U.S. stocks have gotten the better of international stocks in recent years. That’s led investors to shy away from buying companies outside the 50 states.
WisdomTree’s global head of research, Jeremy Schwartz, recently suggested that 2021 could be the year international stocks finally deliver some outperformance vis-a-vis U.S. stocks.
“After a decade of U.S. stocks outpacing their international peers, ‘you’re starting to see signs of the market rotation, but there could be a long way to go.”’ Schwartz told CNBC.
Of course, once you open yourself up to investing outside the U.S., then you have to consider whether you want to stick to developed markets such as Canada and the UK, or take on additional risk by looking at emerging markets such as India or Brazil.
You could literally spend the rest of your waking days pondering this question. However, the ones who do are generally paid for that responsibility.
So, to save you some time, I’m gone ahead and provided you with seven international stocks to buy for international profits.
To make things interesting, I’ll select one stock from all six continents. Antarctica, the last time I checked, has no publicly-traded companies. To make up for the final pick, I’ll select a second North American stock, recommending one from Canada and Mexico.
- Brookfield Asset Management (NYSE:BAM)
- Fomento Economico Mexicano (NYSE:FMX)
- Sony (NYSE:SNE)
- Sibanye Stillwater (NYSE:SBSW)
- Loma Negra Cia Industria Argentina (NYSE:LOMA)
- Unilever PLC (NYSE:UL)
- Wesfarmers (OTCMKTS:WFAFY)
Lastly, to ensure I’m giving you profitable companies, each of them will have a trailing 12-month free cash flow (FCF) that’s positive.
International Stocks to Buy: Brookfield Asset Management (BAM)
Market Cap: $58 billion
Free Cash Flow (TTM): $3.6 billion
Representing North America and the country of Canada is one of the world’s largest alternative asset managers. Brookfield has more than $575 billion in assets under management.
How big is Brookfield? It owns more than 2,000 assets across 30 countries on five continents, including South America, where it started more than 120 years ago.
Brookfield’s got something for everyone, whether you’re into real estate, infrastructure, renewable power, private equity, or credit investments.
Sometimes, its investments require a lot of patience. That’s especially true with Brookfield Property Partners LP (NASDAQ:BPY), owners of some of the world’s most valuable office and retail real estate. Unfortunately, BPY has suffered during Covid-19.
As a result, BAM has offered to buy back the 40% of BPY that it doesn’t already own for $5.9 billion. It wants to clean up this investment behind closed doors away from the public markets.
“This company was going to have major issues over the next two years,” Canaccord Genuity analyst Mark Rothchild recently said about BPY. “Brookfield is to some extent cleaning up a mess.”
Chief Executive Officer Bruce Flatt is better than most at allocating capital. I won’t be surprised in 3-5 years if Flatt turns a rare misstep by the company into a substantial gain for Brookfield shareholders.
Fomento Economico Mexicano (FMX)
Market Cap: $26.3 billion
Free Cash Flow (TTM): 36.5 billion Mexican Pesos ($1.8 billion)
Representing North America and the country of Mexico is Femsa, as it is commonly called, a Mexican holding company whose shares I recommended way back in April 2013.
In the article, I suggested that investors forget about Coca-Cola (NYSE:KO) and buy its shares instead. Femsa owns 47% (56% of the votes) of Coca-Cola Femsa (NYSE:KOF), the largest Coca-Cola bottler in the world. It also owns 15% of Heineken N.V. (OTCMKTS:HEINY) and 100% of Comercio, which operates Oxxo convenience stores in Mexico and South America and 3,161 pharmacies in Mexico, Chile, and Colombia.
Femsa got the stake in Heineken by selling them its Mexican beer business — brands include Dos Equis, Sol and Tecate — for $7.4 billion in 2010. Since then, it’s sold off 5% of its stake to invest in its other two businesses.
Its focus is to understand retail and non-alcoholic beverages in as many places in Mexico, Central America, and South America.
In 2013, it jumped into the pharmacy business by acquiring Farmacias Farmacon, a regional player with 200 pharmacies in the northern part of Mexico. Since then, it’s made several acquisitions in Mexico and elsewhere to gross its pharmacy business. In addition to growth by acquisition, the pharmacy business opened 180 net new stores in fiscal 2019. Overall, the pharmacies achieved same-store sales of 3.7% in 2019.
In recent years, FMX stock has gotten pummeled in relation to the S&P 500. However, in the past three months, its stock generated a 31.9% total return through Jan. 27.
It’s definitely an underdog worthy of more attention from investors.
Market Cap: $117.8 billion
Free Cash Flow (TTM): 1,037 billion Japanese Yen ($10 billion)
The conglomerate represents Asia and the country of Japan. Sony is one of those companies that touch most of us in one way or another.
Whether it’s playing a video game on its PlayStation video game consoles, listening to an album published by its music division, a movie produced by its movie studio, the list goes on and on. It’s even got an electric car — Vision S — that it’s working on. And it’s pretty darn good looking.
Needless to say, Sony’s got its hands in a lot of pies. But right now, in 2021, it is the launch of its newest video game console, the PlayStation 5 (PS5), that has investors excited.
Officially launched in mid-November, Sony sold 3.4 million units of the PS5 within a month of its launch. In 2021, it expects to produce 18 million PS5s. The research firm Gaming Smart says that Sony sold twice the amount of console units since the PS5 launch through the end of 2020 as Microsoft’s (NASDAQ:MSFT) new Xbox Series X.
