In this piece, we will take a look at the 11 best foreign stocks to buy now. If you want to skip our overview of the global economy, then check out 5 Best Foreign Stocks To Buy Now.
The end of 2023 has revisited the decades old argument of American exceptionalism. This is because while nearly every developed economy is facing high inflation and high interest rates, America's economy is among the few that is continuing to grow even as interest rates have been hiked to record levels. This growth has confounded the general public, analysts, and economists alike, since several experts had predicted a recession to hit the U.S. more than a year back.
However, as the fourth quarter of 2023 settles in, the American economy is in no mood to slow down. This is because the latest data from the Commerce Department shows that the advanced reading for U.S. GDP growth during the third quarter of 2023 stood at a strong 4.9% - the fastest pace in two years for the third quarter. On the surface, this is a strong set of results which is in sharp contrast to foreign economies as we'll discuss below. However, digging deeper into this dataset reveals that living has become harder in the U.S. too, as while disposal income grew by 1.9% annually during the third quarter, on a real basis, it actually fell by 1% since high inflation outstripped the additional income.
Additionally, high inflation is also reflected in the savings rate of consumers, as the Commerce Department outlines that personal saving as a percentage of disposable income was 3.8% during Q3, for a sizeable drop over the second quarter's 5.2%. Yet, nevertheless, a 4.9% growth print is still higher than what economists polled by Reuters were expecting, and naturally, the estimate outpace reinforces the narrative of American Exceptionalism.
But what about the world? While the U.S. benefits from a strong industrial base as well as abundant natural resources that leave it relatively well insulated against external shocks, these trends are not present in other developed economies. This absence has created a sharp contrast between America and some of Europe's largest economies such as Germany and the U.K. As an example, consider the German economy - Europe's biggest and the continent's powerhouse. Data from the European Commission shows that the German economy can tip into a recession this year. The Commission revised its German GDP estimates in September, sharing that it now expects the economy to actually shrink by 0.4% in 2023 rather than grow by 0.2% as predicted in the original forecast. Some factors that will hamper German growth include lower exports, weak construction activity, and lower consumption.
However, even as Germany tumbles, the International Monetary Fund (IMF) believes that it will nevertheless overtake Japan as the world's third largest economy in 2023. According to the global lender, the German economy will be worth $4.4 trillion in U.S. dollar terms as of 2023 end, which will be higher than Japan's $4.2 trillion. So while there might be a slowdown in Germany, Japan, which is one of the world's biggest economic powers, is also facing its own troubles since the Japanese GDP will have stood relatively flat between 2022 and 2023.
Any discussion of foreign economies would be incomplete without the world's largest economy in per capita terms, China. After the coronavirus pandemic, China has struggled to find footing and its troubles have been exacerbated by the zero COVID policy and an insolvent real estate sector. Chinese economic managers, who for years allowed capital to flow freely through real estate to incentivize construction activity and economic growth, are now at odds about what to do now that big real estate developers are finding it difficult to pay back their loans. Since China's ability to meet its 5% GDP growth target for 2023 is still uncertain despite a pick up in industrial activity during the third quarter, the Chinese government is issuing bonds to generate funds for stimulus packages, rehabilitating flood hit areas, and balancing budget deficits. The scale of China's economy requires hefty capital financing, and the bond issuance will be worth a whopping $137 billion as the Chinese government raises its fiscal deficit as a percentage of GDP to 3.8% from 3% to account for heavy government spending at a time when deflation has already started to make its way during the economy.
Finally, before we head to the best foreign stocks to buy, some comments from the IMF's World Economic Outlook press briefing in October are worth noting. According to the agency's officials:
The global economy continues to recover from the pandemic and Russia's invasion of Ukraine, showing remarkable resilience; yet growth remains slow and uneven. The global economy is limping along, not sprinting. Under our baseline forecast, growth will slow from 3.5 percent last year to 3 percent this year and 2.9 percent next year, a 0.1 percentage point downgrade for 2024. This remains well below historical averages.
So, with this context, let's take a look at some top foreign stocks, out of which the notable picks are Alibaba Group Holding Limited (NYSE:BABA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Linde plc (NYSE:LIN).
