China might be slowing down. Energy markets could be disrupted by the crisis in Ukraine. The emerging-market growth engine is lagging developed economies.
You may have heard these cautionary forecasts over the past several weeks and months. Of course, these are real risks that have slowed stocks’ powerful 2013 momentum. Yet most global markets continue to advance; MSCI The World Index is trading near all-time highs (see chart below).
If you think stocks will continue to push forward in the face of headwinds, consider a few of the following opportunities from around the world.
With stocks trading at these levels, value may be an even more important objective for the active investor considering new positions.
Several international securities show up at the top of the list in the Deep Value ETFs screen provided by Morningstar. As of April 11, the top results of this screen are iShares MSCI Far East Financials ETF (FEFN), First Trust Hong Kong AlphaDEX Fund (FHK), and Guggenheim China Real Estate ETF (TAO).
Asia seems to be a popular region for value buyers. Jed Weiss, co-manager of Fidelity® Total International Equity Fund (FTIEX) thinks some European commercial lighting companies and financials are undervalued, along with certain small-cap Japanese stocks, despite the big 2013 rally.
Of course, investors with a longer outlook might want to place a greater emphasis on those international equities with value and strong growth prospects.
As of April 11, 2014, large-cap depository receipts1 with the lowest price-to-earnings growth (PEG) ratio are Russian telecommunications provider Mobile Telesystems OJSC (MBT), Japanese bank Mizuho Financial Group (MFG), and London-based biopharma company Astrazeneca (AZN).
In addition, the International Growth screen (provided by Morningstar)—which seeks to find ETFs that exhibited significant sales and cash flow growth over the past year—offers up some opportunities. As of April 11, 2014, Guggenheim BRIC ETF (EEB), SPDR S&P Emerging Latin America ETF (GML), and Powershares Emerging Markets Infrastructure ETF (PXR) are the top results.
Equity Summary Score
Not only do these ETFs show up at the top of this screen, they also have high Equity Summary Scores—all at 100 (see sidebar).
Looking for current income? There’s currently no shortage of large-cap, high-yield stocks that are headquartered outside the U.S.
As of April 11, 2014, Netherlands-based telecom company Koninklijke KPN NV (KKPNY), Brazilian bank Banco Santander Brasil SA (BSBR), and Bermuda-based offshore oil services firm Seadrill (SDRL) offered dividend yields of 26%, 18%, and 12%, respectively.
High yield can be very attractive to those seeking income. However, chasing yield can be risky if there aren’t sound fundamentals behind the investment. The High Yielding Stocks screen offered by S&P Capital IQ looks for current dividend yields of 3% or higher, as well as the prospective earnings growth to sustain or increase payouts to shareholders.
Several international opportunities show up in the top ten of this screen, as of April 11, 2014, including U.K. offshore driller Noble Corp (NE), offering a 5% yield, Brazilian oil firm Petroleo Brasileiro SA Petrobra Petr (PBR/A), paying a 10.8% yield, Monaco-based transportation services provider Navios Maritime Acquisition Corp (NNA), featuring a 5.6% yield, Netherlands-based financial services firm Aegon NV (AEG), paying out a 3.3% yield.
The international landscape has certainly improved over the past several years. Nevertheless, risks remain, and when considering global investing opportunities, a careful analysis of several key regions should be conducted before making any decision.
In addition to the crisis in Ukraine, Dirk Hofschire, senior vice president of Asset Allocation Research at Fidelity, is monitoring the situation in China. In particular, he’s looking at any potential warnings signs associated with late-stage business cycle conditions. “I see potential warning signs in China, the largest emerging market, which has had a huge credit buildup over the past several years and has a lot of excess capacity in areas like real estate,” Hofschire notes.
As a result, there could be some more volatility in the markets in 2014. Yet international pockets of opportunity can provide investors with vehicles to find value, growth, and income.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917