Have investors missed the boat on Amazon (NASDAQ:AMZN) stock, which is up 75% this year? Far from it. Smart investors will realize this: there are still plenty of great high-growth international stocks to buy.
International stocks can offer fantastic potential for investors. That’s because, as emerging markets grow richer, people begin to spend more money on goods and services. From tech giants like Alibaba and Samsung to household names like Nestle and Toyota, these companies have embedded themselves into the lives of millions worldwide.
And what’s the best part about international stocks? Some of them are growing even faster than Amazon AND have far better valuations to boot.
There are risks, of course. International stocks are sometimes more volatile than American ones, and their accounting systems follow an international standard (IFRS) rather than U.S. GAAP accounting.
And so I get it. There are a LOT of international stocks out there, and it’s often hard to know where to begin. So to get you started, here is a list of seven international stocks to buy:
- Sea Ltd (NYSE:SE)
- Just Eat (OTCMKTS:TKAYY)
- Mercado Libre (NASDAQ:MELI)
- Meituan Dianping (OTCMKTS:MPNGF)
- Taiwan Semiconductor (NYSE:TSM)
- Samsung Biologics
- Adyen (OTCMKTS:ADYEY)
Top International Stocks to Buy: Sea Ltd (SE)
Sea has made a splash since its 2017 IPO on the New York Stock Exchange. Revenues at the Singapore-based internet startup soared 420% within two years thanks to strength in mobile gaming and eCommerce.
In 2019, the company’s self-developed game, Free Fire, was the world’s most-download mobile game that year, grossing over $1 billion worldwide.
The company hasn’t stopped there. Sales at Shopee, its eCommerce division, soared 188% in Q2 2020 as customers in Southeast Asia and Taiwan switched to ordering online. Amazon’s 40% growth rate pales in comparison. Shopee now holds the top spot in eCommerce in Indonesia, a country almost as populous as the U.S. Its mobile wallet, SeaMoney, now handles $1.6 billion per quarter.
Still, the company’s enterprise value of $68 billion trades at just a fraction of Amazon’s. Marcus Liu at CLSA has a $178 price target on the company, a 22% upside.
Just Eat (TKAYY)
Amsterdam-based Takeaway.com has been quietly consolidating the European food delivery market in recent years. The company bought Germany’s Delivery Hero and Switzerland’s Foodarena in 2018, before merging with U.K. based Just Eat in 2020 in a $7.8 billion deal.
Then came the coronavirus pandemic.
While the pandemic has caused incalculable harm to millions, it created a silver lining for companies who helped people stay at home. In the first half of 2020, JET saw like-on-like revenues rocket 44% compared to a year earlier. Including acquisitions, gross profit grew 214% to 420 million Euros.
Analysts now estimate JET’s earnings to rise to 3.38 billion Euros by 2022. That’s 20% FASTER than Amazon’s expected topline growth. And even better? JET trades for just 46.4 times 2022 earnings, according to data from Business Insider. That’s significantly less than Amazon’s 51.4x multiple.
There are certainly risks to investing in JET. The company works in a newer field with lower barriers to entry than Amazon’s eCommerce business. And JET will have to integrate Grubhub into its international network. But given management’s history of successful acquisitions, there’s a good chance the company will reward long-term investors handsomely.
Mercado Libre (MELI)
The company known as “The Amazon of Latin America” has been another winner this year. Sales at the Argentinean-based eCommerce company rose a whopping 123%, while unique active users grew 45.2%.
MercadoLibre is far from an American household name. Yet the company dominates major South American markets, including Argentina, Brazil, Mexico, and Chile.
Even in Mexico, a market that Walmart and Amazon have long fought over, Mercado Libre has held a firm market-leading share.
How have they been so successful? Firstly, Mercado Libre invested heavily in piecing together its Latin American logistics network. There’s no delivery equivalent of UPS (NYSE:UPS) or FedEx (NYSE:FDX) that covers all of Latin America, so the company created relationships with thousands of local operators instead. Secondly, the company’s financial arm allows customers and sellers to borrow and pay for goods, easing commerce in a region where half of all people are unbanked. The company now processes $11.2 billion per quarter.
“The region remains largely untapped,” notes LABS, a magazine on Latin America. “E-commerce makes up a mere 2% of the region’s total GDP and fewer than 1 in every 4 people are online shoppers. In stark developmental contrast, in North America, e-commerce constitutes 5% of GDP and 6 out of 10 people shop online.”
Analysts expect sales to increase 37% per year through 2024, more than twice as fast as Amazon.
Meituan Dianping (MPNGF)
Meituan Dianping, China’s “everything app,” has been on a tear. Sales at the Tencent-backed company rocketed 50% in 2019.
The company primarily operates food delivery services across Mainland China, where it has aggressively pushed into lower-tier Chinese cities.
And its nation-wide scale has helped amazingly.
For every 1 RMB in sales the company added in 2019, delivery costs increased just 0.82 RBM. Its take rate (the portion of transaction revenues it keeps) increased from 13.1% to 14.1%.
The company’s billionaire CEO, Wang Xing, hasn’t rested on his laurels. Instead, he’s continued to move the company into adjacent areas, including online hotel booking and ride-hailing. Sales at its Groupon-like “deal-of-the-day” site now makes up around 23% of its total revenue.
