Top 10 Most Popular Foreign Stocks
Check Out These ADRs to Diversify Your Portfolio
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 December 2017, 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.
- Teva Pharmaceutical Industries Ltd. (TEVA) - Teva Pharmaceutical Industries Ltd. is a Tel Aviv, Israel-based pharmaceutical company that's focused on generic drugs and specialty medicines that are sold into global markets.
- Alibaba Group Holdings Ltd. (BABA) - Alibaba Group Holdings Ltd. is a China-based company that's engaged in online and mobile commerce through products, services, and technology offerings in the People's Republic of China and internationally around the world.
- Vale SA (VALE) - Vale SA is a Brazil-based global producer of iron ore and iron ore pellets for steel making, as well as a producer of nickel and various other products, including coal, fertilizers, and base metals that can be used to produce end products.
- JD.com Inc. (JD) - JD.com Inc. is an online direct sales company based in China that's focused on electronics, home appliance products, and general merchandise. It competes directly with companies like Alibaba that are also based in China.
- Orascom Telecom Media and Technology Holding SAE (ORSMY) - Orascom Telecom Media and Technology Holding is an Egyptian telecom company that provides a range of prepaid and postpaid voice and data telecom services.
- Nokia OYJ (NOK) - Nokia is a Finland-based company engaged in the network and Internet protocol (IP) infrastructure, software, and related services market. Its products range from enterprise IP networks to consumer security products.
- Petroleo Brasiliero SA (PBR) - Petroleo Brasiliero SA is a Brazil-based company that specializes in the oil, natural gas, and energy industry where it operates a large offshore drilling program in Brazil where there are substantial crude oil reserves.
- Xunlei Ltd. (XNET) - Xunlei Ltd. is a cloud-based acceleration technology company that enables users to access, manage and consume digital media content. In particular, the technology is designed to reliably speed up the delivery of online content.
- Gold Fields Ltd. (GFI) - Gold Fields Limited is a South African company that specializes in mining gold and holding gold reserves. Its also engaged in the exploration, developing, extraction, processing, and smelting of gold.
- Cemex SAB De CV (CX) - Cemex SAB de CV is a Mexican company that specializes in the production, distribution, marketing, and sale of cement, ready-made concrete, aggregates, clinker, and other construction materials around the world.
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.