Cramer's Top 3 Foreign Stocks in Developed Countries
With all the governmental shenanigans and uncertainty swirling around Washington, it makes sense that investors will find comfort putting at least some of their money overseas, away from an environment Cramer calls "downright hostile to business." In one of his big themes and important trends for 2010, Cramer is suggesting investments in countries that are safer for doing business than in the US.
Instead of focusing on the emerging markets, Cramer is looking to developed countries with similar features... places that he believes have "more respect" for private industry than the current US Government. Countries with more pro-growth policies that are more natural resource focused and who are hedged against huge budget deficits.
What countries fit the bill? Norway, Australia and Canada, says Cramer, who thinks these countries are more business friendly than the US. But remember Cramer's rule that you only want to have 20% of your portfolio invested in foreign equities, so if you own ten stocks altogether, consider only buying two of these picks.
First off, Norway: With a strong currency, the country exited the recession in August and the country's central bank tightened its monetary policy of late, leading Cramer to believe that the country is now out of the woods. The country also had a large stimulus package (4.7% of GDP), maintains a budget surplus and big oil reserves. The reserves are why Cramer's favorite angle for the country is in oil, his favorite pick being Statoil, which is the sixth-largest European oil firm out there. After cutting costs rapidly, the company is also well exposed to oil prices, says Cramer, as a $1 increase in oil translates to a 3.6% in earnings, versus the 2.1% experienced by the rest of the sector.
Next up: Australia. Another resource driven economy with close proximity to China, Australia was the first G-20 country to raise interest rates since the financial crisis, and with two stimulus packages and the country's GDP only shrinking by 0.25%, the country virtually avoided the recession. Cramer's pick down under is BHP Billiton, which is also the largest mining company on the planet and a stock Cramer has suggested as one of the 12 to buy into the recovery. With major natural resources like aluminum, copper, iron ore, coal, nickel, zinc, lead, uranium and oil, Cramer looks at BHP as a "one stop shop" for these mined commodities. With a good amount of cash on its balance sheet, the company is set to make acquisitions and profit big from any increase in Chinese demand.
Lastly: Canada. Again, a resource driven economy, 13% of the country's GDP comes from natural resources. With a stable financial system permeated by strict regulation and oversight, the country's banking system was hit nowhere near as hard as the US system. Last year, Cramer points out, the country faced its first budget deficit in 11 years, but the government should be back in the black in 2010. So what's Cramer's play in Canada? He likes the Bank of Nova Scotia, which also offers a 4.1% dividend yield. One of Canada's largest banks, it also boasts the most international exposure, with 38% of the company's loans extended beyond its borders. With tier 1 capital ratios at 10.7%, it's in much better shape than the average bank in the US. Right now the street right now is relatively bearish, but with the potential for upgrades, Cramer thinks there is plenty of potential on the up side.
What's the bottom line? Cramer recommends keeping 20% of your portfolio in countries that are more business friendly than the US, with healthier budgets, better policies and more natural resource exposure. The stocks he recommends are Statoli in Norway, BHP Billiton in Australia and Canada's Bank of Nova Scotia.
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