Barring any unusually negative events, the major U.S.-based indices like the Dow Jones or the S&P 500 will likely close at or near record highs. Based on the robust momentum that American blue chips have demonstrated, the temptation is to stay the course. However, compelling arguments exist to consider shifting your portfolio toward international stocks.
First, U.S.-based equity indices have already charted multiple years of remarkable growth. Although that in and of itself is no guarantee that they’ll correct, at some point, the odds work against them. After all, markets tend to work in cycles. And as domestic valuations rise, astute investors will look at other sectors for superior growth opportunities. Overlooked international stocks may be that ticket.
Second, not only have our benchmark indices skyrocketed, they’ve consistently dominated the broader performance of international stocks. Since the beginning of the decade, the S&P 500 has largely moved to ever higher plateaus. In comparison, the rest of the world – including viable emerging markets – have flatlined. Based on cyclical probabilities, the capital return potential is higher with global names.
Finally, the Trump administration is facing its toughest domestic challenge (aside from the impeachment hearings) in 2020. Of course, I’m referring to the general election. Given that the President isn’t exactly killing it in public opinion polls, the economy is crucial. A good one may secure a second term but a bad one will cripple his chances.
Therefore, the White House has every incentive to cool its “law and order” agenda. And that may bode well for international stocks, especially considering the recent limited trade deal between the U.S. and China.
With that, here are seven international stocks worth considering for the new year:
International Stocks Worth a Visit: Sony (SNE)
For many years, international stocks originating from Japan have been an afterthought. As you know, the country has a litany of economic and social challenges that make it unattractive to conservative investors. But Japan’s flagship company Sony (NYSE:SNE) has really bucked expectations. On a year-to-date basis, SNE stock is up over 43%.
That said, the natural reaction is to question whether such momentum is an anomaly. To be fair, its performance over the past several years have been stilted and generally unconvincing. However, the consumer tech firm’s release of the PlayStation 5 at the end of 2020 should help sustain momentum in SNE stock.
While naysayers may criticize video games as being threatened by streaming alternatives, I’m not convinced. The reason is that you can substantial computing power in a physical console. And with graphics processors having improved significantly since the predecessor PS4 debuted, the PS5 should be groundbreaking. Therefore, don’t give up on SNE stock just yet!
Japan Airlines (JAPSY)
Typically, I don’t like putting speculative names up high on my gallery slides. However, I’ll make an exception for Japan Airlines (OTCMKTS:JAPSY). Unlike other major airliners like Delta (NYSE:DAL) or United Airlines (NASDAQ:UAL), JAPSY stock does not have an upward bias. Instead, shares have undulated like a roller coaster over the past five years.
However, JAPSY stock may be on the upswing, possibly in the next months ahead. Tokyo will host the 2020 Summer Olympics, bringing the city and Japan into the global limelight. Furthermore, Japan already hosted the 2019 Rugby World Cup. This was not only another showpiece for the nation, but it served as a test for the infrastructural demands that will come as an Olympics host.
Obviously, the Olympics will lure millions of visitors, which is an opportunity for JAPSY stock. Plus, the country ranks among the most popular destination spots for tourists. Therefore, the chance for recurring tourism business is quite high.
Adidas (ADDYY)
Among the strongest international stocks this year has been German athletic apparel maker Adidas (OTCMKTS:ADDYY). Since January’s opening price, ADDYY stock has skyrocketed 53%. However, fears of a European consumer slowdown and a possible recession took the wind out its sails. But with improving relations between the U.S. and China, the Atlantic consumer may just bounce back.
In such a circumstance, it would bode well for ADDYY stock and not just for broader geopolitical reasons. Instead, from the angle of its core industry, Adidas has many untapped opportunities to advantage. Better yet, management has a long-term plan to address these opportunities. For instance, the company has teamed up with singer Beyonce to launch a collection of gender-neutral shoes.
