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Stock Strategist

High-Quality Foreign Stocks on Sale

We've found some bargains in faraway places.

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You may have read about investors' propensity to invest close to home. The downside of doing so, however, is that we tend to miss opportunities to diversify our portfolios. Investing abroad can also be a valuable way to profit from currency trends or make up for rich valuations at home. According to data released monthly by the U.S. Treasury Department, U.S. investors made net purchases of more than $13 billion in foreign equities in August of this year alone. As part of Premium Stock Research Week, Oct. 24-30, we decided to look at what's on sale around the world.

We started out by using Morningstar's  Premium Stock Screener to focus on foreign stocks that we'd consider buying. The screen starts by looking for foreign stocks rated 5 stars. Five-star stocks are those trading at wide discounts to their fair value estimates, and our rating system makes high-quality companies more likely to reach 5 stars on a price dip. We rate a total of 279 foreign firms, and 16 of their stocks currently garner our 5-star rating. To narrow the field a bit, and focus on companies we'd rather own for the long run, we also decided to screen on firms with at least a "narrow" economic moat rating, leaving us with 10 foreign stocks to investigate further. To run this screen yourself,  click here.

Nicolas Owens does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.