Fishing for Foreign Profits as International Markets Rack Up Gains

Donald Trump is pursuing an “America First” agenda, and that’s been great for stocks and sectors in the industries his policies should benefit the most. That includes defense, financials , and infrastructure.

But did you know that several international markets are also shining? In fact, many are outperforming the S&P 500 so far this year.

Take a look at this table. It lists the nine largest, single-country ETFs in the iShares fund family by assets, as well as the SPDR S&P 500 ETF (SPY, Rated “B”). You can see that six of these foreign-market ETFs have outperformed the SPY on a year-to-date, total return basis, led by the iShares MSCI South Korea Capped ETF (EWY, Rated “C-”) at 16.2% and the iShares MSCI India ETF (INDA, Rated “C-”) at 14%.

Another way of illustrating the trend is to compare the performance of the SPDR MSCI SCWI Ex-U.S. ETF (CWI, Rated “C-”) — which tracks a benchmark index of major, non-U.S. stocks — to the SPY on a ratio basis. This is what a chart of that ratio looks like:

When the line is falling, it shows that domestic stocks are outperforming foreign ones. When it’s rising, it shows that foreign shares are taking the lead. Sure enough, this ratio has been climbing since it bottomed out in December.

Why? One key reason is that the U.S. dollar has stopped appreciating against several key foreign currencies. In fact, the Dollar Index topped out in December and then began to slide.

Some of that stems from a re-acceleration in foreign economic growth, a development which draws capital overseas. Some of it stems from Trump’s desire for a weaker dollar. But regardless of the causes, the effect is the same (as I wrote about in early February): Foreign stocks, bonds, and ETFs will prosper.

So if you’d like to fish for profits in foreign markets, take a look at some of the ETFs I just highlighted and comb through their component holdings. To help get you pointed in the right direction, I also created a brand new International Stock Screener with potential portfolio candidates.

The Screener includes stocks from the top 10 largest foreign markets in our Ratings database (by number of stocks traded here in the U.S.). They had to have positive performance over multiple timeframes – 1-month, year-to-date, and 1-year … be traded on major U.S. markets (rather than over-the-counter) … and have a closing price of at least $5. Finally, they had to be rated BUY (“B-” or higher).

Here’s what the results looked like as of late last week, ranked from best YTD performance to worst:

There’s a nice mix of countries represented. But China and Canada took seven out of the top 10 spots.

Strong growth in the private education market in China is helping both TAL Education Group (TAL, Rated “A-”) and New Oriental Education (EDU, Rated “B”), while Tucows (TCX, Rated “B+”) is benefitting from healthy demand for its network access, wireless, and Internet services products. Unilever’s British-listed and Dutch-listed shares (UL and UN, Rated “B-”) have surged amid speculation the consumer products giant could merge with a competitor or launch other shareholder-friendly spin offs or stock buybacks.

I’d take some time to check the Screener out for potential BUYs. Or if you’re a Weiss Platinum member, try tweaking some of the inputs to meet your own needs. Happy hunting!

Until next time,

Mike