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Investors are often guilty of holding too much of their investments in their own country, when some international exposure can increase diversification and reduce risk over time. Below are 3 ideas for ADRs that can help your diversification. ADRs are American Depository Receipts, representing a fixed number of shares trading on a foreign market.

Cemex (NYSE:CX) (Mexico)

ADRs are a useful way to get exposure to the cement and building materials sector where several of the major players are overseas. Other alternatives are CRH (NYSE:CRH) and Lafarge (OTCPK:LFRGY). It's a been a roller coaster ride with Cemex over the past few months as concern over a debt covenant breach drove the stock close to $2 in October, and cement and building materials are very exposed to changes in macroeconomic demand, so Europe could push these stocks lower in the short term. Nonetheless if you have a stomach for risk and are bullish on the economy in 2012, Cemex is currently trading at 0.38x book, despite its strong recent rally, and is trading at approximately 3.5x historic free cashflow, though current there are no dividend or positive net income so you need to take a long term view on this one. Cement stocks are generally good for the long term, because high transport costs for cement create local monopolies leading to attractive margins.

Tata Motors (NYSE:TTM) (India)

An Indian automotive company, Tata Motors is well positioned for emerging market growth with its unique cars such as the tiny and cheap Tata Nano. But Tata Motors has also acquired the Land Rover and Jaguar brands giving it prestige offerings too, with the Range Rover Evoque winning various SUV of the year awards for 2012. So Tata Motors has an impressive, broad brand portfolio. Tata Motors trades on a p/e of 9.7x and a yield of 2.29% though it's less of an absolute value play with its $60B market cap now larger than Ford, Nissan and Daimler (Mercedes). Tata Motors is a good way to play the increasing purchasing power of the Indian consumer.

CityTelecom (CTEL) (China)

With a 7.5% yield and a p/e of 10x City Telecom is a relatively rare value play in China. The company is primarily focused on delivery of telecoms services to the Hong Kong market such as voice, internet and television, and is uniquely adapted to the high density of a city like Hong Kong. The dividend payout ratio of 69% is certainly on the high side, so the dividend shouldn't be taken for granted and a cut would not be pretty, but City Telecom's track record of historic growth of revenue and consistent free cashflow generation has been impressive. As a stock denominated in Yuan the ADR would also benefit from any revaluation against the dollar, and unlike other China stocks that same revaluation shouldn't cause a drop in demand because City Telecom does not rely on exports.

Source: 3 Long ADR Ideas To Add Diversification