In this article we present the list of the 11 Best ADR Stocks To Buy Now. To jump straight to the top foreign ADR stocks to buy now, click on the 5 Best ADR Stocks To Buy Now.
Coupang, Inc. (NYSE:CPNG), Pinduoduo Inc. (NASDAQ:PDD), and Sanofi (NYSE:SNY) are some of the ADR stocks from a diverse group of countries that investors should consider diversifying their portfolios with.
ADRs, or American Depositary Receipts, represent the shares of foreign companies that are traded on their own national exchanges. Those shares are purchased by a U.S.-based depository bank, which then issues them as an ADR for listing on U.S exchanges.
ADRs are not actual shares of the company, but do grant the right for their holder to purchase the fixed amount of shares that each ADR represents. ADR holders also have the same voting rights as a traditional shareholder, and receive dividend payments from the company the same as a regular stockholder. Those dividend payments may be complicated and subject to additional taxation depending on the home country in which the company in question operates. Dividend investors will want to understand the tax laws of any local jurisdiction they’re investing in before making a purchase of ADRs.
ADRs are great for both investors and the companies themselves. For investors, they can far more easily invest in foreign companies and diversify their portfolios without the need to open foreign brokerage accounts and deal with finicky exchange rates, which could impact the investment for good or ill just as much as the ADR itself.
For companies, they gain a larger base of investors to fuel demand for ownership of their company. And in the case of sponsored ADRs, which are issued by the companies themselves, they also gain the added legitimacy of having their stock listed on the NYSE or NASDAQ and having it known that they are complying with the strict regulatory and reporting requirements of those exchanges. There are also unsponsored ADRs, which the companies essentially have no role in, as a bank simply purchases the shares on its own and issues them as an ADR.
Now may be a great time to own foreign stocks, given the expect weakness in the U.S market in the coming years. U.S. stocks have outperformed international stocks over 10 of the past 12 years, with the U.S. market on a torrid bull run. But historically, international stocks have performed better, primarily when the U.S market isn’t as hot as it has been for the last decade plus.
According to Morningstar data, international stocks have outperformed during 60 of the 64 years when the U.S. market returned less than 6% and all 45 years when the U.S. market returned less than 4%. When the U.S. market is weaker, investors tend to look overseas for intriguing growth opportunities. So ADRs could be poised to outperform American stocks throughout the current bear market.
With that in mind, we’ve compiled a list of 11 of the top ADR stocks to buy now, all of which represent a different foreign country, allowing investors to consider various regions in which they could gain exposure to and diversify their portfolios.
Sony
Our Methodology
The following ADR stocks are ranked based on hedge fund sentiment. We follow a select group of hedge funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q3 2022 reporting period.
11 Best ADR Stocks To Buy Now
11. Himax Technologies, Inc. (NASDAQ:HIMX)
Number of Hedge Fund Shareholders: 10
Country of Origin: Taiwan
Sanofi (NYSE:SNY), Coupang, Inc. (NYSE:CPNG), and Pinduoduo Inc. (NASDAQ:PDD) are some of the best ADRs stocks to consider for your portfolio. Another is Taiwanese semiconductor manufacturer Himax Technologies, Inc. (NASDAQ:HIMX). The company’s revenue surged by nearly 75% in 2021, while gross profit more than tripled to $749 million.
Himax Technologies, Inc. (NASDAQ:HIMX)’s results have taken a step back this year in a tough economic environment, but the company nonetheless remains far more profitable and has much higher sales than it did two years ago. The third quarter was a particularly rough one for the company, as net revenue fell by 31.7% quarter-over-quarter and 49.2% year-over-year. Sales of large display drivers took the biggest hit during the quarter, falling by 39.8% quarter-over-quarter, while revenue from small and medium-sized display drivers sank by 29.9%. The company is nonetheless bullish on the longer-term growth prospects for some of its most important segments, including automotive, AMOLED, and Tcon. It expects sales to rise by 4% to 8% quarter-over-quarter during the holiday season.
Hedge fund ownership of Himax Technologies, Inc. (NASDAQ:HIMX) has been tumultuous over the years, cratering to just two smart money managers long the stock in Q3 2019, before rebounding to 20 by the end of 2021. Hedge funds have been selling off HIMX during 2022, with a net total of half those 20 positions being unloaded this year. Daniel S. Och’s Sculptor Capital and John Overdeck and David Siegel’s Two Sigma Advisors sold out of their Himax positions during Q2.
