Since the US represents significantly less than 1/2 of world stocks' market-cap, it makes sense to consider non-US companies, and since some investors prefer to own individual stocks instead of funds of foreign stocks, it makes sense for some to consider purchasing individual stocks in foreign local markets.
There are, of course, many foreign stocks available in the US as ADRs, but there are also more foreign stocks that are not accessible that way.
Many of those foreign stocks have pink sheets shares available in the US (symbols end in .PK), but as a general rule we would not recommend purchasing in the pink sheets, because of liquidity issues in many cases. The company shares listed in the local markets would tend to have much deeper liquidity and better execution.
That said, it is difficult for many investors to search for foreign stocks due to lack of data. There are good professional data sources, but they cost far more money than most people would even consider.
That raises the question whether pink sheets data can be helpful in searching for foreign local market stock opportunities. We think the answer is YES. While volume and liquidity is often an issue with pink sheets, the price tends to follow the foreign local market price.
With that in mind, we ran a price performance filter today on the 17,456 pink sheets stocks in the Thomson Reuters database, and identified 110 companies (0.63% of companies) whose pink sheets shares, and presumably whose foreign local market shares, have outperformed the price of the S&P 500 (PROXY: SPY).
We did the same filter today on all 7,769 stocks on the NYSE, NASDAQ and NYSE AMEX and found 454 (5.84%) that passed our filter criteria. That is a much deeper and easier to access and understand batch of companies, many of which have substantial foreign revenue sources. We also did the same filter on all 1,278 ETFs and found 33 (2.58%) that outperformed the S&P 500.
The Filter Criteria
We required the stocks to meet these criteria:
- price rate of change over 10-days, 1-month, 3-months, 6-months and 1-year was greater than the price rate of change for SPY
- price not more than 10% below the 1-year high
- slope of linear regression best fit trend line was positive over 3-months and 1-year
- price above its 1-month, 3-month and 1-year moving averages
- 3-month moving average above the 1-year moving average.
Meeting these criteria does not make these pink sheet shares or their foreign local market shares good investments (some could be terrible investments), but meeting the criteria is a good place to begin looking further, if you prefer to invest in companies with superior relative price performance. We have not analyzed the companies in this list beyond the filter criteria described above.
Here is the list. There are some obscure names in there, but there are some important non-US companies too. Not all of the names in the list are foreign, but many of the foreign names stand out.
For example you see Volvo, Volkswagen, Porsche, Electrolux, Barclays, Michelin, Bayer, Heineken, Munich Re, BNP Paribas, Lufthansa, Lenovo, BASF, and others.
One we own on the local Tel Aviv stock exchange is Israel Chemicals (one of the largest public companies in Israel) engaged in the fertilizer business.
Not all of the companies are foreign, the list is simply those pink sheet companies that have outperformed the price of SPY based on the criteria above.
|MICRON ENVIRO SYSTEMS ORD||(MSVS.PK)|
|E DIGITAL ORD||(EDIG.PK)|
|BFC FINANCIAL CL A ORD||(BFCF.PK)|
|TALISON LITHIUM ORD||(TLTHF.PK)|
|MIMEDX GROUP ORD||(MDXG.PK)|
|MART RESOURCES ORD||(MAUXF.PK)|
|GALAXY ENTERTAINMENT GROUP ORD||(GXYEF.PK)|
|DIXONS RETAIL ADR REP 3 ORD||(DSITY.PK)|
|MARINE HARVEST ADR||(MNHVY.PK)|
|GEMALTO ADR RPSTG .5 ORD||(GTOMY.PK)|
|WESTERN WIND ENERGY ORD||(WNDEF.PK)|
|FUJI HEAVY INDS ADR||(FUJHY.PK)|
|INTER CITIC MINERALS ORD||(ICMTF.PK)|
