Reversal of fortune
Making money in the stock market usually takes a lot of hard work and patience. Not so my winnings toward the end of last summer. That was easy money -- too easy. Around the middle of August, Mr. Market's mania sent lots of stocks down the tubes, especially the foreign companies I love. I went shopping. Nine weeks later, my average gain on those investments was much better than 35%.

The biggest and the best
Keep in mind, I wasn't dabbling in overly speculative stuff here. The craziest it got for me was purchases of China Mobile or Motley Fool Global Gains recommendation Grupo Aeroportuario del Centro Norte, known as OMA. In fact, you didn't have to shop for small-cap beta-bait to earn major money over the last four-and-a-half months. Even sleepy giant HDFC Bank (NYSE: HDB) tacked on more than 60% over that period.

Here's what's more amazing: My performance pales next to the gains posted over the past 20 or so weeks by other big, well-known foreign companies trading on U.S. exchanges.


Price Change

Solarfun Power Holdings (Nasdaq: SOLF)


China Fire & Security (Nasdaq: CFSG)


Kinross Gold (NYSE: KGC)


Compania de Minas Buenaventura (NYSE: BVN)


Fushi International (Nasdaq: FSIN)


Harbin Electric (Nasdaq: HRBN)


Screening and data from Capital IQ.

And these companies weren't the only ones to make big moves. A couple of months back, I first ran a screen to take a look at the biggest foreign winners since mid-August (all greater than $250 million in market cap, all trading on major U.S. exchanges). I was pretty surprised by what I found when I looked at the aggregate numbers. Big winners in foreign stocks were running way ahead of winners in U.S. stocks. And that trend has continued until today.





Gain >15%



Gain >20%



Gain >30%



Companies with market cap >$250 million, all trading on major U.S. exchanges. Screening and data from Capital IQ.

More than 200 foreign-based companies -- about one-third of the total -- had posted gains of 15% or better. That's hundreds of foreign companies that gave investors a year's worth of market-beating gains in just over a month.

Legends of the fall
Figuring out exactly why foreign stocks outperformed like that isn't easy. Personally, I look to that big August swoon. While overall markets were tanking, for some reason, a lot of foreign issues I track were taking it on the chin -- much worse than they deserved. The ones I bought looked to be trading at 20%-25% discounts. All they had to do was claw their way back, and there would be great gains.

The subsequent rebound was both faster and bigger than I expected, and I think we owe that to the Federal Reserve. As I -- and my colleague Bill Mann -- have observed, those falling interest rates in the U.S. have prompted investors to reevaluate the long-term fate of the greenback. And for right now, they seem to agree it will continue to wither, meaning investment in foreign cash flows and global commodity producers makes an awful lot of sense. The high price of oil has also conspired to keep foreign petroleum producers, as well as hot, alternative-energy stocks, on the run.

Foolish bottom line
Profits are rarely this fast or easy, and no one should invest hoping for that kind of quick return. The stocks above could give those gains back in an instant, because, in the short term, anything's possible. (I took a little off the table for just that reason.)

But I firmly believe these recent returns teach us a lesson about long-term value: It's never a mistake to buy the best at great discounts, and if the bargains are overseas, that's where you should invest. As other world economies take on greater importance, global investing should be a part of everyone's portfolio, even those who don't think the dollar is doomed. So keep your shopping list full, and don't be afraid to take advantage of Mr. Market's next easy-money holidays.

If you could use a few new foreign ideas, my colleagues at Motley Fool Global Gains serve them up, two a month. They'd be happy to let you try out the service for free.

This article was first published Sept. 25, 2007. It has been updated.

At the time of publication, Seth Jayson, a top-10 CAPS player, had shares of OMA, but no positions in any other company mentioned here. See his latest CAPS blog commentary here. View his stock holdings and Fool profile here. HDFC Bank and OMA are Motley Fool Global Gains recommendations. Fool rules are here.