Best International Stock: Sadia

Discover an entire world of compelling investing opportunities in our "Best International Stocks" series.

Among other benefits, international investing helps to lower your portfolio's overall risk. And if you're seeking diversification, you'd be hard pressed to top a company offering more than 1,000 products across nearly 100 countries, with solid growth, a sound dividend, and little direct exposure to the U.S. economy. Meet Sadia (NYSE: SDA).

Home and away
One of Brazil's largest employers, Sadia processes and distributes food, with operating segments including poultry, pork, beef, and processed products. Much like rival Perdigao (NYSE: PDA), the company does business both at home and abroad, with exports accounting for a little less than half of Sadia's revenue.

The processed product segment accounts for nearly 78% of revenue in Brazil. This segment includes a wide range of products, including frozen pizza, bologna, and margarine. According to AC Nielsen surveys, Sadia is the Brazilian leader in frozen and refrigerated processed products. Think of the company as South America's Tyson Foods (NYSE: TSN). Sadia's exports are less diverse than its domestic offerings, though; 71% of its export revenue comes from poultry.

For a company that's been around since 1944, Sadia has enjoyed impressive recent growth. Revenue has risen by 15% in each of the past five years, and the company is forecasting 12% to 14% growth in 2008 sales volumes.

That whole Brazil thing
The Brazilian economy has endured its fair share of problems. But the hyperinflation that once plagued Brazil fortunately seems to have stabilized, and the country has recently become a great place to invest. The iShares MSCI Brazil Index (NYSE: EWZ) has climbed nearly 60% over the past year alone.

Sadia isn't relying solely on those macroeconomic trends to increase business. The company aims to export more processed foods, since they carry much more brand recognition than the company's other segments. Right now, Sadia only gets about 10% of its processed product revenue from outside Brazil, but its export revenues from that segment grew 27% last year.

In addition, the company is growing its production capacity overseas. It recently opened a meat processing plant in Russia -- where McDonald's (NYSE: MCD) will be one of its main customers -- and has other international plants in the works. Spreading these plants around the world should reduce the risk that Sadia might get burned by a large avian flu crisis, since any outbreak would affect only a portion of Sadia's production.

Even with this great potential, Sadia's stock trades at a P/E around 11. Let's quickly examine how the company stacks up against a couple of its peers:

Sadia has gained more than 90% since Bill Mann recommended it to Motley Fool Hidden Gems subscribers in August 2006. While it's certainly no longer the bargain it was then, I think this stock still has plenty of room to run.

Don't be a chicken ...
Sadia's volatile shares have recently taken a hit over recessionary fears, falling to 25% below their 52-week high. I'm pretty sure that most Brazilian chicken farmers could care less about the stock market's crazy gyrations, and we would be wise to follow suit. Now is the perfect time to diversify your portfolio with a high-quality international company like Sadia.

I'm not the only one who likes Sadia, judging by its five-star Motley Fool CAPS rating. More than 700 community members have rated this stock an "outperform," believing it will generate better returns than the S&P 500. Whether you agree or disagree, head on over to CAPS today and cast your vote.