While U.S. stocks have generated incredible returns for many decades and investors the world over want to invest in the stocks of leading U.S. companies, U.S.-based investors can also benefit from investing in top foreign companies as well.
Investing in international companies can help investors diversify their portfolios geographically, help them tap into the explosive growth of emerging markets and other developing economies, and sometimes own shares of companies at less expensive valuations than are typically seen in the United States.
Here are three great foreign companies that U.S. investors can buy now.
1. MercadoLibre
MercadoLibre (NASDAQ: MELI) is Latin America's leading e-commerce platform, as well as an emerging force to be reckoned with in fintech and payments. While U.S. investors don't hear as much about Latin America as they do about China in terms of massive growth opportunities, the Latin American market collectively has enormous potential in its own right.
For example, Brazil, where MercadoLibre derives much of its revenue, has a burgeoning population of over 200 million people and the world's ninth-highest gross domestic product (GDP). Mexico, another key market for the company, has a population of over 125 million and ranks 11th in GDP. This gives you an idea of the vast potential that lies ahead of MercadoLibre.
And this isn't just a story about potential -- the company is firing on all cylinders right now. In its most recent quarter, MercadoLibre posted scintillating year-over-year revenue growth of 57% (to $2.6 billion).
This was impressive at surface level but even more astounding when considering that it was contending with inflation and a stagnating macro economy, while lapping a quarter that included significant tailwinds from the pandemic. The company also increased total payment volume by 84% and gross merchandise volume on the platform by 26% while growing net income.
MercadoLibre is one of the top holdings in my portfolio and a compelling way to invest in growing e-commerce and online payment adoption in Latin America with a well-run company that is executing on all fronts.
2. CD Projekt
Let's head from South America to Europe, and Poland specifically, for this next top international stock: video game publisher CD Projekt (OTC: OTGL.Y). With titles like Cyberpunk 2077 and the Witcher series, the company is establishing a nice foothold for itself in what is estimated to be a $218 billion market globally by 2024.
With a market cap of $2 billion, CD Projekt has plenty of runway ahead in this burgeoning industry. The stock is down 58% over the past year, and its flagship Cyberpunk 2077 game sold well but received criticism for its bugs and glitches. But these situations can also make for an opportunistic entry point for investors.
The company announced a partnership with Epic Games that will enable it to use Epic's coveted Unreal Engine, which should help it to avoid these types of issues and to "continue creating powerful, open-world RPGs [role-playing games]." An anime series called Cyberpunk: Edgerunners will be launching on Netflix (NASDAQ: NFLX), which could help to rekindle interest and broaden the game's appeal.
What I really like about CD Projekt is that the joint CEOs, Adam Kiciński and Marcin Iwiński, have built the company themselves and have been there for a very long time -- 28 years each. Not only that, but they have a lot of skin in the game as Iwiński owns 13% of the company, Kiciński owns 4%, and in total they and other founders and board members own 34% of shares.
I like the longevity and the fact that the people who helped to build the company from scratch are still there and invested for the long term. CD Projekt also pays out a small dividend.
With strong leadership and some success in a massive global market, the company looks like another top international company for investors to consider. U.S. investors can buy its American depositary receipt, or ADR.
3. Canadian Natural Resources
Not all top foreign companies need to work on cutting-edge video games or create the future of commerce, and U.S. investors don't always need to look far from home to find them. Take Canadian Natural Resources (NYSE: CNQ), one of Canada's top producers of oil and natural gas, for example. The $63 billion company has a strong presence in Alberta's oil sands, as well as operations in Great Britain's North Sea and offshore assets in Africa.
Management has a strong commitment to creating value for shareholders on a per-share basis, and it has smartly used 2022's increase in oil prices to pay out dividends and repurchase shares. The stock currently yields just over 4%, and the company also recently stated that, thanks to its strong performance and execution this year, it is rewarding shareholders with a special dividend of $1.50 Canadian dollars ($1.17) per share, which will be payable to shareholders of record as of Aug. 23.
This March, the company also enacted a large share buyback authorization in place that allows it to buy back about 10% of its public float by March 2023. Even after a 33% gain year to date, shares of Canadian Natural Resources still look attractive at just seven times earnings. All in all, it has world-class assets, a strong commitment to shareholder value and returning capital to shareholders, and an inexpensive valuation.
U.S. stocks are great, and there is also a world of opportunity outside of the United States for investors who want to diversify their portfolios and gain exposure to new markets and different valuations. Investing in top foreign companies like the three above is a great way to get started.
