I recently reconsidered my stance on Nokia Corp (ADR) (NYSE:NOK) after taking a closer look at three numbers — $10.7 billion in cash being the most convincing — which suggest Nokia stock isn’t the low-priced dog I thought it was.
This got me thinking about other low-priced, large-cap foreign stocks (Nokia has a $31 billion market cap) that aggressive investors might be interested in owning, so I did a stock screen to narrow the field. Here’s what I found.
The Finviz.com universe of large-cap stocks (market cap > $10 billion) domiciled outside the U.S. but trading on a U.S. exchange came to 181. From that group, 24 stocks trade at $10 or less; Nokia stock being one of them.
Interestingly, if you do the same screen for U.S.-based large-caps the list to choose from widens from 181 to 458 with only two choices at $10 or less — Sirius XM Holdings Inc (NASDAQ:SIRI) and Sprint Corp (NYSE:S) — suggesting U.S.-based stocks are overvalued relative to their foreign counterparts, but that’s a subject for another day.
Right now, I want to determine if Nokia stock is the best foreign large-cap stock under $10. To do that, I’ve identified three alternatives. At the end, I’ll decide which of the four stocks, including Nokia, is the best to own — and more importantly, why.
Ambev SA (ADR) (ABEV)
Operating in 18 countries including Canada and Brazil, Ambev SA (ADR) (NYSE:ABEV) is the largest beverage company in Latin America. Formed in 2000 by the merger of two Brazilian breweries — Brahma and Antarctica — it’s now 61%-owned by Anheuser Busch Inbev NV (ADR) (NYSE:BUD).
As a controlled company, not much happens without the consent of its majority owner, which tends to make ABEV trade in a very tight range. Over the past three years, for instance, it’s traded between traded between $4-$7, and narrowly between $5-$6 over the last 12 months.
Income investors will be interested in Ambev’s 3% dividend yield. However, Brazil has been a serious challenge for the company, and that has hurt the overall business. Everywhere else, business is strong.
Year-to-date, ABEV stock is up 13% as investors bet Brazil will rebound. I think that’s a smart bet.
Cencosud SA (CNCO)
The contrarian in me just loves the idea of betting on retail — in Latin America. How crazy is that? But the truth is, while retail might suck in North America, it’s very much in a growth phase in places like Chile where retail conglomerate Cencosud SA (NYSE:CNCO) is based.
Cencosud operates department stores, grocery stores and home improvement stores in Chile, Peru, Argentina, Brazil and Colombia. It also owns shopping centers and a financial services business, making it a vertically integrated retail conglomerate.
CNCO wants to be the largest retailer in Latin America and has made great strides in the past five years, growing revenues from $9.3 billion in 2010 to $15.4 billion in 2016, an 8.9% compound annual growth rate. In 2016, its adjusted EBITDA was $1.1 billion for a 7.4% adjusted EBITDA margin.
It pays a small dividend, but that’s not why you want to own CNCO stock.
Aegon N.V. (ADR) (AEG)
It’s hard to believe Dutch insurer Aegon N.V. (ADR) (NYSE:AEG) once traded above $60 (December 1998) given it’s now below $6, but the worm appears to be turning.
At a December analyst presentation in New York, CEO Alex Wynaendts laid out his company’s plan to reinvigorate its U.S. business. In addition, he put forth a future for the company that’s much different than its past.
For the 12 months ended Dec. 31, 2016, Aegon increased revenues by 15% to 12 billion euros while increasing underlying earnings by 2% to 1.9 billion euros. Its goal is to generate a 10% return on equity by 2018; it was 8% in 2016.
By transforming itself from an insurance business into a financial solutions company with insurance as a part of that, Aegon’s future looks a lot brighter than it has for some time.
With a 5.1% dividend yield that’s not in doubt, you can afford to wait and see how this plays out. Right now, AEG is looking good.
Bottom Line on Nokia Stock
From a dividend perspective, there’s no question Nokia stock is very attractive. However, from a growth perspective, I’d actually be more excited by Cencosud, and to a lesser extent, Aegon.
Is Nokia stock the best foreign large-cap under $10? I’m afraid not.
But good luck to all those Nokia supporters; I hope you’re right.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.