|GALAXY ENTERTAINMENT GROUP ADR||(GXYEY.PK)|
|TINKA RESOURCES ORD||(TKRFF.PK)|
|MARINE HARVEST ORD||(MNHVF.PK)|
|ERSTE GROUP BANK ADR||(EBKDY.PK)|
|AB ELECTROLUX CL B ADR||(ELUXY.PK)|
|GRUPO FINANCIERO BANORTE ADR||(GBOOY.PK)|
|WHEELOCK ADR REP 10 ORD||(WHLKY.PK)|
|INDUSTRIA DE DISENO TEXTIL INDIT ADR||(IDEXY.PK)|
|AGEAS SPON ADR REP 1 ORD||(AGESY.PK)|
|WOLSELEY SPON ADR REP 1/10 ORD||(WOSYY.PK)|
|ASSA ABLOY ADR||(ASAZY.PK)|
|FREESTONE RESOURCES ORD||(FSNR.PK)|
|SANDS CHINA ADR REP 10 ORD||(SCHYY.PK)|
|MACQUARIE GROUP ADR||(MQBKY.PK)|
|HOPEWELL HOLDINGS ADR||(HOWWY.PK)|
|SOCIETE GEN SPON 5 ADR CNV TO 1 ORD||(SCGLY.PK)|
|MERRILL LYNCH BIOTECH HOLDRS ETF||(BBHYL.PK)|
|SHOPRITE HOLDINGS ADR REP 2 ORD||(SRHGY.PK)|
|MICHELIN COMPAGNIE GEN ADR||(MGDDY.PK)|
|BAYER ADR REP 1 ORD||(BAYRY.PK)|
|LUNDIN MINING ORD||(LUNMF.PK)|
|KIMBERLY CLARK DE MEXICO SAB ADR||(KCDMY.PK)|
|COMPAGNIE FINANCIERE RICHEMONT ADR||(CFRUY.PK)|
|MUNICH RE ORD||(MURGF.PK)|
|BNP PARIBAS ADR||(BNPQY.PK)|
|MUENCHENER RUECKVERSICHERUNGS ADR||(MURGY.PK)|
|TREASURY WINE ESTATES SPONS ADR||(TSRYY.PK)|
|HENKEL ADR REP PRF||(HENOY.PK)|
|TELSTRA ADR REP 5 ORD||(TLSYY.PK)|
|SUPERIOR PLUS ORD||(SUUIF.PK)|
|DASSAULT SYSTEMES ADR||(DASTY.PK)|
|ESSILOR INTERNATIONAL ADR||(ESLOY.PK)|
|SGS ADR REP 1/100 ORD||(SGSOY.PK)|
|DAIWA SECURITIES GROUP SPON ADR||(DSEEY.PK)|
|SAFRAN ADR REP 1 ORD||(SAFRY.PK)|
|CONRAD INDUSTRIES ORD||(CNRD.PK)|
|ASSOCIATED BRITISH FOODS ADR||(ASBFY.PK)|
|LEGAL AND GENERAL ADR||(LGGNY.PK)|
|DEUTSCHE LUFTHANSA SPONSORED ADR||(DLAKY.PK)|
|VOLKSWAGEN REP ADR 1/5 ORD||(VLKAY.PK)|
|LENOVO GROUP ADR||(LNVGY.PK)|
|VOLVO ADR REP 1 CL B ORD||(VOLVY.PK)|
|ACADIAN TIMBER ORD||(ACAZF.PK)|
|ALLIANZ ADR REP ONE TENTH ORD||(AZSEY.PK)|
|FLETCHER BUILDING ADR||(FCREY.PK)|
|CHEUNG KONG HOLDINGS ADR||(CHEUY.PK)|
|VOLKSWAGEN ADR REP 1/5 NV PRF||(VLKPY.PK)|
|ROYAL BANK OF SCOTLAND GROUP ORD||(RBSPF.PK)|
|HONG KONG AND CHINA GAS ADR||(HOKCY.PK)|
|HSBC HOLDINGS ORD||(HBCYF.PK)|
|CHINA STATE CONS INTL HLDGS ADR||(CCOHY.PK)|
|SCHNEIDER ELECTRIC ADR 1/10 ORD||(SBGSY.PK)|
|DANIELI ADR REP 1 ORD||(DNIYY.PK)|
|ATLAS COPCO SR A ADR||(ATLKY.PK)|
|DUET GROUP CF||(DUETF.PK)|
|PORSCHE AUTOMOBILE HOLDING ADR||(POAHY.PK)|
|ADIDAS SALOMON ADR||(ADDYY.PK)|
|SANDVIK ADR REP 1 ORD||(SDVKY.PK)|
|CRYO CELL INTERNATIONAL ORD||(CCEL.PK)|
|PILOT GOLD ORD||(PLGTF.PK)|
|CARLSBERG SPON ADR REPSTG CL B ORD||(CABGY.PK)|
|SAMPO ADR REP 1/2 CL A ORD||(SAXPY.PK)|
|ROYAL DSM ADR REP 4 ORD||(RDSMY.PK)|
|WESTSHORE TERMINALS INVESTMENT ORD||(WTSHF.PK)|
|SWATCH GROUP ADR REP 1/20 ORD||(SWGAY.PK)|
|APA GROUP UNT||(APAJF.PK)|
|RECKITT BENCKISE GRP ADR REP 1/5 ORD||(RBGPY.PK)|
|NITTO DENKO ADR||(NDEKY.PK)|
|DEUTSCHE POST ORD||(DPSTF.PK)|
|JOHNSON ELECTRIC HOLDINGS ADR||(JELCY.PK)|
|TURKIYE VAKIFLAR BANK ADR REP 10 ORD||(TKYVY.PK)|
|CAP GEMINI ADR||(CGEMY.PK)|
|AXA ADR REPSG 1 ORD||(AXAHY.PK)|
|HUTCHISON WHAMPOA ADR REP 2 ORD||(HUWHY.PK)|
|SHIN ETSU CHEMICAL ADR||(SHECY.PK)|
|HANG LUNG PROPERTIES ADR||(HLPPY.PK)|
|SMITHS GROUP ADR REPTG ONE ORD||(SMGZY.PK)|
|ISRAEL CHEMICALS ADR||(ISCHY.PK)|
There are yet other foreign companies that do not have pink sheet shares, for which you would need other means to find them, but this is not a bad way to whittle down a research list to a manageable number.
If relative performance is one of your selection criteria, this list saves you from examining the other 17,336 pink sheets companies.
Disclosure: QVM has no positions in any symbol listed in this article, but does have a position in the foreign local market shares of Israel Chemicals as of the creation date of this article (November 30, 2012). We certify that except as cited herein, this is our work product. We received no compensation or other inducement from any party to produce this article, but are compensated retroactively by Seeking Alpha based on readership of this specific article.
General Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.