It's smart to diversify your portfolio, at least to some degree. In fact, the less you know about investing in general and in the companies in which you're invested, and the less confidence you have in your portfolio, the more it may benefit from diversification. Otherwise, you may have too many of your eggs in too few baskets.
One way to diversify is to add some international holdings to your mix. After all, there are some scenarios where the U.S. economy may falter for a short or long while, and some non-U.S. holdings doing OK can offset trouble in your domestic stocks.
Here are three foreign companies to consider. See if any pique your interest.
1. Taiwan Semiconductor Manufacturing
Semiconductor companies are not all alike. While many specialize in the design of semiconductor chips, only a few actually manufacture or "fabricate" them. Taiwan Semiconductor Manufacturing (TSM -1.67%) is one of those fabricators, claiming to be "the world's leading dedicated semiconductor foundry" since its founding in the 1980s. It manufactured 12,302 products for 535 customers last year and is "the first foundry to provide 5-nanometer production capabilities, the most advanced semiconductor process technology available in the world."
With shares recently down nearly 45% from their 52-week high and a recent forward-looking price-to-earnings (P/E) ratio of 13, well below its five-year average of 21, Taiwan Semiconductor's shares look attractively priced. On top of that, the stock also pays a dividend, recently yielding 2.3%.
There's a lot to like about the company, but some concerns exist, too. For one thing, it's based in Taiwan, so it faces the possibility of disruption due to actions by China. Also, the U.S. has earmarked $52 billion to be invested in the U.S. semiconductor industry to help it grow and become more self-sufficient -- $28 billion targets the building of additional facilities, for example. Still, Taiwan Semiconductor remains a top dog in this critical industry and warrants consideration.
2. Yum China
If you are bullish about the prospects of Taco Bell, KFC, and Pizza Hut, you might invest in Yum! Brands. The company boasts more than 53,000 locations (owned or franchised) in 155 countries and territories. If you're particularly bullish on those chains' prospects in China, you might opt to invest in the international company Yum China (YUMC 1.04%), operating in a country with more than four times the population of the U.S. (recently around 1.4 billion vs. 330 million). Yum China holds licenses to those three chains in China, has partnered with coffee specialist Lavazza, and owns other brands outright, such as the Little Sheep, Huang Ji Huang, and COFFii & JOY. As of the end of June, Yum China boasted more than 12,000 eateries in more than 1,700 cities in China.
Yum China has some competitive advantages that will help defend it against rivals -- for example, it has built a solid distribution network to get food materials to many corners of the huge country. Its valuation is attractive, too, with a recent forward-looking P/E ratio of 24, well below its five-year average of 36. It also pays a dividend, recently yielding 1%. There are risks and opportunities in Chinese stocks, so weigh them well if you're interested in investing there.
3. Medtronic
Finally, we come to Medtronic (MDT 0.12%), which you might think of as a U.S. company. It's now based in Ireland, though, moving its headquarters there in 2015 after acquiring Covidien and now enjoying some tax benefits. The company is a $115 billion healthcare giant specializing in "technologies and therapies [that] treat 70 health conditions and include cardiac devices, surgical robotics, insulin pumps, surgical tools, patient monitoring systems, and more."
Medtronic's stock is appealingly priced these days, recently trading at a recent forward-looking P/E ratio of 15.6, well below its five-year average of 19.2. It pays a dividend, too, recently yielding 3.1%, and it has hiked that payout by an annual average rate of 8% over the past five years.
Supply chain issues have pressured this stock, but those are likely to be temporary. Meanwhile, Medtronic has multiple growth catalysts, too, such as scores of product approvals from regulators worldwide.
If none of the three companies above sufficiently intrigue you, don't worry -- there are many other solid foreign companies to consider. And if you're just not comfortable investing abroad -- after all, different countries have different business regulations and are investor-friendly to different degrees -- then you might just invest in some U.S. companies that generate much of their revenue abroad. ExxonMobil, for example, got 62% of its 2021 revenue outside the U.S., while got Pfizer generated 63% of 2021 revenue from outside the U.S.
