Help make international investing less foreign for clients

February 25, 2021 | Vanguard Perspective

Help make international investing less foreign for clients

Eating bacon and eggs for breakfast or wearing a pair of favorite, broken-in jeans—sometimes we enjoy the comfort of familiar things. But when it comes to investing in equity markets, sticking with well-known U.S. companies—like Amazon.com, Alphabet (the parent company of Google), Apple, PepsiCo, and Johnson & Johnson—could cause your clients to miss out on potential growth opportunities.

As an advisor, you know that not all great stocks are found in U.S. markets. Companies based outside the U.S. make up nearly half of the value of stocks worldwide.1 International investing also offers your clients the benefits of diversification.

So how can you help your clients get more comfortable with international equity investing? Consider making them more familiar with these five international companies by comparing each to its well-known U.S. counterpart.

5 international equity investments

Alibaba—Internet shopping marketplace

U.S. counterpart: Amazon.com

Alibaba Group Holding (Alibaba) is a Chinese multinational technology company. It specializes in e-commerce, retail, online marketing platforms, and internet services. The company also provides electronic payment services, retail search engines, and cloud computing services.

Alibaba’s consistent above-average revenue and earnings growth may help drive the stock’s future performance. Alibaba’s three-year sales growth (46.2%) is significantly higher than Amazon’s (27.7%).2

Tencent—Internet and entertainment technology

U.S. counterpart: Alphabet

Tencent Holdings (Tencent) is a Chinese holding company that provides value-added technology and internet-related services for specific entertainment and artificial intelligence scenarios.

Tencent has higher three-year sales growth when compared with Google (33.7% versus 21.8%, respectively)2 and a lower valuation and greater growth potential.

Roche—Pharmaceutical business

U.S. counterpart: Johnson & Johnson

Roche Holding (Roche) is a Swiss multinational health care company that operates worldwide under separate pharmaceutical and diagnostic divisions and produces a wide range of prescription drugs.

Relative to Johnson & Johnson, Roche has higher three-year sales growth (6.7% for Roche versus 4.7% for Johnson & Johnson).2 Roche is also attractively valued, with shares trading below expected earnings.

Both companies have stakes in coronavirus vaccines, which positions them for success in the current environment.

Nestlé—Food and beverage

U.S. counterpart: PepsiCo

Nestlé is a Swiss multinational packaged-food company that manufactures and markets a wide range of food products, from bottled water to confectionery to pet foods.

When compared with PepsiCo, Nestlé is in a strong position from a valuation perspective (23.1% for Nestlé versus 27.0% for PepsiCo).² Nestlé has a moderate dividend yield that has been growing steadily.

Meituan—Online food delivery

U.S. counterpart: GrubHub

Meituan is a Chinese company that has transformed itself into a super app, offering users the ability to access items from food delivery to group buying to hotel services. While U.S.-based GrubHub delivers around 300,000 meals a day, Meituan delivers more than 25 million meals a day!3 Its new grocery delivery service has been booming as a result of COVID-19 lockdowns.

Meituan’s three-year sales growth is 93.6% versus 39.4% for GrubHub, and its market capitalization is approximately 30 times larger.2

Give clients international access

From portfolio growth to investment growth, investing internationally can help expand clients’ financial horizons. You can help your clients get exposure to these investment opportunities through Vanguard ETFs® and Vanguard mutual funds. 

  Alibaba Tencent Roche Nestlé Meituan Total
Vanguard ETF®/fund Ticker Portfolio weighting
Emerging Markets Stock Index ETF VWO 7.90% 6.45% 1.97% 16.32%
International Growth Admiral* VWILX 6.23% 5.24% 1.18% 1.07% 2.59% 16.31%
International Dividend Appreciation Index ETF VIGI 5.56% 3.43% 3.96% 12.95%
Emerging Markets Select Stock Admiral* VMMSX 5.84% 5.01% 0.81% 11.66%
ESG International Stock ETF VSGX 2.17% 2.03% 1.11% 1.46% 0.63% 7.40%
FTSE All-World ex-US ETF VEU 2.38% 1.95% 0.99% 1.39% 0.59% 7.30%
Total International Stock Index ETF VXUS 2.14% 1.75% 0.90% 1.25% 0.53% 6.57%
FTSE Europe ETF VGK 2.13% 2.85% 4.98%

Source: Vanguard, data as of November 30, 2020. Alibaba holdings in the Emerging Markets Select Stock Fund are a combination of local and ADR shares.

*Data as of September 30, 2020.

1 FTSE Global All Cap Index, as of November 30, 2020.

2 FactSet, as of June 30, 2020.

3 Baillie Gifford Overseas Ltd., as of June 30, 2020.

 

Notes:

  • For more information about Vanguard funds or Vanguard ETFs, call 800-997-2798 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.
  • Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
  • All investing is subject to risk, including possible loss of principal. Diversification does not ensure a profit or protect against a loss.
  • Investments in stocks issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets.
  • Past performance is no guarantee of future returns.