Furthermore, Adidas’ venture with Beyonce helps close the gap with Nike (NYSE:NKE) regarding female-consumer market share. The deal may also boost the German company’s profile in Europe and China, where Nike has led in growth rate.
Deutsche Post (DPSGY)
Millennials love the environment. In fact, their passion for going green extends so meaningfully that companies are actively adjusting to their demands. A company that can possibly benefit from this emerging culture and shifting mores is Deutsche Post (OTCMKTS:DPSGY). Since hitting all-time highs in early 2018, DPSGY stock has come down significantly.
However, momentum could shift to the upside for 2020. Primarily, DPSGY stock has a catalyst in subsidiary company StreetScooter, which Deutsche Post acquired in December 2014. An electric vehicle manufacturer, StreetScooter specializes in eco-friendly delivery vehicles. In 2020, DHL, also under the Deutsche Post corporate umbrella, will launch zero-emission EVs in the U.S.
Over the past several months, I’ve been skeptical of the mass integration of alternative energy vehicles due to infrastructural requirements. But with individual entities, it might work out. Modern American metropolises are actively seeking ways to reduce emissions. With Deutsche Post’s green focus, DPSGY stock just might see some green itself.
TAL Education Group (TAL)
One of the characteristics of Asian companies is their emphasis on longer-term strategies over immediate gratification. As Harvard Business Review points out, Toyota’s (NYSE:TM) patient, forward-looking approach contributed to its modern-day successes. This is one of the key reasons why I like TAL Education Group (NYSE:TAL) and TAL stock.
Most lists of international stocks that have exposure to China will include the obvious names like Alibaba (NYSE:BABA) or Tencent (OTCMKTS:TCEHY). Certainly, these names have skyrocketed thanks to the thawing of the ice between the U.S. and China. However, keep in mind that TAL stock moved substantially higher well before the limited trade agreement.
Why? As an after-school tutoring program, TAL stock is a bet on China’s future generation. In terms of international stocks in China, I think this is a more reasonable bet. Virtually all Asian countries prioritize education, aligning with cultural and societal expectations. Thus, trade war or not, TAL has a bright future.
Autohome (ATHM)
Without any recent context, China’s Autohome (NYSE:ATHM) appears as a no-brainer investment among international stocks. First, ATHM stock is levered to the world’s biggest automotive market. Second, Autohome specializes in providing automotive information to consumers.
However, China’s auto market has worryingly contracted this year. As a result, ATHM stock took a beating after peaking in the spring season.
Still, the biggest catalyst for the organization is obviously the limited trade agreement. It sets the stage for a more meaningful deal later. Furthermore, the Trump administration can’t afford to roll the dice with the economy. Thus, ATHM stock may enjoy some upside due to a reinvigorated consumer base.
One other point to keep in mind: China’s car market is incredibly diverse. For instance, unlike Japan, Chinese consumers love American cars. Therefore, with so much product diversity, the demand for Autohome will likely only increase.
Norilsk Nickel (NILSY)
At least in the western world, Russia isn’t a very popular country. But Norilsk Nickel (OTCMKTS:NILSY) demonstrates why you can’t let your emotions dictate your investing decisions. Although NILSY stock is risky because it’s Russian and a mining company, it should rank highly in your list of international stocks to buy.
That’s because Norilsk is one of the biggest producers of the precious metal palladium. A key metal in terms of emissions control and various technologies, palladium is incredibly rare. Thus, despite the rocky geopolitics surrounding Russia, NILSY stock is an absolute screamer. On a YTD basis, shares are up 70%.
Because of its rarity and incredible demand, I don’t think palladium will come down meaningfully. Seemingly out of nowhere, palladium became the most expensive precious metal, exceeding the gold price by a few hundred bucks. Until we see a paradigm shift again in the commodities market, the future looks bright for NILSY stock.
As of this writing, Josh Enomoto is long SNE, palladium and gold.