If you've followed international stocks over the past few years, you've surely noticed a trend: foreign companies delisting their stocks from major U.S. exchanges.
Well-known foreign companies such as British Airways, Adecco, and Fiat either announced for the near future or implemented their departures from the NYSE last year.
And we can expect this flight from New York to continue.
Nothing personal, it's just business
Why, you ask? Put simply, the extra costs of following Sarbanes-Oxley (SOX) and various exchange regulations, as well as anemic trading volumes on U.S. exchanges, often outweigh the benefits for these companies.
But although other large companies have packed their bags, you're unlikely to see large foreign companies with high daily trading volume -- think China Life Insurance (NYSE: LFC) or Infosys (Nasdaq: INFY) -- leaving Wall Street anytime soon. In these cases, it's often more cost-effective and better for public relations to be listed in the States.
The good news is that you can still gain access to foreign companies that have delisted their shares. You can pick them up on the Pink Sheets.
Oh, the humanity!
The Fool typically discourages investors from patrolling the Pink Sheets, but using them to purchase quality foreign shares is an exception.
Even though companies find it costly to follow SOX and other U.S. exchange regulations, we shouldn't forget that those regulations were designed largely to protect shareholder interests, by requiring greater disclosure and adherence to U.S. GAAP. In fact, it can be much more difficult to interpret financial statements and estimate a valuation for companies not listed on a U.S. exchange.
To help you separate the wheat from the chaff, therefore, each week we'll take a look at a top-rated foreign company trading on the Pink Sheets, and we'll see how our 85,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, have rated it.
This week, we'll take a look at a $2.5 billion South African industrial company looking to capitalize on the growing global demand for infrastructure and construction.
Hey kids, we're going to Barloworld!
Ladies, gentlemen, and children of all ages, welcome to Barloworld (OTC BB: BRRAY.PK)! Sadly, it's not an amusement park, but with a name like Barloworld it would be an easy change of business strategy. Instead, the 106-year-old South African company "operates as a distributor of international brands that provide integrated rental, fleet management, product support, and logistics solutions in South Africa and internationally."
Among the globally known brands that Barloworld distributes are Caterpillar (NYSE: CAT), Ford (NYSE: F), and Toyota (NYSE: TM). More than half of the company's revenue is generated by its automotive and equipment divisions. The former segment has car rental and fleet management operations in southern Africa, Scandinavia, and Australia. The equipment division has been working with Caterpillar for more than 80 years and provides its heavy equipment to 11 countries in southern Africa, and Spain, Siberia, and Portugal.
The company located in South Africa also has operations in the United States, which has logistics and handling businesses, but most of its revenue comes from Africa and Europe.
To regain focus, Barloworld divested two major businesses last year -- its coatings unit, Freeworld, and a cement unit, PPC. The real question now is, "Can a slimmed-down Barloworld make it on its own?"
The company relies heavily on its long-standing relationship with Caterpillar, and the demand for mining and construction in southern Africa. Surely then, its revenue streams and business prospects are positively correlated with demand for natural resources, of which southern Africa contains great quantities.
Over on CAPS, the 22 players who have rated Barloworld think it will outperform the S&P 500 going forward. One of those bulls is former official Fool DaleBaker50 who wrote an article about Barloworld in 2006, noting at the time:
I look for several key factors in my "long-term value franchise" investments -- proven management, quality products in high demand in growing markets, strong cash flow from operations, and, of course, great profits. Barloworld fits the bill on every count.
Even though Barloworld has shed two of its businesses since Dale wrote the article, his investment thesis remains accurate, and the company deserves further research -- especially if you think commodity prices will continue to rise. Barloworld has significant risks, however, so investors should also pay close attention to how the company performs without its former segments.
Your turn
What do you think about Barloworld -- or any other stock, for that matter? Make your voice heard on Motley Fool CAPS today. It's 100% free to participate.
