By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Mutual funds used to be the only realistic option for U.S. investors wanting to secure a substantial exposure to non-U.S. equities.
Transaction costs, for example, used to be prohibitive, not only for the buying and selling of stocks listed on non-U.S. exchanges, but also for the conversion of dollars into the appropriate foreign currencies.
But, because of a variety of developments in recent years, this situation has changed. One is the growth in the number of foreign companies whose stocks trade on a U.S. exchange as American Depository Receipts. Another is the explosion in the number of exchange-traded funds that invest in foreign equity markets.
To help sift through the mushrooming number of choices now available, I turned to the recommendations of those investment advisers that have regularly had a substantial exposure to non-U.S. equity markets. Reflecting the shift in the number and types of investment vehicles available, the most-recommended securities were individual stocks — not mutual funds.
They are, in descending order of number of recommendations from the investment advisers I monitor, along with their country of incorporation and/or major business operations:
— BHP Billiton (Australia) /zigman2/quotes/208108397/composite BHP +0.49%
— Rio Tinto (Australia) /zigman2/quotes/202627887/composite RIO +0.39%
— Total S.A. (France)
— Diageo PLC (England) /zigman2/quotes/208129584/composite DEO +2.94%
— Novartis AG (Switzerland) /zigman2/quotes/203243705/composite NVS +0.54%
— Petrochina (China)
— Petroleo Brasileiro (Brazil) /zigman2/quotes/200745132/composite PBR +2.44%
— Telefonica SA (Spain) /zigman2/quotes/207034643/composite TEF -0.03%
Lest this list lead you to believe that mutual funds are being completely shunned by these advisers for their foreign equity exposure, here are their most-recommended funds (in descending order of number of recommendations):
— Dodge & Cox International /zigman2/quotes/207409772/realtime DODFX -1.13%
— Vanguard Emerging Markets /zigman2/quotes/205715973/realtime VEIEX -1.40%
— Artisan International Value /zigman2/quotes/207322356/realtime ARTKX -0.55%
— Fidelity Emerging Markets /zigman2/quotes/210323686/realtime FEMKX -1.85%
— Fidelity New Markets Income /zigman2/quotes/208479643/realtime FNMIX -0.50%
— Matthews Asia Asian Growth & Income /zigman2/quotes/209008633/realtime MACSX -0.87%
— Matthews Asia Pacific Equity Income /zigman2/quotes/207688991/realtime MAPIX -1.43%
— Vanguard International Growth /zigman2/quotes/207607605/realtime VWIGX -1.91%