When you buy a stock, you're making a statement. You're saying: This is the best place in the world for me to put my money.
Hey -- you said it, not me. After all, you could have named any ticker for your broker, and you'd be buying a different stock.
So when you buy a stock, make sure it's the best place in the world for your money.
What counts
There are tens of thousands of publicly traded companies worldwide for you to choose from -- and you may not be aware of the opportunities hiding under rocks in Uzbekistan. (And no, I'm not pumping a tiny Asian mining stock.)
While there's no shortage of stocks to buy, the number of companies actually worth owning is much, much smaller. In fact, any company worth owning will have at least these three traits:
- A significant competitive advantage.
- A home country that respects property rights.
- An attractive valuation.
What matters
For instance, consider what has made Japanese film maker Fujifilm (Nasdaq: FUJI ) a far better investment than its American rival Eastman Kodak (NYSE: EK ) over the past few decades. With an earlier focus on cost-containment and a determined innovation strategy, Fuji built a competitive advantage that let it win in the marketplace.
On the flip side, despite its tremendous power in the Russian energy market, shares in oil giant Lukoil carry significant political risk. After all, Russia essentially repatriated Yukos and forced BP (NYSE: BP ) to sell out of a gas field, and it generally plays fast and loose with property rights. The risk of losing your entire investment on a government whim makes Lukoil a more precarious investment than an American oil company like Marathon (NYSE: MRO ) .
Of course, there's also the matter of what you get for your money. China seems to have awakened to the national benefits of capitalism and the respect for property rights, setting off an investment boom throughout the country. Unfortunately, as this table shows, that boom has priced some Chinese stocks significantly higher than similar companies operating elsewhere:
|
Company
|
Market Cap
(Billions)
|
Revenue
(Billions)
|
Earnings
(Millions)
|
Price-to-Sales
|
Price-to-Earnings (TTM)
|
|
Baidu (Nasdaq: BIDU )
|
$11.5
|
$0.20
|
$73
|
59.2
|
160.4
|
|
Google (Nasdaq: GOOG )
|
$202.0
|
$14.97
|
$4,030
|
13.2
|
50.8
|
|
Yahoo! (Nasdaq: YHOO )
|
$29.5
|
$6.84
|
$723
|
4.4
|
43.0
|
Find your perfect match
Go ahead and ignore the companies whose lousy business, atrocious politics, or outrageous valuations make them unworthy of your investment cash. By doing so, you can significantly cut down on the prospects you have to sift through in your search for the world's best stock.
From those that remain, our team at Motley Fool Global Gains determines what worldwide businesses are worth buying. If you'd like a little help in looking beyond the border to find your next investing match, join Global Gains free for 30 days. There is no obligation to subscribe.
This article was originally published Oct. 11, 2007. It has been updated.
At the time of publication, Fool contributor Chuck Saletta did not own shares of any company mentioned in this article. Baidu is a Rule Breakers recommendation. Yahoo! is a Stock Advisor selection. The Fool has a disclosure policy.
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