Since bottoming at the end of October, the MSCI Emerging Market Index (MXEA) and MSCI Asia Ex-Japan ...
5 Foreign Winners with Momentum
05/10/2012 1:57 pm EST
Several of the best-performing overseas stocks are still no pricier than the plodding domestic alternatives, writes MoneyShow.com senior editor Igor Greenwald.
It’s cozy here in Fortress America. Sure, jobs are scarce and growth disappointing. Sure, we’re a bitterly divided nation headed for what will probably be the nastiest election campaign yet, just based on the general drift of things.
But at least unemployment isn’t 10%, as in Italy and France, or over 20% like in Spain and Greece. At least the housing market is no longer a bubble that still needs to deflate, like China’s and Australia’s. At least the currency isn’t seriously overvalued like Brazil’s. At least our streets are not blood-smeared, as in parts of Mexico.
Those Americans who bother peering out at the wider world these days will find lots of reasons to stay home. And this is as true for the hardy few still interested in stocks as for the general population.
Perhaps even more so, because US-listed multinationals have prospered even as the US economy has struggled. So it’s been possible to have the best of all possible worlds, enjoying the relative safety of well-known companies trading in New York but capitalizing on the catch-up growth in Shanghai and Mumbai.
Certainly, the returns last year and in so far in 2012 have been every bit as good at home as abroad, and better than in such one-time favorites as China and Brazil. Emerging markets have hardly imploded, of course, but the new leaders like Colombia, Thailand, and the Philippines have not been recent bedrocks of stability, to put it kindly, and are even further off the beaten path.
And yet there are overseas companies and stocks worth knowing given their performance relative to better-known US counterparts.
Booming US auto sales have certainly benefited the domestic manufacturers in Detroit, but General Motors (GM) and Ford (F) shareholders are still down nearly 30% in the last year. Japanese auto stocks are up slightly over the same span, and Toyota Motors (TM) has doubled GM’s 10% return year-to-date.
Tata Motors (TTM) of India is up 60% year-to-date after revitalizing the Land Rover and Jaguar brands it bought from flailing Ford on the cheap three years ago. Tata’s much better run and growing much faster than GM, and its long-term prospects look very promising.
Exxon Mobil (XOM) has flatlined for more than a year now, while Colombia’s Ecopetrol (EC) is up more than 40% year-to-date. Over the last two years, Ecopetrol is up more than 130%, outgaining Exxon fivefold. Yet Ecopetrol remains cheaper than Exxon and offers a better yield along with a much more attractive growth profile.
Verizon’s (VZ) 4.9% annual yield is nice and all, but the stock is flat in 2012, while America Movil (AMX) has already returned 12%—and that’s after the beating Carlos Slim’s fast-growing Mexican telecom took over its recent $4.2 billion bid for a sizable minority stake in KPN of the Netherlands.
Mexican Coke bottler Coca-Cola FEMSA (KOF) has seen its shares rise more than 20% over the last year, while Coca-Cola (KO) itself, which is a partner in KOF alongside watched EMSA, has dribbled slightly lower all the while.
KOF is cheaper than KO in terms of trailing cash flow, and no more expensive on a forward price-to-earnings basis. But it posted 29% sales growth and a 27% profit gain in the last quarter of 2011, versus 6% revenue growth and an 8% profit gain for Coca-Cola in its most recent quarter.
The beat goes on: While Europe struggles with recession, farm equipment maker CNH Global (CNH) has had no trouble of late selling to farmers in Europe as well as North and South America. CNH shares are up 16% in the last month, thanks to unexpectedly strong earnings and talk that majority owner Fiat will soon buy out the remaining 10% of the company. CNH shares are up 24% year-to-date, versus 3% for Deere (DE).
Is this cherry-picking? Absolutely. Are recent gains a reliable indicator of future performance? Of course not.
But the point is that the safe domestic stock isn’t always better. There are companies overseas carving out their own multinational turf, sometimes with excellent results. And they’re worth checking out right now, before the mob decides it’s safe to leave the bunker.
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