10. CEMEX, S.A.B. de C.V. (NYSE:CX)
Number of Hedge Fund Shareholders: 12
Country of Origin: Mexico
The next foreign stock to consider is Mexican cement producer CEMEX, S.A.B. de C.V. (NYSE:CX), whose shares are bargain priced after falling by 37% this year. CEMEX has continued to improve on the results from its record 2021, pushing its trailing twelve month revenue to $15.5 billion and its gross profit to $4.73 billion.
High energy and transportation costs dinged CEMEX, S.A.B. de C.V. (NYSE:CX)’s bottom line in Q3 of last year, when it posted a surprise loss, but higher prices this year allowed the company to return to profitability during the corresponding quarter, as it pulled in $494 million in net profit. Sales grew by 7% year-over-year to $3.96 billion. The company’s margins and EDITDA remain pressured however, which could weigh on shares in the near-term according to analysts at Mexican financial services firm Banorte. Over the longer-term, they expect the company’s fundamentals to remain solid.
Several former smart money shareholders of CEMEX, S.A.B. de C.V. (NYSE:CX) bailed on the stock during Q2, as there was a 37% drop in the number of hedge funds long CX. Ownership remained flat during Q3. Greg Eisner’s Engineers Gate Manager and Donald Sussman’s Paloma Partners were among the funds to bid farewell to their CEMEX positions during the second quarter.
9. Gerdau S.A. (NYSE:GGB)
Number of Hedge Fund Shareholders: 15
Country of Origin: Brazil
Shares of Brazilian steelmaker Gerdau S.A. (NYSE:GGB) have been among the best performing ones on the market this year, gaining 24%, including a 37% rise since late September. Rising input costs and slumping steel prices have created a tough environment for steelmakers, but Gerdau has fared moderately well in recent quarters.
Gerdau S.A. (NYSE:GGB)’s steel sales did slide by 10% to 2.93 million tonnes during the third quarter, but its net revenue was essentially flat. Net income did slide by 33.7% year-over-year, but that didn’t stop the company from announcing a $0.335 per share dividend payment, to be paid out later this month. That equates to a hefty yield of around 12%, and certainly contributed to shares being driven higher over the past two-plus months.
Save for a big jump in ownership during a single quarter (Q2 of 2018), hedge funds have never shown much love for Gerdau S.A. (NYSE:GGB). A few funds added the company to their 13F portfolios during Q2, including Dmitry Balyasny’s Balyasny Asset Management and Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital. Hedge fund sentiment towards the stock was flat during Q3.
T-7. Unilever PLC (NYSE:UL)
Number of Hedge Fund Shareholders: 22
Country of Origin: Britain
Shares of British consumer staples giant Unilever PLC (NYSE:UL) are still down by about 7% this year, but are red-hot right now, having gained 16% over the last two months. The company has been in the midst of a corporate overhaul, which included adding activist investor Nelson Peltz of Trian Partners to its board in July.
Unilever has unusually high exposure to emerging markets for a consumer goods company of its size, which bodes well for its long-term prospects, as growth in those regions is outsized compared to developed markets. In Q3, the company’s same-store sales in the Asia-Pacific region grew by 12.5% despite locked-down China growing by just 1.1%. Organic growth was even better in Latin America, surging by 17.6%.
Hedge funds have shown increased interest in Unilever PLC (NYSE:UL) since late 2020, when ownership of the stock nearly doubled during a single quarter (Q4). Smart money ownership of UL has dipped slightly since, but remains at elevated levels compared to past years. Ken Fisher’s Fisher Asset Management holds 6.97 million Unilever shares as of September 30, while Tom Russo’s Gardner Russo & Gardner owns 6.41 million.
Polen Capital noted how inflation can help companies like Unilever PLC (NYSE:UL) in its Q2 2022 investor letter:
“Multinational consumer goods company Unilever PLC (NYSE:UL) showed robust price increases overall, with minimal impact on volume, resulting in faster-than-expected sales growth during the quarter. Indeed, higher inflation can be a positive change for companies with favorable brands like Unilever as these conditions make it easier for the biggest brands to raise prices, continue spending on advertising, and take share. We believe the appointment of an activist investor to Unilever’s board in June will help spur additional growth.”
