An American Depositary Receipt (ADR) is a certificate issued by a U.S. bank, representing shares of a foreign company. ADRs enable U.S. investors to purchase shares in foreign companies as if they were U.S. stocks, simplifying the process. This makes it easier for Americans to invest internationally and helps foreign companies attract U.S. investors without the complexities of directly listing on U.S. stock exchanges.
Despite the advantages, fewer than 10% of large foreign companies list in the U.S., due to high valuations of some companies which reduce the need for a U.S. listing. Additionally, many foreign firms are often family-owned and resist listing due to concerns about losing control or compromising personal financial benefits.
READ ALSO: 12 Best Stocks to Invest in for the Next 3 Months and Top 8 Stocks To Buy In 8 Different Sectors for the Next 3 Months.
Global Markets React to Trump Era
The recent victory of Donald Trump in the U.S. presidential election is poised to have significant repercussions on global markets, particularly affecting stocks in Europe, the UK, China, and Canada. Analysts from Bloomberg, Yahoo, and CNBC have provided insights into how these regions might respond to Trump’s policies and market dynamics.
European markets are generally expected to suffer under a Trump presidency. Emmanuel Cau, head of European Equity Strategy at Barclays, suggests that Europe may be viewed as a “loser” in this scenario due to Trump’s protectionist trade policies and potential tariffs that could disrupt existing trade relationships. Trump’s historical stance on climate change and environmental regulations could also lead to increased competition for European firms, particularly in energy sectors where U.S. companies may benefit from deregulation. Goldman Sachs analysts have echoed these concerns, forecasting that Trump’s administration could create an unfavorable environment for European stocks, particularly those reliant on exports to the U.S.
For the UK, the implications of a Trump presidency are mixed but lean towards caution. Bloomberg reported that an aggressively competitive U.S. market risks exacerbating existing economic stagnation in Britain. The UK’s reliance on trade with the U.S. makes it particularly vulnerable to shifts in U.S. policy, especially if Trump pursues aggressive tariffs or trade barriers. Additionally, the uncertainty surrounding Brexit negotiations may further complicate the UK’s economic landscape under a Trump administration.
China is likely to face direct challenges from Trump’s trade policies, which may include increased tariffs on Chinese goods. Trump’s statements indicate a willingness to impose significant tariffs on imports from China as part of his broader strategy to address trade imbalances and intellectual property concerns. This approach could lead to volatility in Chinese stock markets as investors react to potential retaliatory measures from Beijing and shifts in global supply chains. The anticipated increase in tariffs could also affect sectors heavily reliant on exports to the U.S., leading to decreased profitability for many Chinese companies.
In contrast to Europe and China, Canadian stocks may experience a long-term boost from Trump’s victory, despite an initial negative reaction post-election. Analysts at Bay Street believe that sectors such as commodities and natural resources could benefit from Trump’s pro-energy policies and potential deregulation efforts despite tariffs. However, there are concerns regarding Trump’s proposed tariffs on Canadian imports, which could disrupt trade relations between the two countries.
As the global market continues to navigate the implications of the Trump presidency, investors are faced with both challenges and opportunities. The potential for increased tariffs, trade barriers, and deregulation efforts has created a complex landscape for foreign companies. Despite the uncertainty, there are still many foreign companies that offer attractive investment opportunities for U.S. investors. With that in context, let’s take a look at the 12 best ADR stocks to invest in according to analysts.
A foreign investor glancing across a cluttered desk, looking out a window at the city skyline.
Our Methodology
For this article, we used the Finviz and Yahoo Finance stock screener to find the 30 largest foreign companies listed in the United States. We then sourced the analysts’ average price targets and picked the 12 stocks that had the highest upside potential, as of November 27. The list is sorted in ascending order of analysts’ average upside potential.
Note: we double checked if these stocks are ADRs using JP Morgan’s ADR website.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12 Best ADR Stocks To Invest In According to Analysts
12. HSBC Holdings plc (NYSE:HSBC)
Upside Potential: 22.92%
HSBC Holdings plc (NYSE:HSBC) is one of the largest banking and financial services institutions in the world, serving around 41 million customers in over 60 countries and territories. The bank operates across four key business segments: Wealth and Personal Banking, Commercial Banking, Global Banking & Markets, and Global Private Banking.
HSBC Holdings plc (NYSE:HSBC) is focusing on digital transformation expanding in high-growth regions such as Asia, and optimizing its global operations to improve cost efficiency and profitability. By streamlining its operations and optimizing its team structure, HSBC Holdings plc (NYSE:HSBC) aims to achieve savings of $300 million.
HSBC Holdings plc (NYSE:HSBC) is actively looking for growth opportunities in the US commercial banking market and is expanding its services in global markets. On November 19, HSBC Holdings plc (NYSE:HSBC) officially launched its Global Private Banking services in the Kuwaiti market, marking a major expansion of its wealth management offerings in the Middle East. This launch solidifies the bank’s position as a leading international bank with an investment advisory license, enabling it to provide bespoke private banking solutions to high-net-worth individuals in Kuwait.
HSBC Holdings plc (NYSE:HSBC) has also decided to subsume its commercial and institutional banking under one division and create a new group for international wealth and premier banking to fuel further expansion. The geographical restructuring, set to take effect on January 1, 2025, will split the business into two divisions, East and West, with Hong Kong and the UK as standalone regions.
11. Shell plc (NYSE:SHEL)
Upside Potential: 24.98%
Shell plc (NYSE:SHEL) is a global energy giant based in London, UK, with operations spanning oil and gas exploration, production, refining, and marketing, as well as renewable energy development. The company’s primary revenue streams come from the sale of crude oil, natural gas, and refined petroleum products. The company is also pivoting toward sustainability, with significant investments in low-carbon technologies, electric vehicle charging networks, and renewable energy projects to adapt to the energy transition and meet rising global energy demand sustainably.
On October 31, Shell plc (NYSE:SHEL) announced results for the July-September period. The company reported adjusted earnings of $6 billion, exceeding analyst projections of $5.3 billion, according to estimates compiled by LSEG. Shell plc’s (NYSE:SHEL) Free cash flow (FCF) rose to $10.83 billion, compared to $7.5 billion in the same quarter last year. Cash capital expenditure declined to $4.95 billion from $5.65 billion in Q3 2023. Additionally, the company announced plans to repurchase $3.5 billion in shares over the next three months while maintaining its dividend at 34 cents per share.
On October 23, Shell Energy North America, a subsidiary of Shell plc (NYSE:SHEL), announced its agreement to acquire a 100% equity stake in RISEC Holdings, LLC. RISEC owns a 609-megawatt (MW) two-unit combined-cycle gas turbine power plant located in Rhode Island, USA. This acquisition strengthens the company’s long-term supply and capacity offtake position in the deregulated Independent System Operator New England (ISO New England) power market.