Still Plenty of Overseas Profits to Be Had

 | Apr 11, 2013 | 9:30 AM EDT  | Comments
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Stock quotes in this article:

rds.a

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tot

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tsm

The news from overseas has not been encouraging of late. The European Union just reported record-high unemployment. Cyprus, after its recent crisis, is hovering on the financial brink, and for 2012 China reported its weakest growth in 13 years.

With headlines like these, it should come as no surprise that international stocks have not been rocketing upward. They have not done too badly, I should note, as the MSCI EAFE international index up 4.49% year to date. But that badly lags the S&P 500's 10% climb so far this year which is more than double that of the MSCI EAFE's bump up.

Though international markets have been wobbly, my guru strategies have been identifying a number of international corporations they like. These are automated stock screens I created that mirror how Wall Street gurus actually invest. When these strategies really like a stock, I pay attention.

Royal Dutch Shell (RDS.A) is one such company. One of the world's largest oil-and-gas names, the Netherlands-based Shell operates in more than 80 countries, and my James O'Shaughnessy-based strategy strongly recommends the stock. Financial aspects it likes are its large market cap, at $206 billion; its high cash flow per share, at $12.93; its high number of shares outstanding, at 3.1 billion; and its high 12-month sales, at $467 billion. The strategy then takes those stocks that have all of these qualities and whittles them down to those in the top 50 based on their dividend yield. With a 5.35% yield, Shell is in this top-50 cohort.

Another foreign oil company in favor is Total (TOT). Based in France, Total is the fifth-largest publicly traded integrated oil-and-gas company, and is considered one of the "majors," like Shell. My Peter Lynch strategy thinks highly of Total, in part because of the company's favorable yield-adjusted P/E/G ratio, or price-to-earnings relative to growth -- a measure of how much the investor is paying for growth. The strategy demands a reading under 1.0, and Total's is at 0.87. The company's yield, meanwhile, is 7.66%.

Taiwan Semiconductor Manufacturing (TSM) is in another part of the world, and in another industry altogether. The Taiwan-based company is the world's largest contract chip manufacturer -- and it is also a favorite of my Lynch strategy. Its yield-adjusted P/E/G is 0.75, well below the 1.0 maximum. It also has a fairly low debt load.

Don't let the bad news from overseas blind you to opportunities international companies present. These are three solid performers and well worth considering by almost every investor.

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