Why You Must Own International Stocks

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By Bill Mann

It wasn't long ago that I opined that American investors didn't need to invest overseas. After all, the United States is the most diverse economy on the planet, the driver of global growth, and the country with -- by and large -- the best shareholder protection framework. You could (and can) get a ton of international exposure by holding U.S.-based companies like McDonald's (NYSE: MCD) and Caterpillar (NYSE: CAT).

I wrote these words. I believe them to be true. So why did I sign on to be the advisor for The Motley Fool's international investing service, Global Gains?

Because my own investing track record would be dramatically poorer had I not made the choice from the beginning of my investing career to comb foreign markets for great investing ideas. No, you don't need to invest overseas. But I firmly believe that everyone should own at least one international stock.

But Bill, isn't foreign investing risky?
After all, that's the message we get from the weathervanes on financial television. One person will say "I am taking my allocation in international up to 30%," and another will say "Wow! That's really aggressive!" The implication is that the more money one allocates outside the United States, the higher the absolute risk level.

What utter rot.

The thought that America Movil (NYSE: AMX) is riskier than Sirius Satellite Radio (Nasdaq: SIRI) just because the former is based in Mexico rather than New York City is absurd. America Movil generates billions in free cash flow each year, while Sirius followed up its $500 million cash-from-operations drain in 2006 with a $300 million cash drain in 2007.

As a group, international stocks are no more risky than U.S. stocks. Foreign companies offer substantial diversity in the same exact way that U.S. companies do, from the massive cash flow-rich Novartis (NYSE: NVS) to the riskier Chinese medical company American Oriental Bioengineering (NYSE: AOB) to the high-technology giant Nokia (NYSE: NOK).

In fact, they may be less risky. Over the past five years, people who invested heavily in overseas companies have seen a powerful benefit from diversification as the U.S. dollar has dropped in value against nearly every major currency. That means earnings denominated in pounds, dinars, rupees, or won are worth more for people who invest in dollars.

The fact that so many money managers pooh-pooh foreign investing as being "riskier" is the exact reason why you should look here. Think about it: The foreign markets in aggregate exceed the size of all U.S. stocks, yet a 25% allocation to foreign stocks is considered "aggressive." Hmmmmm. Sounds to me as though most investors underallocate to foreign companies. I'd be perfectly comfortable putting 100% of my money overseas. If anything, the types of industries available are more diverse than what's available in the United States.

Yes, it is risky -- but probably less than you think
All investing has an element of risk to it. But the U.S. market has underperformed many international markets for the better part of this decade, for the very reason that capital invested in China, India, even Brazil has generated higher returns. I don't expect this condition to reverse itself long-term, and with the recent savaging of markets around the globe, we're seeing some pretty intriguing bargains from Taiwan to Finland to Canada.

Source:
http://www.fool.com/investing/international/2008/02/19/why-you-must-own-international-stocks.aspx

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NYSE Timeline

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NYSE Timeline

~1792 - Twenty-four brokers and merchants gathered on Wall Street to sign the Buttonwood Agreement. The NYSE is born!

~ 1792 - Bank of New York becomes the first listed company on the NYSE.

~1903 - April 22, the NYSE moved into 18 Broad Street. (This building is still in use today.)

~1918 - The pneumatic vacuum tube system is made for sending tickets to and from different departments.

~ 1929 - October 23: Black Thursday.
October 26: Blue Monday (Market loses $26 billion in value.)

~ 1939 The NYSE opens its trading floor gallery to the public.

~ 1953 - October 10: Trade volume on the NYSE reaches
900,000 shares, this marks the last day that the daily volume of the NYSE is under 1 million shares.

~ 1967 - NYSE admits its first woman member.

~ 1976 - NYSE lists first Non-US member.

~ 1987 - October 19: Black Monday (Market drops 508 points, the largest one-day drop in history.)

~ 1992 - May 17: the NYSE celebrates its 200th anniversary.

~ 1996 - May 7: The highest price ever paid for a membership is $1,450,000

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Don't Believe Everything You Hear

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By Sham Gad

Between February and October of 1945, the Dow Jones Industrial Average advanced 21.3%. Must have been a time of prosperity or a bubble, right?

Nope. Would you believe that this performance occurred during a recession? With the "recession" buzzword floating around these days, it's worth reflecting on what that uncharacteristic behavior can teach us.

A recent BusinessWeek article reveals the stock market performance both during and one year following several American recessions.

Recessions aren't "bad"
Contrary to popular media opinion, not every single recession is bad for the investor. In the 1945, 1953-1954, and 1980 recessions, stock market returns behaved as if they were in a period of prosperity. As mentioned, during the recession of February to October 1945, the market actually jumped 21.3%.

Investors who are quick to head for the exits simply because there is a recession looming are forgetting one very important fact: The principal goal of an investor is to focus on acquiring strong businesses selling at attractive prices -- regardless of the market environment.

While you might experience a little volatility or find yourself waiting a period of months before any capital appreciation, that's the nature of the markets. Markets go up, markets go down, and markets go nowhere.

Market timing is useless
Before researching this article, I was not aware of the strong performance that occurred during some of these recessionary periods. Of course, the advancing markets were outnumbered by declining ones, but the notion that recessions simply destroy returns is not necessarily the case.

Sure, some companies behind consumer luxuries may be squeezed. If the economy is tough, penny-pinching consumers might cut back on their Starbucks (Nasdaq: SBUX) trips, or they may delay buying an iPod or iPhone from Apple (Nasdaq: AAPL). Indeed, that's part of the reason why these stocks have been hurt over the past few months.

The economy, though, still needs to function at some level. People will still need to eat, do laundry, brush their teeth, buy medicines, etc. This bodes well for dividend-paying consumer-staples powerhouses such as Procter & Gamble (NYSE: PG), Johnson & Johnson (NYSE: JNJ), and Kraft Foods (NYSE: KFT). Even Wal-Mart (NYSE: WMT) is a candidate to weather a recession; with consumers paying closer attention to their pocketbooks, the retailer's "everyday low prices" give it a leg up.

Recessions develop over time. There is no set formula that reveals to us when a recession begins and when it ends. By some accounts, we are currently in a recession. Others are predicting an upcoming recession. Waiting for the "end" will often lead to waiting until it's too late and missing out on a great buying opportunity. So the key, again, is to buy quality issues for cheap and be patient.

Invest in the company first, not the market cycle.

It's not the end of the world
What's most important about recessions is at some point, they cease and things pick up. You'd never guess that during a recession -- there's too much noise pronouncing doom and gloom.

But the facts speak for themselves. Not only do they end, but investors who exhibit patience are rewarded in the following year. Those who wait it out on the sidelines -- until the headlines provide a cheery consensus -- later come to realize that they joined the party shortly before midnight.

Source:
http://www.fool.com/investing/value/2008/02/06/dont-believe-everything-you-hear.aspx

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Stocks under a Dollar

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List of Stocks under a Dollar ($1)
Stocks Traded in NYSE (Stock Price as of 22 Dec 2007) Click on Link for Latest Price


Name
Symbol
Last Traded $

Conseco, Inc.
CNOWS
0.03
Emrise Corporation (Listed NYSE Arca - Tier II)
ERI
0.62
Impac Mortgage Holdings, Inc.
IMH
0.59
Scottish Re Group Limited
SCT
0.76
Zarlink Semiconductor, Inc.
ZL
0.68

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