T-7. Infosys Limited (NYSE:INFY)
Number of Hedge Fund Shareholders: 22
Country of Origin: India
Indian IT consulting company Infosys Limited (NYSE:INFY) has been on a roll over the last few years, adding a diverse group of customers to its stable and growing revenue to $16.3 billion in the company’s fiscal 2022 ended March 31. It expects that figure to grow by another 15% to 16% during its current fiscal year.
Investors have been cautious with Infosys Limited (NYSE:INFY) and other IT firms’ shares this year, with INFY shares losing 27% of their value over fears that enterprise customers will scale back spending in 2023. However, the company noted during the release of its Q2 of FY23 earnings that its demand pipeline is strong, which prompted a slight raising of its FY23 guidance. Longer-term, the company is in a great position to continue growing, as a 2021 survey conducted by IBM found that 80% of IT executives expect to rely on outsourcing to handle their much-needed modernization initiatives.
There’s been a slight drop in the number of hedge funds long Infosys Limited (NYSE:INFY) over each of the past four quarters after the stock hit an all-time high in smart money ownership during Q3 2021. David Harding’s Winton Capital Management and Noam Gottesman’s GLG Partners sold off their INFY positions during Q2.
6. Sony Group Corporation (NYSE:SONY)
Number of Hedge Fund Shareholders: 27
Country of Origin: Japan
Closing out the first half of the list is Japanese electronics giant Sony Group Corporation (NYSE:SONY), which has never been particularly well-loved by hedge funds. Sony shares are down 36% this year, partly over a slowdown in the company’s gaming business this year as lockdown restrictions have been lifted. Chip shortages have also curtailed production of the PlayStation 5. Despite that, Sony has continued to post strong results, thanks in part to its music and movie businesses, as well strong sales of its image sensors. In the second quarter of its fiscal 2023 ended September 30, Sony’s sales grew by 16% year-over-year, while net income surged by 24% to $1.78 billion. The company raised its full-year sales guidance to 17% growth, which is impressive given the slowdown in gaming.
Smart money ownership of Sony Group Corporation (NYSE:SONY) hit a 3-year low in the third quarter of 2021 before having a big bounce back in Q4. However hedge funds have been collectively selling off the stock over each of the past three quarters. Ben Jacob’s Anomaly Capital Management bought over 1.65 million shares of SONY during Q2, while Cathie Wood’s ARK Investment Management unloaded her stake in the electronics giant during Q3.
The Aristotle Capital Management International Equity ADR likes some of the moves Sony Group Corporation (NYSE:SONY) was making earlier this year, as it discussed in its Q1 2022 investor letter:
“Sony, maker of the PlayStation videogame console, was a leading detractor for the quarter. After a strong year in 2021, a shortfall in PlayStation 5 sales due to continued semiconductor shortages has dampened new console unit sales. Although there are likely to be continued limitations on the supply of components in the short term, consumer demand remains strong, and upcoming releases of major titles such as Horizon Forbidden West and Gran Turismo 7 are likely to further enhance demand. While Sony continues to manage supply-chain headwinds, the company has also again demonstrated its ability to build on the fundamental strength of its business across various segments. During the quarter, Sony acquired Bungie, a U.S.-based videogame developer known for the Destiny franchise and live game services; completed its initial equity investment in Japan Advanced Semiconductor Manufacturing, a foundry service subsidiary of Taiwan Semiconductor Manufacturing Company (TSMC); and acquired Brazilian music label Som Livre. Lastly, Sony announced a partnership with Honda Motor (NYSE:HMC) where the two companies expect to combine Honda’s expertise in manufacturing vehicles with Sony’s proficiency in imaging, sensing, telecommunication and network technologies to develop and commercialize electric vehicles. We feel these strategic actions demonstrate Sony’s ability to continue to improve on its market positions across its business segments with a long-term, forward-looking approach.”
Pinduoduo Inc. (NASDAQ:PDD), Sanofi (NYSE:SNY), and Coupang, Inc. (NYSE:CPNG) are three of the best ADR stocks to buy now. Check out all the details by clicking the link below.
Click to continue reading and see the 5 Best ADR Stocks To Buy Now.
Suggested articles:
- 11 Best Midcap Dividend Stocks To Buy
- 10 Best Rebound Stocks To Buy
- Harvard University’s Stock Portfolio
Disclosure: None. 11 Best ADR Stocks To Buy Now is originally published at Insider Monkey.
