As it became clear that our nation would not be spared the horrors of the novel coronavirus, I had a sinking feeling in my stomach regarding our investment sectors. But in a seemingly counterintuitive manner, our benchmark indices, particularly the technology-centric Nasdaq, went on to post blistering records. Therefore, you may want to stay at home and eschew international stocks to buy.
Granted, many reasons exist why you should focus domestically with your investment dollars. First and foremost, it’s patriotic in the sense that assuming management also has a pro-America mindset, you’re investing in American jobs for American people. Second, as the dominant force in the global economy, our sheer importance means that your portfolio may benefit from a heavier allocation to domestic names as opposed to international stocks.
Nevertheless, I believe there are huge benefits to going abroad with your portfolio. Number one, this is going to sound controversial but this whole write-up will be controversial, we have become a dysfunctional country. I’m not referring to any specific incident or person. Rather, we’ve completely lost the ability to disagree with each other and yet maintain civility. Please watch the fourth 1960 presidential debate to glimpse what America used to be.
It’s no wonder why some of the smart money is rotating out of domestic names and into international stocks. Most investors don’t like unnecessary variables and our political infrastructure is anything but stable.
Another point bolstering international stocks is our politicians’ unwillingness to accept hard truths. I am an immigrant and a citizen of the United States of America. The former doesn’t mean anything to me because I had no choice in the matter, but the latter is everything because I earned this ship. Thus, loose immigration laws deeply offend me because it cheapens my citizenship. Many foreign countries have strict immigration laws to reinforce social stability, which is positive for investors.
As well, the rise of agnosticism in the west may be contributing subtly to economic decline due to a stripping of higher purpose and culture in one’s life. For some odd reason, the eastern hemisphere tends to be more religious or spiritual than the west — even Pew Research Center noted the east-west divide within Europe regarding spirituality. Bottom line, people are the same but simultaneously different, which can lead to “culturally driven arbitrage opportunities” for these international stocks:
- KT Corp (NYSE:KT)
- Momo (NASDAQ:MOMO)
- Panasonic (OTCMKTS:PCRFY)
- Wipro (NYSE:WIT)
- Volkswagen (OTCMKTS:VWAGY)
- Rio Tinto (NYSE:RIO)
- Dollarama (OTCMKTS:DLMAF)
- Petroleo Brasileiro (NYSE:PBR)
- Sibanye Stillwater (NYSE:SBSW)
For this write-up, I’ve made it a point to spread the love as much as I can. The United Nations has 193 members — I’m not going to write a list of 193 securities to consider for your portfolio! Therefore, I decided to go regional, though there is a heavy emphasis on Asian companies as that’s the primary focus for my international stocks to buy.
KT Corp (KT)
When it comes to viable opportunities with international stocks, China is the one country that comes up most often. However, those who want to take the path less chosen should look into South Korea. As CNBC reported, the Kopsi index, the nation’s benchmark for publicly traded equities, rallied nearly 31%, which is the best annual performance in more than a decade.
One of the biggest contributors to South Korea’s success is its response to the novel coronavirus. Here, the cultural difference in terms of social trust and respect for authority allowed the country to mitigate the economic and health devastation seen in other nations. As a result, I believe names like KT Corp, Korea’s biggest telecommunications firm, have significant upside potential.
For one thing, KT stock is below parity relative to the beginning-of-2020 price. This suggests that the underlying company offers a better deal than those that have enjoyed the remarkable Korean rally.
More importantly, KT stock is simply relevant. With many Asian countries focused on technology, connectivity has never been more important. That will be especially true if Covid-19 becomes endemic.
Momo means many things in Asia. In Japan, it’s the word for peaches. Apparently, it’s also the name of a half-bird, half-woman monster that’s the subject of a modern-day urban legend. But in this case, Momo is a social media platform in China, with many users electing to deploy the network as an online dating site.
Generally, I believe e-dating is a great business model because it’s a clever way to get to know someone. Sure, at the beginning, online dating had the perception of being a last resort to finding a partner. And don’t get me wrong — there are certain safety issues associated with online dating that no one should ignore. But with everyone connected digitally, MOMO stock and similar investments have a decades-long upside pathway.
However, the pandemic has magnified the importance of dating sites and social media networks broadly. As pbs.org argued, there’s an incentive to get down to the brass tacks and really get to know someone, not go through the charade seen in the dating game. I believe that sentiment will apply to MOMO stock, and to other international stocks that are Cupid approved.
Although it didn’t nearly get as much attention, Japan’s Nikkei 225 — basically, that country’s version of the Dow Jones — had a solid year in 2020 and is off to an auspicious start in 2021. For international stocks levered to Japanese businesses, the biggest question is the coronavirus. With the Olympics coming up, I’m not sure if the event will take place. That’s something to keep in mind.
However, if you’re feeling bullish, Panasonic is a company that can buck the negativity. As you know, electric vehicle fever dominated business-related headlines last year. But the problem of having so many EVs to choose from is that they can’t all be winners. With PCRFY stock, you don’t have to sift through the pile. Instead, you’re basically playing on the EV battery game.
Up till now, many EV makers have generated profits from artificial markets, such as selling carbon credits. But now, traditional automakers find it more viable to make their own EVs, which should help PCRFY stock generally. As well, you have non-carmakers, like Sony (NYSE:SNE) apparently entering the fray. To me, that makes Panasonic even more enticing.