The company has seen a substantial recovery since the coronavirus pandemic. Sales at its hotel-booking business are back to around 70% of pre-pandemic levels. And its food delivery business aims to hit 100 million orders per day by 2025.
What about fraud? Shares of Meituan Dianping trade on the Hong Kong Exchange, an exchange known to have more stringent reporting and governance requirements than the U.S. and Mainland China. This doesn’t guarantee fraud-free reporting, but it certainly lower the risk of investment.
There’s one downside, however: the Meituan’s grow-at-all-costs strategy makes the stock devilishly hard to value. Shares currently trade at 12.7 times revenue, putting it among smaller tech companies like Square (NYSE:SQ), Splunk (NASDAQ:SPLK) and Etsy (NASDAQ:ETSY). Amazon last saw valuations like these in 2000 before the tech bubble burst.
Yet, there are plenty of investors who believe Meituan may one day rival Alibaba (NYSE:BABA), a company worth four times as much. And with CEO Wang Xing’s single-minded focus on growth, they may well be right.
Taiwan Semiconductor (TSM)
Now for a more traditional business. Taiwan Semiconductor Manufacturing, the world’s largest semiconductor manufacturer, has been a clear winner in 2020. Its advanced 7nm manufacturing process has leapfrogged the company above rivals Intel (NASDAQ:INTC) and Samsung (KRX:005930), pushing gross profit up by 67% in 2019. That’s far faster than Amazon’s 21%.
While relatively unknown to outsiders, TSMC plays a pivotal role in the semiconductor industry. That’s because, while companies like AMD (NASDAQ:AMD), Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Huawei might design their own chips, they rely on foundries like TSMC to manufacture them. Today, over half of all computer chips in the world are produced by TSMC. Their products are found in everything from PCs to F-35 fighter jets, to dishwashers.
And TSMC has earned its place as the world’s largest foundry. The company was the first to commercialize extreme ultraviolet lithography (EUV) technology, paving the way for the its current 7nm process, which squeezes 15 to 20% more transistors onto a single chip and reduces power consumption. In 2019, AMD moved its high-end graphics card production over to TSMC.
And its lead is set to keep growing. While the company is already working on 3nm technology for 2022, Intel announced in June that its 7nm chips will barely be ready by then.
TSMC has also deftly navigated the recent U.S.-China trade wars. In May, the company announced plans to create a $12 billion plant in Arizona to address U.S. concerns over its semiconductor supply chain. The company also has production centers in Nanjing and Shanghai.
Sales at Samsung Biologics, the medical arm of tech giant Samsung, has seen sales skyrocket during the coronavirus pandemic. The company, which focuses on antibody medications, saw revenues jump 150% in the first half of the year.
The company operates as a Contract Manufacturing Organization (CMO) for biotech companies that either lack their own production capacity or want to outsource it.
And that’s put Samsung Biologics in the spotlight as a contender for producing a Covid-19 vaccine. The company finalized a $362 million deal with Vir Biotechnology (NASDAQ:VIR) to manufacture a potential vaccine, and also has agreements with WuXi Biologics (OTCMKTS:WXXWY) and Biogen (NASDAQ:BIIB) to help ramp up production.
The company intends to build a $2 billion “Super Plant” at its Incheon, South Korea hub, which would double its manufacturing footprint by 2022. In the meantime, the company is negotiating additional space to meet Covid-19 production demands.
Samsung Biologics isn’t without its flaws. An accounting scandal in 2015 led to the arrest of multiple executives; a South Korean court later ruled that management had inflated the company’s value by $3.8 billion before its IPO. And ownership of South Korean’s family-controlled Chaebols are notoriously opaque.
But investors willing to brave such risks will end up with a fast-growing biotech firm with a proven business model.
While far from a household name, global payments processor Adyen has exploded in usage thanks to its laser-like focus on integrating eCommerce payments. Today, the Amsterdam-based company lists tech giants like eBay (NASDAQ:EBAY), Etsy, Uber (NYSE:UBER), Microsoft (NASDAQ:MSFT), and Spotify (NYSE:SPOT) as customers.
Adyen has undergone a meteoric rise since its $8 billion IPO in 2018. The company grew sales by 69% in 2018, followed by another 52% in 2019. Analysts expect sales to double by 2022 to $1.46 billion, a growth rate almost three times as fast as Amazon.
How did Adyen do it?
The company realized early on that eCommerce fraud worked differently from traditional point-of-sale (POS) fraud. Firstly, it’s extremely prevalent: according to a study by American Express, merchants estimate that fraudulent transactions make up an astonishing 27% of annual online sales. Secondly, eCommerce leaves a massive trail of user data – Adyen runs a full in-house risk management system to manage all the data.
These insights have made Adyen one of the great international stocks to buy. Today, the company generates a massive 47% EBITDA margin, compared to Amazon’s 12.3%.
There’s also some good news for budget-minded investors: Adyen isn’t particularly expensive. Larger rival PayPal shares trade for 4.3 times more, yet the U.S. company processes just 2.5 times Adyen’s volume.
But Adyen’s stock price might not last forever — shares are already up 107% this year.
Conclusion: International Stocks Worth Buying
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Because remember: half of all stocks in the world trades outside the U.S. That means there’s plenty of opportunity for investors to find fast-growing companies at great prices to match.
On the date of publication, Thomas Yeung did not hold a position (either directly or indirectly) in any of the securities or cryptocurrencies mentioned in this article.
Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.