In recent years, U.S. investors would have done well to avoid the rest of the world. But after years of poor results, foreign stocks are now a lot cheaper than their U.S. counterparts, enhancing their appeal for value-conscious investors.
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The list of one-year winners among funds that focus on large, growing companies features two funds from Harding Loevner, which specializes in overseas stocks. The separate management teams that run International Equity Research Portfolio (HLMNX) and International Equity Portfolio (HLINX) start with a pool of 250 firms in both developed and emerging nations that meet four criteria. Each company must have a competitive edge in its industry, a strong balance sheet, sustainable growth that's not vulnerable to business cycles, and smart, shareholder-focused executives. Harding Loevner's analysts rate each stock "buy," "sell" or "hold."
All of the buys end up in International Equity Research, which at last word held 175 stocks. To limit the fund's volatility, none of the stocks takes up more than 1.2% of assets. But the managers of International Equity Portfolio are free to choose among the holds and sells as well as the buys. In the end, 50 to 60 companies--mostly huge firms--make the cut. German drug and chemical maker Bayer is the only top-five holding in both funds.
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