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Barcroft Media via Getty ImagesI think a big boom is coming in the U.S., which may keep a richly valued stock market out of trouble.
But you never know. Some international diversification is usually a good idea. And I think it’s wise now, since U.S. stock valuations are high and interest rates are rising – a potentially dangerous combination.
If you are exclusively or almost entirely in U.S. stocks and you want to diversify a little, here are five ideas for stocks outside America.
Right now, Europe is struggling worse with the coronavirus pandemic than is the U.S. But when it finally begins to make progress, I see potential for a big jump in European stocks.
One of my favorites is Total SE (TOT), the big French oil company. Think of it as the Exxon or Chevron of France. In addition, the company is active in wind and solar energy. For example, it is developing a big solar installation in Qatar, and a big wind project offshore Britain.
The dividend yield is mouthwatering at 6.7%, but there is some danger of it being cut. The stock is priced reasonably, at 15 times earnings and 1.0 times revenue.
In Japan, my favorite stock is Sony (SNE), a conglomerate built around consumer electronics. It makes the Sony PlayStation, produces music and movies, and manufactures components for iPhones, among other things.
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Sony is barely covered by Wall Street, which is odd considering that it is a $130 billion company. The two U.S. analysts who currently follow it rate it a strong buy.
Sony Pictures, the movie producing subsidiary, has been hampered as theatres have been closed worldwide. Reopening should be a boon.
Check Point Software Technologies CHKP , based in Israel, makes products to help protect computer networks against hackers. I think this is an important and timely niche.
The company is debt free, and has more than $1.6 billion in cash and marketable securities. That’s comforting at a time when interest rates are starting to rise.
Over the past ten years, Check Point has increased its revenue and earnings at 11% a year and 10% a year, respectively. The stock goes for 19 times earnings. That is more than I (a notorious cheapskate) will usually pay, but I think it’s worth it in this instance.
Based in Hong Kong, CK Asset Holdings Ltd. (CHKGF) is one of the main business vehicles of the Li family. Patriarch Li Ka-shing is the richest person in Hong Kong according to Forbes, with a fortune of about $35 billion. He has been called the Warren Buffett of China.
CK Asset holds most of the family’s real estate, totaling 17.2 million square feet, primarily in Hong Kong, mainland China and Britain. It also operates hotels, runs utilities, engages in aircraft leasing and owns the Greene King chain of British pubs.
In the past year, pubs were mainly shut and hotel occupancy was minimal because of the pandemic. Those negatives should turn to positives in the next 12 months.
At 11 times earnings and 0.5 times book value (corporate net worth per share), this stock is a major bargain in my view.
In Germany, I like BASF AG (BASFY), the world’s largest chemical company. It operates in some 80 countries and employs more than 100,000 people.
BASF had shown a profit for at least 14 years in a row prior to a loss last year in the Covid-19 recession. Right now, Europe is struggling with vaccine delivery, but I expect the problems to be resolved in six to 12 months, with a vigorous economic rebound likely to follow.
The stock hit briefly hit $30 in 2018 and dropped to below $11 during the worst of the pandemic bear market. It sells now for about $21, which is 16 times estimated earnings for the coming 12 months.
Past Results
Beginning in 1998, I’ve written 17 columns recommending stocks outside the U.S. (Today’s is the 18th.) One was fairly recent, so I can calculate 12-month returns for 16 of them. The average one-year return has been 14.8%, compared to 12.2% for the Standard & Poor’s 500 Index. My recommendations were profitable 12 times out of 16, and beat the S&P nine times.
Bear in mind that my column recommendations are hypothetical: They don’t reflect actual trades, trading costs or taxes. These results shouldn’t be confused with the performance of portfolios I manage for clients. Also, past performance doesn’t predict future results.
Disclosure: I own Total, Sony, Check Point and CK Asset Holdings personally and for most of my clients.
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John Dorfman is chairman of Dorfman Value Investments LLC. His firm or clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.
The Link LonkMarch 29, 2021 at 09:40PM
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