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Favorites for International Growth
01/28/2014 10:00 am EST
Not only a noted authority on Canadian stocks, Gordon Pape is a long-standing expert on global investing. In his Internet Wealth Builder, he highlights two international stocks that he particularly likes for 2014—one, a Chinese Internet firm, the other, a London-based liquor distributor.
Baidu Inc. (BIDU) is the Chinese equivalent of Google, which obviously makes it a very large company with great growth potential. The stock has been extremely volatile, falling to as low as $82.98 last April. But it has been on a tear since mid-summer.
The company has experienced higher costs, primarily due to promotional expenses for mobile products. Research and development rose 77.5% over 2012, due mainly to an increase in the number of R&D personnel.
Both these factors represent an investment in future growth, so investors were not overly concerned by the small size of the profit increase.
Baidu's market cap is increasing rapidly and now stands at almost $63 billion. The stock is not cheap, with a trailing 12-month p/e ratio of 36.1 and a forward p/e of 28.7. And there is no dividend, so this is strictly a security for growth-oriented investors who are willing to live with volatility.
But China has almost 600 million Internet users and most of them use Baidu. A few years from now, the current price will look cheap.
Meanwhile, London-based Diageo plc (DEO) controls many of the best-known liquor brands, including Johnnie Walker, Crown Royal, J&B, Bushmills, Captain Morgan, Tanqueray, Guinness, and a host of others.
It's hard to lose money on booze and this is the world's largest liquor company. The stock fell all the way to the $40 level during the 2008-09 crash, but has been on a steady rise since.
The company only releases financials twice a year, with the announcement of the first half results for fiscal 2014 due on January 30. The dividend is tied directly to the bottom line; the payout in 2013 was $2.92 per share, up from $2.76 in 2012. It's expected we will see another increase in the dividend this year.
The company has a market cap of almost $90 billion. The trailing 12-month p/e ratio is 21.8, while the forward p/e (based on expected 2014 results) is 17.5.
This is one of the rare growth stocks that also offers a reasonable dividend, with a current yield of 2.2%. It is, therefore, well-suited for all types of portfolios.
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