Now is as good a time as ever to invest offshore, and the sooner, the better. The US dollar should continue to strengthen, due to deflationary pressures and a guaranteed rising interest rate environment in the U.S. By investing into foreign stocks, investors simply have access to a broader range of investment themes and can take advantage of changing domestic macroeconomic trends.
In my last two international investing columns, I focused on several key tech sectors still in their infancy. GE, IBM, Disney, Skyworks, and Apple are all investing heavily in the Internet of Things (IoT), while Palo Alto Networks and Cyber Ark Software are making lucrative gains in cyber security. Google, Baidu, TSLA, Delphi, and Mobileye are also already profiting from investments in automated smart car technology.
Today, I’ll share tips on a leading Chinese e-commerce company and a large US blue chip at the forefront of telecommunications, broadband, and wireless services.
Online Appeal: Alibaba
Haven’t heard of Singles Day? You will soon. Lonely college kids started this event in China and it has become a huge one-day online bonanza of discounts. In fact it is the single largest one-day online shopping event. Singles Day is symbolized by the four lonely ones (11/11) and is also known as double eleven in China.
Despite a slowdown in growth in China, Chinese e-commerce giant Alibaba (NYSE: BABA) posted the largest ever online sales on Singles Day with US$14.3 billion last month. In the first 8 minutes, the company recorded more than US$1 billion in sales. Last year US$9.3 billion was sold online in 24 hours and this year Alibaba easily smashed those figures. In comparison the biggest online five day shopping period in the US, Thanksgiving to Cyber Monday, only reached a total of US$6.6 billion in sales in 2014 and in 2015 US$.
Alibaba’s stock price has struggled this year, but impressive Q3 earnings have shown Wall Street that Alibaba can live up to it’s initial IPO hysteria. Alibaba already does more business volume than Amazon and EBay combined. They also have 300 million plus active users, roughly the population of the United States.
Telecomm Convergence: AT&T
Out of 700 million mobile subscribers in Africa, more than 230 million belong to MTN. The company is a true pioneer in African telecommunications. Recently their CEO has resigned due to a regulatory fine of US$5.2 billion over unregistered SIM cards. This has plummeted MTN’s shares by more than 25 percent. I do not want to make any judgment issue, but MTN’s volatile stock price and Dabengwa’s resignation highlights the political, legal, and regulatory uncertainties facing big companies doing business in Africa.
In contrast, a large blue chip in global telecommunications, AT&T (NYSE:T) simply does not deal with these regulatory unknowns in North America. The stock pays an attractive 5.72% dividend to shareholders, and is very much a stable blue chip income and growth investment. AT&T bought DirecTV last year to move into video streaming and can now bundle wireless and cable services together.
The combination of AT&T's wireless business and expected bundled synergies from their recent DirecTV acquisition should drive real growth. AT&T is betting big on convergence—the idea that services that used to flow via different wires and satellites will all start traveling via the Internet.
Investors would be wise to consider the potential benefits of owning AT&T and Alibaba. If you overlook international stocks, you are ignoring some of the world’s best companies. Now more than ever, international equity exposure plays an important role in creating an overall well-balanced portfolio with superior investment returns.
Wade Dawson is an American living in Johannesburg and is a Senior Partner for Austen Morris Associates. If you would like more offshore investment tips go to www.austenmorris.com or follow us on Linked In. Wade can also be reached via Linked In, by e-mail on [email protected] or follow him on twitter @wadedawson4