginning of last year. Despite the market’s lack of enthusiasm, the company generated about $20 billion of free cash flow last year. Not bad for a company with a market cap of a little over $100 billion and no substantive debt as of the end of March. 4 What did the company do with all that cash? Last year, Vale paid out about $9 billion in regularly scheduled dividends and distributed another $10 billion between extra dividends and share repurchases. Combined with dividends distributed in the first quarter of this year and a recently announced share repurchase, Vale has returned or announced the return of over $33 billion since the beginning of last year, almost a 32% yield relative to the market cap of the company. Not a bad way to win.”
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Disclosure: None. 10 Best International Stocks to Invest In is originally published on Insider Monkey.
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