Investing in foreign stocks can offer diversification benefits, exposure to emerging markets, and opportunities to capitalize on global economic growth. As of February 19, 2025, several factors make international investments particularly compelling:
Diversification and Valuation Opportunities
International markets often provide exposure to industries and companies not prevalent in the U.S., allowing investors to diversify their portfolios. European stocks, for instance, have been gaining popularity due to their attractive valuations compared to U.S. equities. The STOXX Europe 600 index has outperformed the S&P 500 this year, reflecting investor interest in markets perceived as undervalued.
Economic Reforms in Emerging Markets
Countries like Argentina and Turkey are implementing political reforms aimed at reducing inflation, which could lead to significant stock market returns. J.P. Morgan anticipates that these markets could see returns exceeding 20% this year, driven by policy changes and economic stabilization efforts.
Growth in Asian Markets
Despite geopolitical tensions, China’s market presents unique investment opportunities. The departure of Western capital has led to more attractive valuations for Chinese stocks. Hedge funds and investors are identifying undervalued assets, particularly in the technology sector, which is poised for growth due to advancements in artificial intelligence and robotics.
Three International Stocks to Watch
1. Alibaba Group Holding Ltd. (BABA)
Alibaba is the leading e-commerce and cloud computing company in China, comparable to Amazon in the United States. The company’s ecosystem spans online retail, digital payments, logistics, and cloud services. As China’s economy continues to recover, Alibaba is positioned to benefit from the rising middle class and increased consumer spending.
Why Consider Buying:
- Growth Potential: China’s e-commerce market is the largest in the world, and Alibaba is the dominant player, giving it substantial growth potential.
- Cloud Computing Expansion: Alibaba Cloud is rapidly growing, with strong potential to compete globally with Amazon Web Services and Microsoft Azure.
- Attractive Valuation: After regulatory challenges, Alibaba’s stock is undervalued compared to its growth potential, presenting a buying opportunity.
2. Toyota Motor Corporation (TM)
Toyota is a global leader in the automotive industry, renowned for its reliability and innovation. It is at the forefront of the electric vehicle (EV) transition, hybrid technology, and hydrogen fuel cell development. With its strategic investments in autonomous driving and connected cars, Toyota is well-positioned to lead the future of mobility.
Why Consider Buying:
- EV and Hydrogen Leadership: Toyota’s focus on hybrid, electric, and hydrogen vehicles aligns with global sustainability trends.
- Global Market Presence: Toyota’s extensive international footprint and brand loyalty make it a dominant player in emerging and developed markets.
- Strong Financials: Toyota’s consistent profitability and robust balance sheet provide stability and growth potential.
3. ASML Holding N.V. (ASML)
ASML is a Dutch company that is the world’s leading supplier of advanced semiconductor manufacturing equipment. It holds a near-monopoly on Extreme Ultraviolet (EUV) lithography machines, which are crucial for producing the most advanced chips. With the rise of AI, 5G, and the Internet of Things, demand for cutting-edge semiconductors is soaring.
Why Consider Buying:
- Technological Monopoly: ASML’s EUV technology is critical for producing advanced semiconductors, giving it significant pricing power.
- High Demand for Chips: Growing demand for advanced chips in AI, 5G, and consumer electronics supports long-term growth.
- Robust Order Book: ASML’s high order backlog and strategic partnerships with leading semiconductor manufacturers secure its revenue streams.
Incorporating foreign stocks into your investment portfolio can provide diversification and access to growth opportunities not available in domestic markets. However, it’s essential to conduct thorough research and consider geopolitical and economic factors that may impact international investments.