International shares are rising on the radars of Aussie retail investors.
While there are plenty of great companies listed on the ASX, they only represent a tiny fraction of the global stock offering.
So it pays to take some time to investigate the potential risks and rewards offered by international shares.
While there are added risks with investing overseas – exchange rate fluctuations chief among them – international shares can help diversify your portfolio from issues likely to predominantly impact Aussie companies.
The potential rewards offered by international shares has certainly been reflected in the past financial year’s investment allocations by Austalia’s superfunds.
As the Australian Financial Review notes, FY21 saw a record $130 billion of Aussie capital invested into global exchanges.
According to Robert Rennie, senior strategist at Westpac Banking Corp (ASX: WBC), a record share of the $450 billion increase in FY21’s super assets was invested in international shares.
“In effect, 28 cents in every dollar placed in super went into foreign equity. That takes foreign assets relative to domestic assets to 19.4%, which is the highest on record,” he said.
With that in mind, Josh Gilbert, market analyst at global online investment platform eToro, outlines 2 exciting international shares to consider.
Global share number 1
The first international share Gilbert recommends is Crowdstrike Holdings Inc (NASDAQ: CRWD).
Crowdstrike counts among the world’s largest cybersecurity companies.
Gilbert points to United States President Joe Biden’s May 2021 executive order to beef up the nation’s cybersecurity measures as likely to offer significant tailwinds for the company moving forward:
Crowdstrike, is expected to reap the rewards of Joe Biden’s plans. The company is growing at an exceptional rate, with 70% year-over-year revenue growth in its Q2 earnings, whilst adding over 1,660 customers, up 81%. Crowdstrike also raised guidance for Q3 and the full-year, with both coming in above analyst expectations.
As many global businesses continue to upgrade their cybersecurity systems, and enterprises move more work to the ‘cloud’ than ever before, cybersecurity spending is expected to top US$200 billion by 2024.
The Crowdstrike share price is up 36% in 2021.
International share number 2
Another overseas share Gilbert tips is Alibaba Group Holding Ltd (NYSE: BABA).
The Chinese multinational technology company, co-founded by billionaire Jack Ma, has struggled this year. Shares are down 25% in 2021 amid increased red tape from the Chinese government.
Despite this, however, Gilbert says, “Alibaba’s fundamentals remain strong, with a positive earnings report at the start of August 2021, announcing US$2.57 per share on US$31.85 billion in revenue.”
Alibaba reported a significant increase to its share buyback program, increasing by 50% to US$15 billion. This essentially means Alibaba feels the stock is undervalued and expects further growth in the share price.
Alibaba’s valuation is close to historic lows, trading at a forward P/E ratio of 17.37, lower than value stocks such as Home Depot and Target. This essentially opens an exciting opportunity for investors looking for a bargain. Of course, there will be ongoing risks with Chinese stocks, but adopting a dollar cost averaging strategy can help investors navigate the volatility on a stock that’s undervalued.
The next time you’re looking at adding to your investment portfolio, don’t ignore the ASX.
But you may want to balance the potential risks and rewards offered by international shares as well.