Top 10 Most Popular Foreign Stocks

Check Out These ADRs to Diversify Your Portfolio

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International investors have access to virtually limitless opportunities around the world, from Austria to Zambia. Buying and selling these foreign securities has also become a lot easier with the advent of exchange-traded funds (ETFs) and American Depository Receipts (ADRs) that cover the vast majority of popular companies and countries around the world.

In this article, we will take a look at the top ten most popular foreign ADRs, as well as some important considerations for investors before purchasing them.

The 10 Most Popular Foreign ADRs

Below are ten of the most popular foreign companies trading on U.S. exchanges, as of 2015, according to ADR.com. These companies represent some of the largest operations in foreign countries with substantial trading volume and may be a great way to diversify any investment portfolio with securities spanning both geographies and industries.

  1. Melco Crown Entertainment Ltd. (MPEL) - Melco Crown Entertainment is a Hong Kong-based developer, owner, and operator of casino gaming and entertainment resort facilities in Macau and the Philippines.
  2. Prima Biomed Ltd. (PBMD) - Prime Biomed Ltd. is an Austalian biotechnology company that aims to become a leader in the development of immunotherapeutic products for the treatment of cancer.
  3. BHP Billiton Ltd. (BHP) - BHP Billiton Ltd. is an Australian mining company that has a diversified interest across many natural resources, including aluminum, coal, copper, iron ore, manganese, nickel, silver, uranium, and oil and gas.
  1. Sony Corp. (SNE) - Sony Corp. is a Japanese electronics company with a focus on electronic equipment, instruments, and devices for consumer, professional, and industrial markets, as well as game consoles and software.
  2. Mitsubishi Financial Group Inc. (MTU) - Mitsubishi Financial Group Inc. is a Japan-based company that's engaged in the banking business, as well as security, credit cards, leasing, and other businesses for consumers and businesses.
  1. Sumitomo Misui Financial Group Inc. (SMFG) - Sumitomo Misui Financial Group Inc. is a Japanese company that engaged in the banking business with deposits, lending, trading, securities, foreign exchange, and other businesses.
  2. Nomura Holdings Inc. (NMR) - Nomura Holdings Inc. is a Japanese financial services company operating in retail, asset management, and wholesale business areas with offices in countries and regions around the world.
  3. Mizuho Financial Group Inc. (MFG) - Mizuho Financial Group Inc. is a Japanese provider of domestic and international financial services across a number of different countries around the world.
  4. Panasonic Corp. (PCRFY) - Panasonic Corp. is a Japanese provider of white goods, beauty and living appliances, healthy products, and other solutions. 
  5. Honda Motor Co. Ltd. (HMC) - Honda Motor Co. Ltd. is a Japanese automobile manufacturer engaged in building everything from general-purpose engines and scooters to specialty sports cars.

What to Know Before Investing in ADRs

American Depository Receipts (ADRs) are a popular way to invest in foreign companies. ADRs are created when U.S. banks purchase a bulk lot of shares from a company, bundle them into groups and reissue them on a U.S. stock exchange.

The bank then sets the radio of U.S. ADRs per home-country share in order to ensure that they are properly priced for U.S. markets.

While these ADRs are easy to use, there are several risks that investors should consider. First, there's always greater political risk in many foreign markets. Second, there's an exchange rate risk that originates from fluctuations in foreign currency relative to the U.S. dollar. And third, there's inflationary risk (and deflationary risk) that face many countries around the world.

ADRs are a great way for a U.S. investor to buy foreign stock and diversify their portfolio, but investors may also want to consider exchange-traded funds (ETFs) that hold a variety of different foreign securities in a single fund. These are better options when an investor is looking for broad exposure to a country's economy rather than a specific company.

The Bottom Line

ADRs are a great way for a U.S. investor to buy foreign stock and diversify their portfolio internationally, with the ten ADRs listed in this article being the most popular in 2015. But, investors may also want to consider purchasing exchange-traded funds (ETFs) as an alternative for better diversification and exposure to an entire country rather than a single company.