Confidence Remains Strong in Global Markets Despite Crises
Andrew Leckey

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"Make the World Go Away," a country music standard, is not the song that international investment experts are singing in 2011.

They see safe global companies to invest in that are reasonably priced because so many investors have become petrified by world events. Some of the best examples are stable major companies expanding their products into high-growth emerging markets.

"Despite uncertainty in the world, not investing in international stocks is like investing in the U.S. but only in companies based on the East Coast," said Jed Weiss, portfolio manager for the $59 million Fidelity International Growth Fund (FIGFX), up 15 percent over the past 12 months. "International equities are an important part of an investor's overall diversified portfolio."

Emerging-market consumer stocks are attractive, especially those in Turkey, Brazil, China and South Africa, he said, because they have a "long runway" for increasing the sales to their citizens.

"The first thing investors must keep in mind is that not all emerging markets are created equal ... investing in Brazil is a very different experience from investing in Venezuela," explained Weiss, pointing out that some emerging markets have healthier banking systems than some developed markets. "Greece is a developed market but has far worse characteristics than Brazil, an emerging market."

Last May when everyone was "freaking out" about Portugal defaulting on its debt, he said, his fund was benefiting from investment opportunities there.

A conservative way for investors to play emerging markets is through the Swiss-based company Nestle SA (NSRGY). As the largest packaged food company in the world, it is rapidly expanding the sale of its products around the globe. With leading positions in bottled water, pet food and infant formulas with universal appeal, Nestle is the largest holding in Fidelity International Growth Fund.

Apparently even oil-price woes are not significant enough to make the world's industries grind to a halt.

"Oil prices are not a recovery killer for either the world or the U.S., and the markets are ignoring them," observed Alec Young, international equity strategist with Standard & Poor's Corp. in New York. "If anything happened to Saudi Arabia, oil could shoot up to $200 a barrel and that would be a bigger issue, but at current levels it is not a problem."

While Japan's trauma is a tragic event on the local level, it has no impact on the global economy because any lost economic activity will "more than be made up for" by reconstruction later this year and in 2012, he said. He expects large-cap foreign stocks to outperform small-caps this year and would focus on dividends as a barometer of a stocks' attractiveness.

"The sovereign debt issues in Europe were priced into the market last year, so we'd have a hard time truly scaring people the seventh or eighth time around," said Young, whose firm is overweighting global energy, information technology, the S&P 500 and the S&P 500 materials sector. "We've definitely seen this movie before."

In an exchange-traded fund, the $430 million SPDR S&P International Dividend (DWX) that invests heavily in the U.K., Western Europe and Asia is up 14 percent over the past 12 months. It is focused more heavily on the developed markets than the emerging ones.

"Events in Japan and the Middle East have made investors a little more conservative, but when things are at their worst, sometimes it is the best time to invest," said Allan Nichols, international equity analyst with Morningstar Inc. "For example, with Japan's market struggling for more than 20 years, is this finally the bottom, and will it be possible to make money out of Japan now?"

Though Middle East uncertainty has been affecting oil and food prices, not much is likely to spill over into Western Europe, the U.S. or Latin America, Nichols said. Europe is actually having a decent year after struggling for the past few years.

"Telecoms and utilities are the conservative bets and they continue to generate good cash flow," said Nichols. "They don't grow a lot but they pay nice dividends, with the average telecom yield in Europe over 6 percent."

Nichols believes investors should take a close look at the following reliable foreign stocks as possible investments with staying power:

-- France Telecom (FTE) is the high-yielding, reasonably priced stock of a firm making acquisitions in emerging markets to obtain growth. About half of its sales are in France, with additional operations in Spain, Poland and other countries. It continues to look for small acquisitions.

-- National Grid Plc (NGG) is the stock of an international utility that provides electricity and gas transmission and distribution in the U.K. and northeastern U.S. It also has operations in power generation, communication infrastructure and metering services. Its balance sheet is strong.

-- E.On AG (EONGY) based in Germany, is one of the world's largest integrated power and gas companies. It provides electricity and natural gas in 30 countries, mostly in Europe. It generates one-third of Germany's electricity, with about 40 percent of it coming from nuclear power.

-- Novartis AG (NVS), the Swiss health care company, should benefit as the world's population ages. It manufactures and sells pharmaceuticals, vaccines and consumer products, with Alcon eye-care products being its most recent acquisition. Its product diversity means earnings stability.

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