01/13/2006 12:00 am EST
For his 2006 favorites, Jim Stack—long one of my favorite advisors and money managers—chooses two stocks offering foreign diversification. His more speculative pick is a Japan ETF, while his more conservative pick, Diageo, "offers the benefit of a healthy yield."
"Diageo plc (DEO NYSE) is a UK domiciled firm that produces and distributes premium alcoholic beverages. The company manages nine of the world's top 20 premium spirits brands by volume. DEO has over 20% of the US spirits business by volume, almost twice the No. 2 competitor. It is an especially appealing idea in a late-stage bull market because its business is largely immune to economic fluctuations. Diageo's brand strength and geographic reach enables the company to deliver revenue growth and cash flow generation in a consistent fashion. The recently increased dividend provides investors with a net 3% yield.
"Among foreign markets, we currently favor Japan, where we recommend investors consider iShares MSCI Japan Fund (EWJ ASE). Our interest in this major market is a result of the recent improvement in Japan's domestic demand, and a possible end to the country's deflationary pressures and banking problems. As an exchange traded index, the iShares offer an easy alternative for those wishing to capitalize on this latest evidence of a sustainable recovery in Japan. Not only are these shares easily traded on the NYSE, but they avoid the short-term redemption penalties and some of the stock-picking and sector-focus problems that have plagued many actively managed Japan funds in recent years."
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