Best Foreign Stocks To Buy Now
Our Methodology
To compile our list of the best foreign stocks, we first made a list of all non-U.S. firms that trade on the NYSE and NASDAQ exchanges and ranked the top 40 by market capitalization. Then, those with the highest number of hedge fund investors during this year's second quarter were selected as the best foreign stocks to buy.
Novo Nordisk A/S (NYSE:NVO) is a Danish pharmaceutical company that is one of the largest of its kind in the world. Its weight loss drug Ozempic continues to create hype and news despite being on the market for months, and the latest bit of news about Ozempic is that Belgium is temporarily banning the drug as it battles counterfeits.
As of June 2023, 43 out of the 910 hedge funds surveyed by Insider Monkey had bought Novo Nordisk A/S (NYSE:NVO)'s shares. Jim Simons' Renaissance Technologies owns the largest stake among these, which is worth $1.5 billion and comes via 9.3 million shares.
Novo Nordisk A/S (NYSE:NVO) joins Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Alibaba Group Holding Limited (NYSE:BABA), and Linde plc (NYSE:LIN) in our list of the best foreign stocks to buy.
Chubb Limited (NYSE:CB) is a Swiss insurance and reinsurance company. Rising interest rates typically help insurance companies earn more revenue since the premium is influenced by higher rates and for Chubb Limited (NYSE:CB), this led to a whopping 157.8% net income growth during the third quarter of this year.
In the prior quarter, 50 hedge funds among the 910 tracked by Insider Monkey had bought the insurance company's shares. Chubb Limited (NYSE:CB)'s biggest hedge fund investor is Israel Englander's Millennium Management due to its $291 million stake.
Eaton Corporation plc (NYSE:ETN) is an Ireland based industrial equipment manufacturer. Despite a global economic slowdown, the firm has beaten analyst EPS estimates in all four of its latest quarters, and it announced an $85 million investment in U.S. utility manufacturing solutions in October 2023.
During this year's second quarter, 51 out of the 910 hedge funds profiled by Insider Monkey had invested in Eaton Corporation plc (NYSE:ETN)'s stock. Out of these, the firm's largest shareholder is Philippe Laffont's Coatue Management courtesy of its $357 million investment.
Canadian Pacific Kansas City Limited (NYSE:CP) is a Canadian railway company with operations in its home country and in the U.S. High inflation and dropping consumer demand have made the firm cautious about its demand in in 2024, and this might be merited too, since Canadian Pacific Kansas City Limited (NYSE:CP) has missed analyst EPS estimates during the first and second quarters of 2023.
Insider Monkey scoured through 910 hedge fund portfolios for 2023's June quarter to find 52 Canadian Pacific Kansas City Limited (NYSE:CP) shareholders.
ASML Holding N.V. (NASDAQ:ASML) is an industrial equipment company that focuses on building machines that are used to manufacture semiconductors. The company enjoys a considerable advantage in its market since it is the only company in the world capable of making advanced chipmaking machines. However, this also makes its intellectual property quite sensitive, and these days, the firm is investigating whether a former employee stole company secrets to sell them to the Chinese firm Huawei.
By the end of this year's second quarter, 55 out of the 910 hedge funds polled by Insider Monkey had held a stake in the firm. ASML Holding N.V. (NASDAQ:ASML)'s biggest stakeholder in our database is Rajiv Jain's GQG Partners as it owns one million shares that are worth $750 million.
Accenture plc (NYSE:ACN) is an information technology company that provides companies with consultancy services. The firm is currently busy expanding its international portfolio, as it acquired a Canadian infrastructure consulting provider in October 2023.
After digging through 910 hedge funds portfolios for Q2 2023, Insider Monkey discovered that 56 were Accenture plc (NYSE:ACN)'s investors. Guardian Capital's GuardCap Asset Management owns the largest stake among these, which is worth $576 million.
Alibaba Group Holding Limited (NYSE:BABA), Accenture plc (NYSE:ACN), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Linde plc (NYSE:LIN) are some top foreign stocks with hedge fund interest.
