I am asked a lot, ” Which are the Best Stocks To Buy in 2021?”
Did you know you can buy the shares of the best global stocks and put them into your SIPP, ISA, or another pension plan? People do not know that, and they do not know how to do it, or even find out which stocks are out there.
Of course, American companies you’ve heard of like the following (with their six-month returns in brackets at the time of writing)
Why Buy Global Stocks?
But what if you want more than US tech? What about Chinese companies or Indian, and what about outside of tech? And quite right too.
After all, look at these, their 6-month return and country of origin)
Alibaba (15% China)
JD.com (80% China)
Pinduodua (140% China)
Infosys (70% India)
HDFX (55% India)
Tata Motors (90% India)
Or you could go more exotic – MercadoLibre of Argentina is up 70%.
But wait? Isn’t that difficult? No, all these are listed on the US exchanges, and you can buy them the same way you buy BP or Lloyds shares. And aren’t these risky, tiny companies? Surely there is not much information about them, and what about currency risk?
As the internet allows us a window on global finance through the browser, I want to own more foreign stocks.
Why should we miss out on owning some world-beating stocks producing exceptional returns just because we do not have the often ten of thousands of pounds needed for a private client account with a major investment bank that would allow us to access global markets?
Or overpaid fund managers with high fees and narrow focus, when we can have the freedom ourselves.
Online investing allows us to trade foreign stocks cheaply, efficiently, quickly, and easily through American Depository Receipts (ADRs).
ADRs are dollar-denominated US securities backed by and related to the underlying company stock – which may for instance, be UK listed shares or Indian ones or Brazilian. The price of the ADR and the underlying stock will generally move in tandem. Only large companies tend to have these.
The Best Global Stocks To Buy in 2021: Complex?
Of course, in place of trading ADRs, we could always open multiple foreign online trading accounts with different brokers, holding them in other currencies – facing conversion costs and of course learn the language of each country since their e-broking sites often are not in English. Try E*Trade Korea – www.etrade.co.kr for a taster of the difficulties. Not for me!
We can also face the problems of double taxation on our gains in those companies. Or perhaps, for instance, the Korean government has rules about how much currency you can convert from sterling to local currency and how long you have to keep it in the country.
The efficient solution then becomes ADRs, which avoids all of these difficulties. And before you ask about currency risk – no, it does not worry me – sometimes you win, sometimes you don’t – all come out in the wash.
The reasons for trading in foreign stocks are compelling. Firstly, other global regions may be experiencing superior growth rates to our economy. Trading their stocks could significantly improve our performance.
When the recession comes, we may be able to avoid a downturn in our own performance by tapping into the economic cycle of a country or region going through a growth phase of its economic cycle.
Global Stocks Give You An Edge
As one Salomon Smith Barney analyst commented about Latin America, for instance, “The region enjoys unique characteristics that could turn it into the hottest internet market in the world.” Now, through ADRs, I can act and profit from that analysis.
Secondly, I can have a more diversified portfolio exposed to a whole industry group. I may find exciting but which is global rather than local.
For instance, a favourite of mine and many traders is the tech sector. ADRs allow me to take advantage of spectacular growth affecting the whole industry by not being restricted to only UK companies in the field.
The third reason I find ADRs a compelling proposition is that the choice provides me with a broader selection of companies to choose the very best. The wider the choice, the greater the chance I will pick winners assuming my research remains diligent.
Further advantages of trading ADRs is that you can invest in them like any other US security. You are only holding dollars, not numerous different currencies.
Of course, with the ADR, you have the currency risk of holding dollars and the conversion costs involved. But if you intend to put away for several months a pool of money for trading in dollar stocks and don’t plan to convert back and forth, those costs and risks can be minimised.
The practicalities of trading ADRs are straightforward. It is just like trading any US security. You would use a UK e-broking account. And if you don’t have one yet, then I suggest looking at my free site www.investing-champions.com
Time now for me to return to my portfolio and plans for global domination.
My own global compnies I like based on their valuations, growth prospects, dividends, profitability, cash flow growth:
The Best Stocks To Buy in 2021; Top 10 Long Term, Cheap, Growth
Want more names for my ‘The Best Stocks To Buy in 2021’ ?
T Rowe Price, Asbury Auto, Volex, Alpha FX, Vipshop, UnitedHealth, Medifast, North Media, Dover, Garmin, Crocs, Factset, LVMH, Marshalls, Neste, Paycom.
Alpesh Patel OBE
A version of this article was first published in the Financial Times by the Author