17 Top Stocks and ETFs Based on 2023 Expert Forecasts

There are a few things in life you can depend on. Unsolicited advice from your parents, for instance. Or being one sock short after washing a load of laundry. And you can also rely on my colleague Christine Benz sharing the long-term stock and bond return forecasts of several highly respected investment firms—including BlackRock, J.P. Morgan, Morningstar Investment Management, Research Affiliates, Schwab, and Vanguard—each January.

Why does she engage in this annual ritual?

“Long-term return projections can be useful and are arguably even mission critical in a financial planning context,” she argues. “Without some expectation of what market returns might be, it’s difficult to know how much to save, whether a retirement nest egg is adequate or if an in-retirement spending rate is too high. Long-term historical returns might fill that role, but at various points in time, such as early 2000 or early 2022, they might be unrealistically high.”

What are the pros expecting from the markets in the next several years after a tough 2022 for stocks and bonds? “Thanks to higher fixed-income yields and lower equity valuations, almost all of the firms in our survey have increased their expectations for stock and bond returns for the next decade,” reports Benz. And every firm surveyed expects better returns for international stocks than for U.S. stocks over the next decade. (Read the details in Experts Forecast Stock and Bond Returns: 2023 Edition.)

For those investors who’d like to increase their exposure to non-U.S. equities, here are Morningstar’s top international-stock and ETF ideas today.

10 Undervalued International Stocks

These 10 international stocks were taken from the Morningstar Global ex-US Moat Focus Index and looked undervalued as of Jan. 27, 2023.

1. Airbus EADSY
2. ING Groep ING
3. Anheuser-Busch InBev BUD
4. Bayerische Motoren Werke BMWYY
5. Imperial Brands IMBBY
6. WPP WPP
7. Yum China YUMC
8. BRP DOOO
9. HSBC Holdings HSBC
10. GSK GSK

For those comfortable investing in individual stocks, Morningstar’s strategy for stock investing applies around the globe. First, favor companies with durable competitive advantages, or economic moats. These companies should be able to fend off competition and outearn their costs of capital for years to come. Then, buy these companies when their stocks are trading below what they’re worth—in our parlance, below our fair value estimates. (Learn more about our approach to stocks in Morningstar’s Guide to Stock Investing.) We think undervalued stocks with economic moats make the excellent long-term investments.

The Morningstar Global ex-US Moat Focus Index is a quality-focused subset of the Morningstar Global Markets ex-US Index, a broad index representing 97% of the developed-markets (excluding the United States) and emerging-markets market capitalization. Morningstar ranks the wide- and narrow-moat stocks in the broad index by lowest price/fair value to find the 50 cheapest wide- and narrow-moat stocks. These stocks represent the most compelling values in the global moat universe.

Watch: “3 Cheap International Stocks to Buy and Hold”

7 Best International-Stock ETFs

For investors who would rather not pick individual stocks, plenty of exchange-traded funds provide broad-based exposure to international stocks. Here’s Morningstar’s shortlist of the best international-stock ETFs—those funds that earn a Morningstar Analyst Rating of Gold. Ratings are as of Jan. 27, 2023.

1. Dimensional International Core Equity Market ETF DFAI
2. iShares Core MSCI Total International Stock ETF IXUS
3. Vanguard FTSE Europe ETF VGK
4. Vanguard FTSE All-World ex-US ETF VEU
5. Vanguard FTSE All-World ex-US Small-Cap ETF VSS
6. Vanguard Total International Stock ETF VXUS
7. Vanguard Total World Stock ETF VT

There are several different international Morningstar Categories represented on our Gold-rated list. Dimensional International Core Equity Market ETF, iShares Core MSCI Total International Stock ETF, Vanguard FTSE All-World ex-US ETF, and Vanguard Total International Stock ETF land in the foreign large-blend category. Foreign large-cap funds tend to focus on Europe, specifically, established markets in France, Germany, Switzerland, the Netherlands, Spain, Italy, and the United Kingdom. They often hold significant positions in Asia, as well. And although they dabble in emerging-markets stocks, they often cap their exposure to those markets at about 15% of assets. Foreign small/mid-cap funds often carry larger emerging-markets positions.

Meanwhile, Vanguard FTSE All-World ex-US Small-Cap ETF favors, as its name suggests, small and midsize international stocks, while Vanguard FTSE Europe ETF invests in European stocks. And lastly, Vanguard Total World Stock ETF lands in the global large-stock blend category, meaning that it invests all across the globe, including in U.S. stocks.

As is always the case, read an ETF’s Analyst Report for a better sense of what regions it invests in, what size companies it favors, and so on. Knowing how an ETF’s portfolio diverges from the average allows for better performance expectations—and better investor outcomes. For instance, emerging-markets stocks tend to be more volatile than developed-markets stocks. As a result, international-stock ETFs with higher emerging-markets stakes will exhibit performance very different from their peers’ when emerging markets soar or sink.

For more about how Morningstar evaluates ETFs, read Morningstar’s Guide to ETF Investing.

How to Find More International Stocks and ETFs for the Long Term

Those investors who’d like to find more international stocks and ETFs to consider can do a few different things.

• Review all the international stocks on the Morningstar Global ex-US Moat Focus Index’s portfolio page. Remember, the index focuses exclusively on undervalued non-U.S. stocks with wide or narrow economic moat ratings.
• Expand your search to include highly rated mutual funds, too. You’ll find some of Morningstar’s top-rated international-stock mutual funds on our Core Foreign Funds and Foreign Index Funds lists.
• ETF diehards who’d like more options to consider can find more highly rated international-stock ETFs (and highly rated ETFs in other categories, too) on our Medalist ETFs list.