Part of having a well-diversified portfolio is investing in international companies. International companies offer investors added diversification (location and currency), exposure to growth opportunities around the world, and access to industries that are not well represented in the United States.
If you’re looking for three great foreign companies to invest in, look no further than these.
1. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing (TSM -1.35%) is the world’s leading chipmaker. It has become a leading player in the industry with customized microchips used in many technology products. In fact, you’re probably reading this on a device with a TSMC microchip in it.
TSMC’s ability to manufacture powerful microchips (their smallest 3nm) has earned it an impressive customer base from tech giants. apple And The tiny device of the future, and it paid off handsomely for its top line. The company has posted a revenue compound annual growth rate of 18% since 1994. Still, even the impressive numbers didn’t save the company from shedding more than a third of its value last year.
There is no doubt that TSMC faces some short-term challenges in technology sales and a cyclical semiconductor business sensitive to broader economic conditions. However, this should not deter long-term investors.
TSMC could be a 2-for-1 win for investors, considering its growth potential as well as a dividend payout. TSMC’s current quarterly dividend is $0.45 per share, and its trailing-12-month dividend yield is about 2%. It’s not huge, but it is somethingAnd could help investors overcome some of the company’s short-term hiccups.
Alibaba Group (Dad -1.17%) The past few years have had their share of ups and downs and controversies, but brighter days seem to be ahead for the Chinese e-commerce giant. For starters, China has greatly relaxed its zero-covid restrictions that have halted much of Alibaba’s core business.
The company has also taken steps to appease Chinese regulators, most notably announcing that it is splitting into six smaller businesses.
I believe this is a good thing for shareholders for a few reasons. Large conglomerates are often traded at a discount to the sum of their individual businesses. For example, a conglomerate with five businesses valued at $100 million will typically be valued at under $500 million.
As independent businesses, Alibaba’s subsidiaries will be able to operate with more autonomy, which could translate into more efficient operations and increased focus on core businesses.
Alibaba’s price-to-sales ratio is above 2.1, nearly its lowest ever, and down 80% from five years ago.
For an industry leader with its huge market share and resources, this makes the stock fairly undervalued in my opinion. Any long-term risk at current price levels should outweigh the upside.
3. LVMH Moët Hennessy – Louis Vuitton, European company
French luxury group LVMH Moët Hennessy – Louis Vuitton, European company (LVMHF 0.42%) Has been a powerhouse for quite some time. With a portfolio that includes brands including Louis Vuitton, Tiffany and Co., Dom Pérignon, Fendi, Christian Dior and many other Rodeo Drive residents, LVMH has cemented itself among the best companies in the world.
While consumers buy staple goods and services due to necessity factors regardless of economic status, luxury goods are similar due to status factors. LVMH’s high value consumer makes it one of the least sensitive stocks to broader economic conditions. Someone buying designer bags, high-dollar champagne, or five-figure watches probably isn’t too concerned with high inflation.
The past two years have been profitable for the company after a small setback in 2020 due to the Covid-19 pandemic. Revenues range from 44.6 billion euros in 2020 to 64.2 billion euros in 2021 to 79.1 billion euros in 2022. In a year when many companies are stagnating or experiencing declining sales, LVMH managed to increase its revenue by 23%.
LVMH has pricing power that many companies can’t compete with, putting it in a position to thrive regardless of the global economy. Combine that with the company’s continued demand and world-class products, and LVMH’s dominance will continue for a long time.
Stephen Walters has positions at Alibaba Group and Apple. The Motley Fool has positions on and recommends Advanced Micro Devices, Apple, and Taiwan Semiconductor Manufacturing. Motley Fool has a revealing policy.