Many Aussie investors will already have exposure in their portfolio to international stocks from the US.
But a new report from Canaccord Genuity Australia has reinforced the case for targeting stocks outside the Australian and US markets.
Tony Brennan, Chief Investment Strategist, said until this year, being concentrated in US equities within international portfolios produced better returns.
But this year, the US has underperformed the rest of the world, illustrating the benefits of being more diversified.
US stocks have provided prolonged success
In the report from Canaccord Genuity Australia, the firm reinforced the success investors have had by targeting US stocks, particularly technology shares.
Brennan said this has been supported by a generally solid economy and boosted by a large corporate tax cut during the first Trump Administration.
In the last decade, Europe had to contend with fiscal restraint after its sovereign debt crisis in 2012, the rupture of Brexit in 2016, and the war in Ukraine since 2022.
Changing tides
Although the US and the rest of the world have faced different challenges over the past decade, this year both sides were hit by the same shock: the new US tariffs and resulting trade war.
Despite initial fears, after nine months it's clear that economic damage from tariffs has been less severe than anticipated. Additionally, growth across major economies has held up better than expected.
The report also indicated that a key change this year is that the gap between US economic growth and growth in other major regions has narrowed.
International stock picks
The report highlighted 9 international stocks that the firm believes offer exposure to similar structural growth themes as US peers, while providing valuation alternatives.
After their remarkable success, many of the large US companies, particularly the large US tech stocks, are quite well known and well held by investors. So, in this report we highlight some major companies in other markets that could provide desired diversification for Australian investors.
The 9 international stocks are:
- HSBC Holdings PLC (UK)
- Airbus SE (France)
- ASML Holding NV (Netherlands)
- L'Oreal SA (France)
- Roche Holding AG Genussscheine (Switzerland)
- SAP SE (Germany)
- Siemens AG (Germany)
- Sony Group Corp (Japan)
- Tencent Holdings Ltd (Hong Kong).
The report said Airbus, ASML, SAP, and Siemens deliver access to industrial automation, semiconductor infrastructure, and aerospace duopolies with strong pricing power.
L'Oréal and Roche represent defensive quality with global market leadership in beauty and healthcare, delivering stable earnings with reduced cyclicality.
Sony and Tencent provide exposure to Asian technology platforms at more attractive valuations than US counterparts.
HSBC offers global banking exposure at modest valuations relative to US and Australian banking peers.
How to gain exposure
Investors looking to gain exposure to these international stocks can target each one individually.
However, there are also ASX ETFs that include many of these companies.
For example, the Vanguard FTSE Europe Shares ETF (ASX: VEQ) includes 7 of these companies that are based in Europe/UK.
This is the same for the iShares Europe ETF (ASX: IEU).
Both funds are up 20% or more in 2025.
