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Clear Thoughts
Is it "Un-American" to invest in non-U.S. stocks?
Originally Published Friday, November 19, 2004
| Why and how do we invest in foreign markets? We believe that business in our nation is impacted by what is going on outside of it. We also believe that the way we invest in foreign markets is very important to our success. |
The persistence of bloated U.S. trade deficits over time can pose a risk to the U.S. economy, which thus far has proven resilient, Federal Reserve Chairman Alan Greenspan warned today. This has sent the broad markets and indices down over 1% in just one day.
This brings up a question...
Is it "Un-American" to invest in non-U.S. stocks? Our quick answer is no. We believe it is in the best interests of America to do so.
The Business of America is Business. This is as true today as ever. If Greece gave philosophy to the world, if Rome is known for contributing roads and taxation and France fine wine; history may well show the U.S. has enthusiastically taken Business expertise, especially entrepreneurial endeavors, to a new level for the world's benefit.
It was inevitable that our curiosity, thirst for goods and history would bring us outside our borders to import all the world has to offer while selling our products and services on a global basis; we export everything, from Coke and Disney to computers and financial services.
At the end of World War Two, one out of every two items made on the planet was made in the U.S. "Made in the USA" was ubiquitous. Now, this is not the case. Today, "Bought in America" is the new reality. So, if we buy the product, why not own the company, or at least shares of the company that is selling it as well?
Consider this hypothetical situation: A large chain of stores sells a huge amount of goods produced overseas to its U.S. customers. If that store contracts with an overseas manufacturer to make DVD players for its thousands of stores and for its millions of customers, doesn't it make sense to consider looking at the shares of the overseas manufacturer?
We not only think it does, we do just that in our investment strategy.
How then does an investor go about making an investment in Asia, South America, the Euro-zone or even Canada? How can they make the investment with a sense of confidence? We feel these are the questions to ask.
Many investors are pouring money into China and elsewhere, with a reckless gold-rush-fever abandon. The word "emerging" - as in emerging markets - has caught their fancy. These investors may be American, but they are not necessarily the smartest ones.
One intelligent approach to investing in foreign markets is through buying the stocks of U.S. based multinational companies and ADRs (American Depository Receipts). ADRs are certificates issued by banks which represent specific foreign stocks. Americans have bought and sold ADRs since the late 1920's. In today's global economy and trading environment, ADR's are highly visible and accessible. They have met at least the minimum financial reporting requirements by the SEC and are traded in the U.S. on major exchanges.
We include ADRs in the universe of stocks we pursue. Our computers are looking at the numbers behind the ADRs right now. We are constantly screening and ranking them over the global field of perspective stocks, frequently turning up opportunities which are destined to make our investors wealthier. And, as we have discussed above, we believe that's the American way.
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