Sony believes the PS5 launch was its most successful in its history. In the process, SNE stock has become one of the most popular stocks to buy by millennials. It makes sense that younger investors, who likely use the consoles a lot more than their parents, would share a greater affinity for the stock.
That said, Sony is a lot more than video game consoles. When the PS5 excitement dies down in 2022, shareholders will be happy it’s so much more.
Sibanye Stillwater (SBSW)
Market Cap: $10.8 billion
Free Cash Flow (TTM): $875.5 million
It’s appropriate that the stock representing the continent of Africa and the country of South Africa is a gold company. In 2019, South Africa produced 118.2 tonnes of gold, putting it in eighth spot amongst gold-producing countries. However, the country once produced over 1,000 tonnes of precious metal (1970).
I’m not a big gold bug, so my knowledge of Sibanye Stillwater is limited. That said, I’ve got a colleague at InvestorPlace who’s written about the company in recent weeks to help me out.
Josh Enomoto recently highlighted that the company had gotten a fair bit of attention from investors and the media because of its palladium production, commonly used in catalytic converters. As Josh says, until electric vehicles (EVs) fully take over, catalytic converters will remain in demand. It’s also used in jewelry that’s also unlikely to see demand fall off a cliff soon.
According to its December 2020 presentation, Sibanye Stillwater has total reserves of 70 million ounces, 22% of which are gold, with palladium, platinum, and rhodium accounting for the rest.
In Q3 2020, its adjusted EBITDA set a record of $922 million, more than it generated for all of 2019. Its profitability, cash flow, and balance sheet have never been stronger.
Loma Negra Cia Industria Argentina (LOMA)
Market Cap: $603.2 million
Free Cash Flow (TTM): 1.58 billion Argentine Peso ($18.1 million)
The smallest of the seven companies on my list of international stocks, I was trying to get a U.S.-listed stock that wasn’t based in Brazil, the more common go-to for Latin American investors. That’s not a slight against Brazil. I just wanted something different.
Loma is in the cement business in Argentina.
The company’s history dates back almost 100 years to 1926, when Alfredo Fortabat discovered limestone, the key ingredient for making cement. Today, it is the leading cement producer in Argentina with a 43% market share.
Up until August 20, it owned 51% of Paraguayan cement producer, Yguazu Cementos, which has 42% cement market share in Paraguay. In 2020, it sold its interest in the company for an undisclosed amount. The 51% interest contributed approximately 10% of its annual revenue.
Loma is controlled by Brazilian cement conglomerate InterCement Group, which owns 51% of its stock. Inter Cement spun-off Loma in September 2017, selling shares at $19. Trading for approximately 25% of its IPO price, Loma’s stock is definitely the value play of the group.
Unilever PLC (UL)
Market Cap: $155.8 billion
Free Cash Flow (TTM): 7.86 billion euros ($9.5 billion)
Unlike some of the names on this list of international stocks, most everyone has heard of Unilever and likely uses one or more of their products regularly. A quick look at its U.S. brands tells me that I use several brands regularly (Q-tips, Vaseline, Knorr, Degree), if not daily.
CEO Alan Jope succeeded the controversial Paul Polman, who initiated a move from London to Amsterdam in 2018. That move was nixed after several large UK investors protested. In September 2020, shareholders overwhelmingly voted to become a British company with its headquarters in London rather than Amsterdam.
Jope believes that Covid-19 has forever changed Unilever.
“We anticipate never going back to five days a week in the office,” The Guardian recently reported Jope’s comments on the subject. “That seems very old-fashioned now.”
According to Morgan Stanley, the number of people working from home will double from 15% before the pandemic to 30% post-Covid-19. It seems as though Unilever will play a part in that growth.
At the end of the day, Unilever will prosper and grow by utilizing technology to help sell its products online and off.
Yielding 3.9% at the moment, it’s a dividend investor’s dream stock.
Market Cap: $47.9 billion
Free Cash Flow (TTM): 3.68 billion Australian Dollars ($2.8 billion)
I try to avoid going with over-the-counter international stocks as much as possible. However, it’s not an easy task to find Australian stocks that trade on the NYSE or Nasdaq. At least ones I’d consider worthy of investment.
Wesfarmers got its start in 1914 from two small rooms in Perth, Australia, as a farmers’ cooperative. Today, it’s a massive company with almost $20 billion in assets and five operating segments: Bunnings (Home Improvement), Kmart Group (Discount Retail), Officeworks (Office Products), WesCEF (Chemicals, Energy & Fertilizers), and WIS (Industrial & Safety).
By far, its biggest business is Bunnings, which accounted for 49% of its revenue and 62% of its pre-tax earnings in fiscal 2020 (June 30 year-end). Growth for Bunnings was tremendous in 2020. Revenues grew 14% year-over-year while pre-tax profits were up 12% over fiscal 2019.
If you follow Home Depot (NYSE:HD), you know how healthy the home improvement market’s been in the U.S. It turns out that Australians were also spending a lot of time at home in the second half of 2020.
Overall, Wesfarmers saw revenues grow by 10.5% in 2020, with net income, excluding one-time items, rising by 8.2%.
Wesfarmers is all about capital allocation, and that’s an excellent thing.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.