6 Best Stock Picks from Abroad
Momentum has shifted, but smart buyers won’t abandon the opportunities overseas. See how top international fund managers are earning their keep.
The cat’s out of the bag: US stocks are the new catnip, foreign equities more like cat litter. The US has stimulative deficit spending including the recently approved payroll tax holiday, high productivity, and extremely competitive, globally-sourced companies.
Meanwhile, emerging markets are laboring under an inflation scare.
Europe consists of countries that have been bailed out, countries that will need to be bailed out, and Germany. (The rest of northern Europe’s pretty cozy too, but there’s no arguing that the European Union has major structural problems that will need to be tackled sooner rather than later.)
Australia’s flooded and soggy in the financial sense, too, as a result of sky-high house prices and consumer debt. Japan is still Japan, notwithstanding early signs of a revival. China’s got wasteful government meddling and the resulting construction bubble. Russia’s a one-trick pony fired by oil and corruption. Mexico is barely governable, thanks to drug cartels. Everywhere a potential investor turns, troubles, and risks seem to abound.
Zigging as the Market Zags
The seemingly fashionable preference for US equities is actually a contrarian call, based on the behavior of US mutual fund investors. Since the beginning of 2007, they have withdrawn $318 billion from domestic stock funds, while plowing $150 billion into overseas equities.
So add another danger to the list of those lurking overseas: that if investing preferences ever truly reverse, plenty of late-arriving cash could flow out of overseas markets.