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International markets returns have trailed US equity returns year-to-date as of June 25th, with the Morningstar US Market TR USD index up 14.12%, compared to the Morningstar Global Markets GR USD index, up only 10.87%. That may leave some enticing opportunities for investors.
Today we’re taking a peek into the portfolios of some of the best concentrated international fund managers to see what they’ve been buying. We think these companies make great candidates for a watchlist of international stocks.
3 International Stocks the Best Managers Have Been Buying
BNP Paribas BNPQY
ASML Holding ASML
Airbus Group EADSY
BNP Paribas BNPQY
Analyst: Johann Scholtz, CFA
The first name on our list of international stocks top fund managers are buying is BNP Paribas, which is the largest publicly traded bank in France. Now, although BNP has operations in about 80 countries, it considers France, Italy, and Belgium to be its home markets. While BNP has one of the weaker balance sheets of the European banks that Morningstar covers, the bank has reported remarkably consistent earnings over the past decade. Reported earnings haven’t grown by much over this period, and return on tangible equity was in the mid- to upper-single-digit range. However, interest rates have been at or below zero for most of the past decade, and the return-to-normal monetary policy in the eurozone should support a structural increase in profitability for BNP to a low double-digit return on tangible equity. We think the ADRs of the company are worth US$46.
ASML Holding ASML
Analyst: Javier Correonero
The second name on our list of international stocks top managers are buying is ASML. ASML is the world’s largest supplier of photolithography machines for semiconductors, with around 90% market share. Morningstar thinks the company has carved out a wide economic moat that should allow it to fight off competitors for two decades or more. And ASML’s large investments in research and development should allow the company to continue to widen its economic moat and act as a barrier to entry. ASML’s machines last more than 30 years, providing recurring service revenue. We expect ASML to outpace the growth of the overall semiconductor market, thanks to its strong competitive position. Morningstar recently raised its fair value estimate on the ADRs of the company to US$990.
Airbus Group EADSY
Analyst: Nicolas Owens
The final name on our list of international stocks top managers are buying is Airbus. Airbus is a global aerospace and defense firm that designs, develops, and manufactures commercial and military aircraft and space launch vehicles and satellites. We believe Airbus is the dominant partner in a commercial aerospace duopoly, as its A320 family of aircraft splits the traditional narrow-body market with Boeing and is gaining share of the attractive medium-haul market. We think Airbus earns a wide moat rating based on the durability of its intangible assets and the switching costs associated with its products. To meet demand, Airbus is ramping up global jet production as fast as its supply chain will allow. We think the ADRs are worth US$43.80 each.
