Overseas Blue Chip Picks

Currently stretched equity valuations, an imminent presidential election and a probable December rate hike are fueling uncertainty in the markets. Validea CEO John Reese, in a Forbes article appearing yesterday, outlines issues that could support the notion of increasing international stock holdings as part of a balanced investment portfolio.

“Europe is facing a number of structural challenges,” Reese writes, but lists some issues that could support the idea of overseas investing:

  • The economy is increasingly global;
  • Of all publicly traded companies, 80% are headquartered outside the U.S.;
  • In 2015, international stock funds saw inflow of $200 billion while U.S. equity funds saw a drawdown of more than $50 billion;
  • Many developed countries in the E.U. are pushing to stimulate their economies while the U.S. has begun tightening monetary policy;
  • The uptrend in the U.S. dollar versus major European currencies threatens downward pressure on U.S. exports while favoring European-based countries.

Reese emphasizes the importance of focusing on high-quality companies and identifies the following blue-chip picks that meet the rigorous standards of Validea’s guru-based investment strategies:

  • Novo Nordisk (NVO)is a health care company headquartered in Denmark engaged in discovery, development, manufacturing and marketing of pharmaceutical products. The company earns high marks for predictable earnings and long-term growth in earnings-per-share of 21.8%.
  • Baidu (BIDU)is a Chinese language Internet search provider with a market cap of $63.81 billion. Average return-on-total capital is favorable at 22.1%, and a solid sales base of $10.67 billion plus strong liquidity add appeal.
  • Allianz SE (AZSEY)is a financial services company that is favored for it size (market capitalization of $69.19 billion) coupled with trailing 12-month sales of $108.46 billion. A dividend yield of 5.49% adds interest.
  • Canon (CAJ)is a manufacturer of office multifunction devices, copy machines, printers, cameras and lithography equipment. Favorable cash flow-per-share of $3.45 and a sales base of $35.23 billion are further bolstered by a dividend yield of 4.86%.