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International funds offer exposure to overseas market revival

The US stock market is set to make further gains, even though there has been talk that it is already fully priced for the earnings being reported. It is hard to call the top, and as they say, no one rings a bell to signal the top.

For Australian investors who see extended future growth in overseas markets or want to have some diversity in their portfolio so that it isn’t all domestic equities, they can most likely use the same stockbrokers to buy overseas shares.

If you are interested, but are not sure which stocks to buy or don’t have the time to research them, you can buy into managed funds that specialise in international equities. They can be quite profitable in their own right, and with the world’s economies righting themselves, this could be an opportunity for extra earnings growth.

Magellan Financial Group (ASX: MFG) is an Australian-based global equity fund management business that offers three separate funds. From 2005-2009, earnings per share (EPS) were sometimes in the negative, but since then its EPS have taken a decidedly strong turn up — from 2.43 cents per share in 2010 to 40 cps in 2013.

Correspondingly, its share price has soared from $1.25 to $10.55 in the past 12 months.

One of the largest investment funds that specialises in overseas equities is Platinum Asset Management (ASX: PTM), which has a $3.5 billion market capitalisation. It uses a “bottom-up” stock selection strategy in which it targets undervalued quality stocks rather than choosing equities according to current economic or market, or macroeconomic, trends.

Over the past six years it has an average 58% net profit margin, and return on equity and return on assets are 37.5% and 35.2%, respectively. Its share price is around $6.05, and is within about 5% of surpassing a recent peak of $6.41.

Perpetual (ASX: PPT) invests in a wide range of assets, some of which are international equities, and it also offers its Perpetual Private service, which caters to high net worth clients, offering holistic advice and service.

Net profit margin for 2013 was 21.3%, with return on equity at about 24%. Its share price has risen 57% over the past year, and is currently at $45.27

Foolish takeaway

Sometimes it may be better to leave this kind of investment to professionals who routinely follow international stocks. From the thousands of overseas companies, industry funds, country funds and ETFs to sort through, they have the experience and historical performance that investors would need to feel comfortable investing through them.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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