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7 Impressive International Stocks Set to Fly

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24.08.2021

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U.S. markets are looking mighty expensive these days, but there are still plenty of investing opportunities available out there – especially in international stocks.

In July, the S&P 500 Index booked its sixth straight month of gains. The index that tracks the performance of 500 of the largest companies listed on U.S. stock exchanges is now up 18% year-to-date and trading in record-high territory. In contrast, the MSCI All Country World Index, excluding the U.S., is up 5.3% over the same period.

International stocks have lagged for a variety of reasons, including delta variant headwinds and reopening concerns, as well as a recent drubbing in Chinese stocks as the government tightened regulations on tech and private-tutoring companies.

However, this outperformance in the S&P 500 now has BofA's sell-side indicator pointing to a lot of optimism in U.S. stocks – so much, in fact, that it's nearing a market "sell" signal. The indicator is at the closest it has come to a "sell" signal since May 2007, during the financial crisis. "We have found Wall Street's bullishness on stocks to be a reliable contrarian indicator," says Savita Subramanian, equity and quant strategist at BofA Securities.

With U.S. markets potentially poised for a pullback, it seems like an attractive time to search for better values in international stocks.

We screened companies according to estimated earnings per share (EPS) growth over the next two years, low forward price-to-earning (P/E) ratios – indicating the shares may be undervalued – analyst ratings, and whether they are traded on a major U.S. stock exchange.

Here are seven international stocks that could be solid buy-and-hold investments. With the caveat that Chinese stocks have been volatile lately amid a rash of governmental regulation, we included two high-growth, high-quality stocks from China that nonetheless look attractive over the long run.

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By now, the world knows the name AstraZeneca (AZN, $59.39) for its development of a COVID-19 vaccine. Pharmaceutical investors, however, have long known this English company is tops among international stocks thanks to its most popular drugs, including high cholesterol-fighter Crestor and Nexium, which treats acid reflux.

Patents for both of these drugs have expired, with another popular drug Symbicort (asthma) heading that way. AstraZeneca nevertheless is developing "one of the strongest" pipelines among pharmaceutical companies with several drugs holding "blockbuster potential," writes Morningstar analyst Damien Conover in a research note. These include cancer drugs Tagrisso and Imfinzi, as well as treatments for respiratory diseases and diabetes.

"Astra's strong lineup of next-generation drugs should significantly offset sales lost to new generic competition," Conover says. Moreover, its recently completed $39 billion acquisition of Alexion could "diversify cash flows into the rare disease market, which should help Astra consistently reinvest in research and development, supporting the firm's wide moat," he adds.

Jefferies analysts say the Alexion acquisition implies the deal is accretive to earnings by 30 cents per share to 40 cents per share, which should "calm some nerves," according to a recent note.

AstraZeneca also recently reported second-quarter sales that beat Wall Street expectations. However, gross margins weakened likely due to producing a larger supply of its no-profit COVID-19 vaccine, the analysts say.

Jefferies has a Buy rating on the healthcare stock, with a price target of $68.50. Its analysts say the stock is trading at a favorable valuation within the European pharma industry, even with the company's "leading growth profile." Meanwhile, "a multitude of pipeline........

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