The Dow Jones industrial average may have busted through 12,000 this week, but it’s still only up 12 percent for the year.
Many foreign stocks, on the other hand, have gone through the roof.
The Dow Jones China 600 index is up almost 37 percent this year; Argentina is up 40 percent, and stocks in Vietnam have surged more than 75 percent.
Even though most money managers recommend that investors have at least 10 percent of their portfolios in foreign stocks or mutual funds, many American investors think foreign stocks are either too risky or impossible to buy.
David Riedel, a former telecom analyst for Salomon Smith Barney in Thailand, aims to change all that with his new book, “Finding the Hot Spots: 10 Strategies for Global Investing.”
Riedel, who now has his own independent research shop in New York, says serious investors should have at least one-third of their portfolios in foreign stocks – since about a third of the things they buy come from overseas.
Investors don’t have to call the Beijing Stock Exchange to invest in Chinese companies. There are literally hundreds of foreign companies traded on U.S. stock exchanges. These American Depository Receipts, or ADRs, as they are called, can be bought and sold just like normal U.S. stocks and are under the same disclosure rules that govern General Electric and Google.
One of Riedel’s picks is CDC Corp., a Chinese software and online gaming company that trades on the Nasdaq Stock Market. The company is benefiting from recent acquisitions and the explosion of online gaming in China.
China’s wireless phone industry is also booming. At the end of 2004, there were 334 million mobile subscribers in China and that number is expected to grow to 500 million by 2007, Riedel says.
To be sure, there are risks to investing overseas. Riedel cautions that drastic currency movements can quickly wipe out any profits, and government instability in developing countries poses a greater risk than it does at home.
To mitigate the risks, Riedel recommends diversifying by region, country and company but sticking to only a handful of themes, such as the Chinese cellphone market or the turnaround of Argentinean banks.
WORLD SERIOUS
This Beijing woman has 1.3 billion countrymen who want cell service. Put your money to work where there is real
growth – internationally – says one money manager.
Company
Ticker
Performance
(YTD)
Business
ABB Inc.
NYSE: ABB
up 46.3%
Swiss infrastructure construction concern.
Companhia de Bebidas Das Americas
NYSE: ABV
up 18.9%
Brazilian beverage company.
CDC Corp.
Nasdaq: CHINA
up 107.5%
Cell-phone technologies.
Cognizant Technology Solutions
Nasdaq: CTSH
up 51.8%
Indian IT outsourcing.