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3 Leading International Stocks to Buy in 2021 and Beyond

By Leo Sun – Sep 21, 2021 at 6:33AM

Key Points

  • MercadoLibre is Latin America’s top e-commerce company and has plenty of room to expand.
  • TSMC is the world’s most advanced chipmaker, and it holds the keys to resolving the global chip shortage.
  • Baozun connects overseas companies to millions of China’s online shoppers.

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MercadoLibre, TSMC, and Baozun deserve closer looks.

American investors often gravitate toward domestic stocks because they're more familiar with the companies and their products. It's not a bad idea to invest in companies that you know or even engage with yourself. However, shunning international stocks because you're unfamiliar with their business can also cause investors to miss out on some major growth opportunities. In that spirit, here are three international stocks that deserve some consideration.

1. MercadoLibre

MercadoLibre (MELI -0.86%) owns the largest e-commerce platform in Latin America. The Argentina-based company, which operates in 18 countries, generates most of its revenue in Brazil, Argentina, and Mexico. It also processes online payments through its Mercado Pago platform.

MercadoLibre's revenue surged 73% in 2020 as more people shopped online during the pandemic and it narrowed its net loss. Its unique active users increased 47% year over year to 75.9 million in the second quarter of 2021, and analysts expect its revenue to rise 70% for the full fiscal year. MercadoLibre also plans to post a net profit.

An adult holds a credit card while shopping on their laptop at home.

Image source: Getty Images

In 2021, it expects its revenue and earnings to rise 36% and 185%, respectively. MercadoLibre's stock trades at 13 times forward sales, which makes it cheaper than many other tech stocks with comparable growth rates. Its forward P/E ratio of 604 might seem frothy, but that multiple should contract as its profitability improves.

MercadoLibre belongs in your portfolio for two simple reasons. First, its first-mover's advantage in Latin America gives it a significant advantage against its potential challenges. Second, Latin America's e-commerce penetration rate could double from 8% in 2020 to 16% in 2025, according to Morgan Stanley, and may hit 50% over the next few decades. If MercadoLibre stays at the top of this growing market, it could easily generate multibagger gains for patient investors.

2. TSMC

Taiwan Semiconductor Manufacturing Company (TSM -1.03%), or TSMC, is the world's largest contract chipmaker. It manufactures the world's smallest chips for fabless chipmakers like Apple, AMD, and Qualcomm.

TSMC's top-tier 5nm plants are currently operating at full capacity, and its next-gen 3nm plants have already been fully booked. TSMC expects the global chip shortage to keep its capacity tight through 2022, and it plans to spend an additional $100 billion over the next three years to upgrade its processes and build new plants. The U.S. also plans to subsidize TSMC's development of new stateside plants.

TSMC's revenue and earnings rose 25% and 50%, respectively, in 2020. This year, analysts expect its revenue and earnings to rise 24% and 20%, respectively, as it continues to work through a flood of fabless orders. With this in mind, TSMC's stock still looks cheap at 28 times forward earnings. The stock could still have plenty of room to run as more investors realize it holds the keys to resolving the global chip shortage.

3. Baozun

Baozun (BZUN -3.85%) provides end-to-end e-commerce services -- including the development of websites, the management of marketing campaigns, and the fulfillment of orders -- for large companies in China. Most of Baozun's clients, including Starbucks and Nike, are large overseas companies that want to quickly set up online presences in China without hiring local teams, building their own infrastructure, or dealing with government regulators.

Baozun's revenue rose 22% in fiscal 2020. Its gross merchandise volume (GMV) increased 25%, and 92% of that total came from its higher-margin "non-distribution" channel, which enables companies to directly ship their goods to customers instead of passing through Baozun's capital-intensive logistics network. Its adjusted earnings increased 50%, supported by the expansion of its non-distribution channel, its rising take rate, and tighter cost controls.

Analysts expect Baozun's revenue to rise 15% this year, but for its earnings to dip 24% as it ramps up its spending and faces tough year-over-year comparisons to the pandemic. But next year they expect its revenue and earnings to grow 23% and 37%, respectively -- which are impressive growth rates for a stock that trades at 18 times forward earnings. Shopify, a Canadian e-commerce services company which Baozun is frequently compared to, is growing significantly faster but trades at nearly 215 times forward earnings. 

Baozun's stock could remain under pressure as regulatory headwinds batter Chinese tech stocks, but big overseas companies will likely continue to adopt its services to reach more Chinese consumers.

Leo Sun owns shares of Apple and MercadoLibre. The Motley Fool owns shares of and recommends Advanced Micro Devices, Apple, Baozun, MercadoLibre, Nike, Qualcomm, Shopify, Starbucks, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify, long March 2023 $120 calls on Apple, short January 2023 $1,160 calls on Shopify, short March 2023 $130 calls on Apple, and short October 2021 $120 calls on Starbucks. The Motley Fool has a disclosure policy.

Stocks Mentioned

Baozun Stock Quote
Baozun
BZUN
$4.49 (-3.85%) $0.18
Taiwan Semiconductor Manufacturing Stock Quote
Taiwan Semiconductor Manufacturing
TSM
$78.74 (-1.03%) $0.82
MercadoLibre Stock Quote
MercadoLibre
MELI
$855.64 (-0.86%) $-7.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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