Most top investment firms expect better returns from international stocks than U.S. stocks during the next decade.
Legendary economist John Maynard Keynes once said that investing in stocks is like judging how other people are judging a beauty contest.
In that vein, Christine Benz, Morningstar’s director of personal finance, says it’s useful to look at the forecasts of top investment firms in trying to get a read on what may happen in the markets.
Some of these firms recently boosted their forecasts for U.S. stocks and bonds compared to the beginning of the year. “But most firms continue to expect better returns from international stocks than U.S. stocks and bonds during the next decade,” writes Susan Dziubinski, director of content for Morningstar.com.
Here are 10 international stocks that have been assigned a moat by Morningstar and are undervalued according to Morningstar analysts’ estimates of fair value. All of the stocks trade on U.S. exchanges.
· Sinopharm Group (SHTDF) , a Chinese state-owned pharmaceutical company;
· Imperial Brands (IMBBY) , a British tobacco company;
· HSBC Holdings (HSBC) – Get HSBC Holdings plc. Report, a London-based bank;
· KT Corp. (KT) – Get KT Corporation Report, a South Korean telecommunications company;
· Swire Properties (SWPLY) , a property developer based in Hong Kong;
· Meiji Holdings (MEJHF) , a Japanese food/pharmaceutical company;
· ABN AMRO Bank (AAVMY) , a Dutch bank;
· Anheuser-Busch InBev (BUD) – Get Anheuser-Busch Inbev SA Sponsored ADR (Belgium) Report, a Belgian-based beer company;
· NetEase (NTES) – Get NetEase Inc. Report, a Chinese Internet technology company;
· Nice (NICE) – Get NICE Ltd Report, an Israeli enterprise software company.
Morningstar’s Take on Imperial Brands
Morningstar analyst Philip Gorham assigns the company a wide moat and puts fair value for the stock at $36. It recently traded at $23.
The company “unveiled a five-year strategic plan in 2021 that will concentrate investments both geographically and on emerging categories that are likely to become the largest profit pools in the future,” he wrote in a commentary.
“We think the plan makes sense because it essentially recognizes Imperial’s place in the marketplace.”
And what’s that place? Imperial is “a fast follower, rather than a leader, in most markets,” Gorham said. “But it’s a highly profitable one with strong cash flow generation potential that should drive returns to shareholders higher in the coming years.”
Morningstar’s Take on Anheuser-Busch InBev
Gorham gives Anheuser-Busch a wide moat too and puts fair value for the stock at $90. It recently traded at $56.
“Management’s strategy is to buy brands with a promising growth platform, expand distribution, and ruthlessly squeeze costs from the business,” he wrote in a commentary. “The payback period for the SABMiller deal has been much longer than usual, however.”
So, “we expect the merger and acquisition playbook to be on hold for a year or two more until AB InBev deleverages its balance sheet,” Gorham said.
“Still, previous acquisitions have created a monster with vast global scale as well as regional density. AB InBev has one of the strongest cost advantages in our consumer defensive coverage and is among the most efficient operators.”