Asia is a massive continent, which includes more than the Far East. Therefore, those who are eastern bound with their international stocks should also consider publicly traded Indian companies. I covered this fascinating part of the world recently, which has been enjoying a robust rally. Part of the reason why American investors may want to look here is that India offers an excellent geopolitical counterweight to China’s communist government and its hegemonic ambitions.
Of course, the biggest reason why Indian stocks rank highly among the smart money is the nation’s growing technology sector, which has catalyzed rapid advancement of India’s middle class. One company that I didn’t cover in my article is Wipro. A specialist in information technology, consulting and business process services, WIT stock will likely rise in relevance over the next several years due to the importance of connectivity.
Further, the dissociation between work product quality and the physical working environment means that as world economies become further integrated, the opportunities for advancement may be in developing countries like India, not necessarily mature ones like the U.S. Therefore, I’ll be looking at names like WIT stock with much interest.
At first glance, Volkswagen seems a bizarre company to put on a list of international stocks to buy. After all, we have organizations like Tesla (NASDAQ:TSLA) that are shoving EVs down everyone’s throat. The future is electric. Even the blogosphere has become a platform to frame the international combustion engine as a pejorative. Things do not look good then for VWAGY stock and our sauerkraut-eating friends.
However, the Germans don’t mess around when it comes to engineering pretty much anything. The first time I ever got drunk was in Hamburg. I ordered one beer — just one — and I had to tilt my head to adjust for the change in my visual horizon. Vodka is tame in comparison. My thinking is, if Germans place that much potency in their beer, they’ll definitely do so with their cars.
Now, I like VWAGY stock because it hits all the notes in the automotive world. For one thing, it may take some time before the combustion engine is kaput. In the meantime, even combustion is making improvements. Also, Volkswagen is launching its own EVs. Even the VW-owned Porsche Taycan has received rave reviews.
Rio Tinto (RIO)
I’m going to be blunt. One of the reasons I picked Rio Tinto was its “coverage.” As an Anglo-Australian multinational firm, RIO stock essentially takes care of the British Isles — an Englishman once told me he doesn’t like being called European — and Oceania.
You know what I say. If you can get a two-fer, you take it and worry about the specifics later.
However, RIO stock is much more relevant than where its underlying headquarters are located. Primarily, its position as one of the world’s biggest metals and mining corporations gives it incredible influence. Naturally, with so much uncertainty over the pandemic, mining firms have additional relevance because of its precious metals production.
Let’s be real — it’s far better from a logistical standpoint to own shares of RIO than it is to own physical bullion. Also, investors may want to look carefully at Rio Tinto for its diamond mining operation. There’s a possibility that gemstones could become the new safe-haven asset because of their undervaluation relative to other precious commodities.
When the concept of international stocks comes up, many people react by thinking as far away from them as possible. But remember, even though Canada is basically “USA 2.0” — or as some might call it, America without the crazies — it is a foreign country. Therefore, you might want to start there before getting too exotic with your picks.
Part of the reason falls under the logic that you should invest in what you know best. For me, I know that the U.S.-Canada relationship is a special bond, featuring many shared goals. However, this also suggests that our economies are intertwined, which is why I’m eyeballing Dollarama. I like DLMAF stock for the same reason that I like Dollar General (NYSE:DG) back home.
I’m just not sure how this economic crisis is going to pan out.
Certainly, I’m encouraged that, at least on the U.S. side, the government is taking Covid-19 seriously. However, the pain to small businesses may be too deep, which would imply sustained high unemployment. I see similar circumstances for Canada, which is why I’m cynically bullish on DLMAF stock.
Petroleo Brasileiro (PBR)
Debates about who the greatest race car driver will long rage for all eternity. For me, there is no greater driver than Ayrton Senna. His passion and devotion to Formula 1 racing is unparalleled. He competed at a time when the machines were more rugged, requiring tremendous stamina and courage. And he was a standup man, the pride of Brazil at a time when the country was mired in ignominy.
If any country can use Senna’s indomitable spirit, it’s Brazil. Wracked by political corruption, economic challenges and most recently, a terrifying surge in Covid-19 cases, Brazil has seen better days. Indeed, even its prime publicly traded companies, such as Petroleo Brasileiro, have been wading in red ink. Still, hope may not be lost for PBR stock.
Don’t confused this with a confident take on the petroleum industry: it’s not. However, it’s unlikely that the pandemic will be a permanent headwind. Also, key oil benchmarks have been improving. Completely speculative, PBR stock still offers something intriguing and substantive for the risk-tolerant contrarian.
Sibanye Stillwater (SBSW)
From the conventional understanding of human history, we all originated from Africa. So I’m going to bring this back full circle with Sibanye Stillwater. A multinational mining company headquartered in Johannesburg, South Africa, Sibanye is well known for its precious metals production. But lately, SBSW stock has been relevant because of its exposure to platinum and palladium mining.
Most of you will be familiar with palladium as a cheaper but effective alternative to platinum for manufacturing catalytic converters. Theoretically, the rise of EVs threatens this business model. However, as I stated earlier, the pathway for combustion engines remains a bright one. Sure, EV batteries are coming down in cost. But until a solid-state battery is introduced that has both efficiency and energy density (the combustion engine’s advantage), regular cars won’t be going away for a while.
That might tee off the environmentalists, but it’s good news for SBSW stock.
However, SBSW stock is still pertinent for the 21st century economy. With fuel cells becoming a hot topic, platinum will be crucial for the electrolysis process to create usable green hydrogen. Thus, Sibanye is one of the better ideas among international stocks.
On the date of publication, Josh Enomoto held a long position in SNE, platinum and palladium.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.