Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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| Beat
the S&P with These Foreign Companies |
Published: February 21, 2007
In 2006, the S&P 500
finished the year up about +15% including dividends -- the best year for
the U.S. market since 2003. That return is also far better than the
average annualized +11% gain registered by the S&P over the past 70
years.
But while a +15% return is far from shabby, it pales in comparison to
the more than +127% gain logged by China's Shanghai and Shenzen 300
Index, the +53% jump in India's Sensex, and the +33% gain in Brazil's
Bovespa.
While all three of these indices are in emerging markets, investors
didn't even have to put money in the developing world to best the
S&P 500's 2006 return. Germany's DAX soared +22% last year, while
Canada's TSX rallied more than +17%. The point of this comparison: it's
a mistake for U.S. investors to ignore foreign markets.
Specifically, emerging markets like China and India offer superior
growth potential to what's available in the developed world. China, for
example, has gone from an economic backwater into a world manufacturing
superpower. As the country has seen significant economic growth, wages
have been rising. Rising wages have fueled spending -- consumers are
starting to spend on everything from travel to clothes to automobiles.
That has helped reinforce the nation's growth. And China has years of
growth ahead as consumers catch up to their developed world
counterparts.
The same basic trend is evident in India. Fifteen years ago, mortgages
were unheard of in this vast nation. Nowadays, mortgage lending in India
is growing as fast as +30% annualized, fueling a real estate boom in
India's larger cities. Easier financing has also helped boost consumer
spending.
This cycle is nothing new for emerging markets. A little over a century
ago, the U.S. was an emerging market -- Britain was considered the
world's preeminent superpower. But America grew into the world's largest
economy and a manufacturing superpower during the 20th century. During
this phase of rapid development, America posted strong economic growth.
Ultimately, however, countries mature and growth rates slow. The U.S.
now has a gross domestic product (GDP) of more than $10 trillion -- far
and away the largest in the world. In this type of established economy,
growth of +3-4% is considered more than acceptable. To put these figures
into context, consider that +3% GDP growth for the U.S. would mean $300
to $350 billion in additional annual GDP. That's roughly equivalent to
the entire GDP of Sweden -- it's hard to maintain growth even at that
pace year after year.
But growth is not the only reason to gain exposure to foreign markets.
Another is simple diversification. For example, last year U.S. stocks
faced several headwinds, including a slowing economy and rising interest
rates. Meanwhile, stocks in key European economies such as Germany
benefited from economic reforms and a relatively benign interest rate
environment.
Simply put, not all economies and stock markets move in the same
direction at the same time. When the U.S. stock market is trending
lower, a select basket of foreign stocks may be trending higher. By
diversifying internationally, investors can lower their risk while
enhancing their potential returns.
A study conducted by Merrill Lynch for the period from 1973 to 2003
shows that a basket of 20% foreign stocks and 80% domestic stocks
returned about +12.7% annualized. Meanwhile, a portfolio of only U.S.
stocks nearly matched that return at +12.5% annualized. The big
difference: the global portfolio showed less volatility and lower risk.
Fortunately, it's easy to invest overseas. Many foreign companies in
developed and emerging markets alike now trade on U.S. exchanges as
American Depository Receipts (ADRs). ADRs trade in U.S. dollars and cost
no more to buy than any U.S.-based company.
With these points in mind, my staff and I recently searched for foreign
companies with strong growth and reasonable valuation levels. In the
process, we looked for companies that met the following criteria:
-- Companies headquartered outside the U.S.
-- Three-year annualized revenue growth of +25% or higher
-- Three-year annualized earnings growth of +35% or higher
-- Operating margins of 15% or higher
-- P/E-to-Growth (PEG) ratio of less than two
-- Market capitalization of greater than $100 million
After running these criteria through StreetAuthority's advanced
screening software, we came up with the following list of companies. . .
Important Note: Throughout the remainder of
this article, editor Paul Tracy and our research staff provide a list of
17 firms that meet the requirements listed above and trade on U.S.
exchanges. However, in order to view the remainder of this article,
you'll need to subscribe to our premium newsletter -- Market Advisor.
After you subscribe you'll receive immediate access to this full
article, as well as our monthly Market Advisor newsletter and a
host of additional premium content. Please visit one of the following
links to continue. . .
Good investing!
-- Paul Tracy
Editor
StreetAuthority
Market Advisor
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receive in-depth guidance on today's leading investing
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Market Advisor. |
Paul Tracy
founded StreetAuthority and became Chief Investment Strategist in 2001. Prior to
that he spent several years as Managing Editor at a multi-million dollar
financial publishing firm with over 150,000 subscribers. In addition to
his role as managing editor and lead financial writer, he was also
responsible for equity research and managing a team of seasoned
professional financial writers, researchers and market commentators.
Paul's previous experience
includes a position at Robert W. Baird & Co.'s full-service
brokerage operations as well as economic research work on a Money and
Banking project funded by the National Bureau of Economic Research. He
has also spent time doing outside consulting and research for the
University of Virginia, has appeared as a guest expert on several
prominent financial radio shows, and has been a featured speaker at
various investment conferences across the U.S.
Paul graduated with a B.S.
in Finance and Management from the McIntire School of Commerce at the
University of Virginia.
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