As the editor of The Motley Fool's inaugural international stock report, Around the World in 80 Minutes, I view the past couple of weeks in the market with mixed emotions. On the one hand, I look at my account balances and feel as if I've gotten the Old Yeller treatment. On the other hand, when the markets get tough, it's often a great time to go shopping. And if you can treat these inevitable swoons as welcome opportunities instead of gut-wrenching horror shows, you'll boost your long-term returns several times over.
I was a big fan of the stocks we recommended when we launched this report in March, and that's still true today. The great news, though, is that with this recent market correction, you can now get a second crack at many of these stocks for prices close to --and in a few cases, better than -- their original prices.
Why stocks go down
So why are we getting a second chance at these stocks that I call "great"?
Sometimes, there are entirely valid reasons for a stock to decline, but other times, things just go too far. The Vioxx fiasco was an entirely valid reason for Merck
And now, take the case of a foreign telecom that was recommended for our report. Should the stock have dropped on news about the government forcing the company to open its network to rivals? Absolutely. But it seems to me the reaction may have been out of proportion with the nature of the long-term threat. In other words, maybe you're getting one of those Disney
In other cases, though, stocks are just indiscriminately sold because investors turn nervous on entire sectors or markets. Is Microsoft
The reasons to go overseas are still valid
By no means am I thoroughly bearish on the U.S. markets, but a few issues do concern me. And that's where overseas investing can be a boon to your returns. You can diversify your risks, exploit inefficiencies, and shop around for the best possible long-term returns for your investment dollar.
Seeing what has happened in the past in other countries in the wake of housing bubbles (or booms, if you prefer) gives me some concerns about consumer spending in the next few years. And while General Motors'
Let's also not forget that newfound worries about interest rates or oil prices don't change some of the most appealing long-term aspects of many overseas markets. As per capita incomes rise, more goods and services become accessible to more people. Want to find the Google
At the risk of oversimplification, it's fair to say that foreigners like the Chinese have been financing a lot of our spending. That means they have the money to invest in R&D, infrastructure, new businesses, and more consumption in general. And if the local folks are getting more wealthy, it stands to reason that the local companies will share in some of that wealth. I'm not saying that it's over for an American company like Citigroup
Valuations
Another perk to overseas investing, and investing in several of the stocks we highlight in our report, is the valuations. For a variety of reasons, including the fact that some markets come into and out of favor, you can often find at least a few markets trading at general valuations below what you find in the States. And with emerging markets coming under a lot of fire recently, you can buy into strong companies with a better margin of safety.
Don't be afraid of taking advantage of these great opportunities that are in many cases a product of ignorance and fear. Individual investing is not as common or popular in other countries as it is here, and that means there are fewer investing dollars chasing those local companies. That's also true on the professional stage -- there are ample numbers of professional international investors, but it's still largely true that an American fund manager is more comfortable losing money on Wal-Mart
Avoid the fads; go with the winners
The herd instinct is a powerful force in investing, and that's just as true with international investing. And if you choose to run with the dogs, you have to look out for fleas.
You can see markets go into bubbles just as we saw here a few years back. Our antidote is simple -- look for great companies and wait for them to trade at good, or even great, valuations. Sometimes, that means you have to wait for overpriced stocks to come to you, and sometimes it means you have to buy cheap stocks and just wait patiently for the market to come to its senses. But when it happens, it's a great feeling.
And that's what we believe we've done here. We have 12 stocks and two mutual funds that we believe can not only earn you good returns in the years to come but can also help you lower the overall risk of your investments. More money for less risk -- what's not to like?
Second chances don't come easy or often, so don't let this one go by unexplored. Check out our International Stock Report, and let us give you a hand in finding some of the overseas multibaggers of tomorrow.
Merck is a Motley Fool Income Investor recommendation, and Microsoft and Wal-Mart are Motley Fool Inside Value picks.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
