Not all stocks traded on U.S. exchanges are actually U.S. companies. In fact, some of the most successful stocks on the market are foreign, but they see the U.S. as a place to raise funds and get exposure to another class of investor.
If you're looking for foreign companies to own, Spotify (SPOT +1.54%), MercadoLibre (MELI +3.74%), and Taiwan Semiconductor (TSM +0.55%) stand a cut above the rest.
1. Spotify
You probably know Spotify as the music streaming company, but it's becoming much more than that. It has invested heavily in podcasts over the past five years, and has now added audiobook time to premium subscriptions. Spotify is the business that wants to "own your ears," and that's what differentiates it from competitors like Apple and YouTube that have bigger businesses outside of music.
The user base is growing quickly, with premium subscribers up 16% in the third quarter of 2023 to 226 million and ad-supported subscribers growing 32% to 361 million. And that forms the base for both a growing premium business as well as an attractive advertising business, which is where Spotify's upside lies.
There aren't a lot of companies that can go head to head with Apple and come out on top, but Spotify has done that in both music and podcasts. And recent cost cuts could help drive rapid financial improvement in 2024.
2. MercadoLibre
Latin America is adopting both e-commerce and fintech products at a rapid rate, and MercadoLibre is leading the way in both. Over the past five years, the company has grown revenue 730%, and it's gone from breakeven to highly profitable in just the last two years.
MELI Revenue (TTM) data by YCharts
Like Amazon in the U.S., MercadoLibre has a large infrastructure lead over competitors in e-commerce, and its fintech products are both integrated with its e-commerce platform as well as built into other sellers.
The stock is expensive, with the enterprise value near 5 times sales and a price to earnings ratio of 49 times, but the growth and profitability are too good to ignore, and this is one of the best ways to play growth in Latin America long-term.
3. Taiwan Semiconductor
Semiconductors have become critical to the world, and Taiwan Semiconductor is arguably the most importer and manufacturer there is. It makes AI chips for NVIDIA and the chips inside iPhones and Macs -- even Intel is buying chips from Taiwan Semiconductor.
The beauty in Taiwan Semiconductor's business model is that it's a fabricator that isn't vertically integrated into designing and selling its own chips. It's just a third party manufacturing facility for other companies. This has allowed TSMC to build the most advanced manufacturing facilities in the world and spread the upfront cost across hundreds of customers.
It's hard to overstate how profitable this model is, but the net income approaching 50% of revenue that you see below gives an idea of how well the company is doing.
TSM Revenue (TTM) data by YCharts
This is one of the most important companies in the world, and investors are getting a reasonable value in the stock. Shares trade for 16x earnings and we are in a down cycle, so there's upside as more and more companies build custom chips for their tech products.
Great foreign companies you can buy in the U.S.
None of these companies are based in the U.S., but they tapped U.S. markets to go public, which is why you can buy shares. And with lots of exposure to international markets, they're great ways to get geographic diversity in your portfolio.
