U.S. growth stocks were once again among the best performers of 2019. However, a recent market rotation toward value stocks and two new international trade deals has the outlook for foreign value stocks looking relatively bullish heading into 2020.
The USMCA, the phase one trade deal with China and clarity on the Brexit situation in the U.K. has created more certainty in the global economy. After international stocks have lagged U.S. stocks in recent years, U.S. investors may start looking overseas in 2020.
Growth stocks have outperformed value stocks throughout the decade-long bull market. That extended rally has left growth stock valuations extended, while the relative value gap between growth stocks and value stocks has expanded.
Signs Of Rotation
Since Sept. 1, that pattern has changed. The Vanguard Growth ETF (NYSE: VUG) is up just 7.3% in that time, while the Vanguard Value ETF (NYSE: VTV) is up 9.5%. Over the same period, the SPDR S&P 500 ETF Trust (NYSE: SPY) is up 9%, while the VANGUARD STAR F/VANGUARD TOTAL INTL (NASDAQ: VXUS) is up 10.5%.
For investors looking to shift toward value in the international market in 2020, here are the 11 U.S.-listed foreign stocks with the lowest earnings price-to-earnings ratios (minimum of $2 billion market cap), according to Finviz.
- Liberty Global PLC Class C (NASDAQ: LBTYK), 1.2 PE.
- Micro Focus International PLC - ADR (NYSE: MFGP), 3.4 PE.
- Encana Corp (NYSE: ECA), 3.4 PE.
- Banco Macro SA ADR Class B (NYSE: BMA), 3.5 PE.
- Banco Santander SA (NYSE: SAN), 4.3 PE.
- Woori Financial Group Inc (NYSE: WF), 4.4 PE.
- Ternium SA (NYSE: TX), 4.8 PE.
- Athene Holding Ltd (NYSE: ATH), 5.4 PE.
- COMPANHIA ENERG/$.01 RED PFD SH (NYSE: CIG), 5.7 PE.
- Tata Motors Limited ADR (NYSE: TTM), 6.3 PE.
- Shinhan Financial Group Co., Ltd. (NYSE: SHG), 6.4 PE.
While these value stocks could certainly have upside potential, investors may not want to assume that these foreign companies should be trading in-line with the earnings multiples of their U.S. counterparts. U.S. investors aren’t as familiar with these brands and they typically aren’t as trusting of the financial reporting in other countries.
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