Stay away from Pink Sheets stocks!

That's generally the party line here at The Motley Fool. And for good reason. The Pinkies are teeming with underperforming dreck and more than a handful of scams, and even when you find Pink Sheets businesses that are legit, the thin volume and huge bid-ask spreads can easily snatch away any potential for profit.

But there is profit potential
Unfortunately, to toss out all Pink Sheets listings means chucking the baby along with the bathwater. That's because there are plenty of real powerhouses trading on the Pink Sheets. I'm talking about strong, foreign companies that don't care to list their shares on a major U.S. exchange as a traditional American depositary receipt/share (ADR or ADS) -- as, say, Nokia (NYSE:NOK), Sony (NYSE:SNE), and Honda (NYSE:HMC) do.

There are many reasons a company might not want to list a traditional ADR. Among the most likely is that it simply doesn't want to deal with the hassle and expense of meeting U.S. listing requirements, especially after Sarbanes-Oxley. To be sure, differences in disclosure might provide obstacles for U.S. investors, but it would be wrong to think that a company's unwillingness to list an ADR is a sign of a fly-by-night organization.

Some of the world's best companies are available to us in the United States only on the Pink Sheets -- companies such as carmaker BMW Group, sports-equipment powerhouse Shimano, and beer baron/Anheuser-Busch (NYSE:BUD) bete noire SABMiller.

Look where others won't
And frankly, the opportunities for profit are outstanding for those willing to look overseas. I recently ran a quick screen to find only non-U.S. companies that:

  • Had market capitalizations of more than $500 million ...
  • Had at least a 10% compound annual growth rate in earnings for the past half decade, and ...
  • Had stock price returns of better than 25% over the past year.

I came up with 330 such companies. And again -- I need to stress -- these companies were not crazy, micro-cap flukes. Consider some of these recent winners.


Market Cap (millions)

One-Year Return

London Stock Exchange






Mahindra & Mahindra



Gujarat Ambuja Cements



McCarthy & Stone



Anyone familiar with the home run on our shores for NYSE Group (NYSE:NYX) could have had triple the fun by grabbing hold of some shares of overseas counterparts such as the London Stock Exchange or Euronext. Deere (NYSE:DE) investors probably know up-and-coming Indian competitor Mahindra & Mahindra all too well. And while the stateside real-estate bust has taken a bite out of materials providers Cemex (NYSE:CX) and real estate companies of every stripe, Indian cement producer Gujarat Ambuja Cements has continued to roll, as has U.K. retirement-community builder McCarthy & Stone.

The Foolish bottom line
These are just a few of the opportunities we endeavor to help you find at Motley Fool Global Gains, our new premium service devoted to digging up the best investment opportunities in the world. While lead analyst Bill Mann, along with team members Nate Parmelee, Mike Olsen, and yours truly, will concentrate on foreign firms available via ADR, we'll also feature lesser-known opportunities, such as these Pink Sheets powerhouses. Better yet, we'll provide you with information and support on how to best invest in these more illiquid shares, should you decide they're right for your portfolio.

There's a whole world out there beyond our shores, and fortunes will be made by investors willing to expand their horizons.

If you'd like a free 30-day guest pass and a look at the inaugural issue of Global Gains, as well as access to our growing international community, it's just a click away.

At the time of publication, Seth Jayson had no positions in any company mentioned here. View his stock holdings and Fool profile here. See what he's Digging these days. NYSE Group is a Motley Fool Rule Breakers recommendation. Cemex is a Stock Advisor pick. Anheuser-Busch is an Inside Value choice. Fool rules are here.