Investing Abroad: Australian and New Zealand Stocks
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Diversification is the best defense against global uncertainty. Living abroad, that is one truth that I have come to appreciate more and more. With so much uncertainty in Europe and the rest of the world, we sometimes forget that truth. In these times of uncertainty, many investors seek the safety of good US companies, avoiding the rest of the world completely. Diversification means more than just different sectors of the US economy. Diversification also means foreign companies that will protect your portfolio from domestic risk.
The simplest way for individual investors to achieve adequate international diversification is through an ETF. The PowerShares FTSE RAFI Developed Markets ex-U.S. Portfolio or the PowerShares FTSE RAFI Emerging Markets Portfolio will give investors sufficient global diversification, with a decent dividend to boot. For investors looking for a more hands-on approach, below are five Australian and New Zealand companies that might be suitable for a more globally diversified portfolio.
1. Telecom Corp of New Zealand is the only New Zealand-based company on this list. It offers mobile, broadband and fixed-live communications to customers and business in New Zealand. The company also offers information, technology and communication services to businesses in New Zealand and Australia. Its dominance in New Zealand provides it with a stable base to expand into other Asia-Pacific countries. Increased competition from the UK-based Vodafone (NASDAQ: VOD) in the mobile phone and broadband segments is a continuing risk for shareholders. Telecom Corp of New Zealand has a dividend yield of nearly 10%.
2. BHP Billiton (NYSE: BHP) is a mining, oil and natural gas company headquartered in Melbourne, Australia. BHP Billiton is the largest mining company in the world, a top 10 of independent oil and natural gas company and the largest company based in Australia. The company has mining, oil and natural gas operations in 25 countries in 20 different commodities. Their mining operations include iron ore, aluminum, coal, uranium, diamonds, as well as other metals and minerals. With its size, worldwide operations, diversity of commodity types, and its 3.42% dividend yield, BHP Billiton is probably one of the least risky mining companies you be able to invest in.
3. Westpac Banking Corporation (NYSE: WBK) is a multinational banking and financial services company based in Sydney, Australia. Westpac is the second largest bank in both Australia and New Zealand, with smaller operations in other South Pacific countries, Asia and the United States. Westpac is currently the number one ranked bank in the world for sustainability, according to the 2011 Dow Jones Sustainability Index (a ranking that Westpac had previously from 2002-2007). Australian banks have avoided much of the financial craziness that hurt the US and European banking sector. Many analysts and commentators, however, have been predicting a US-style housing/property bubble for Australia. So this company is not without its possible systemic risks.
4. Alumina Limited (NYSE: AWC) has a complicated business structure. Alumina Limited is a publically-traded holding company of the Western Mining Corporation (WMC). WMC itself is a subsidiary of previously mentioned BHP Billiton. Alumina Limited’s only business activity is its joint venture with Alcoa (NYSE: AA), called Alcoa World Alumina and Chemicals (AWAC). Alumina Limited’s ownership stake in the joint venture is 40%, with Alcoa owning the remaining 60%. Alcoa is in charge of the day-to-day operations of AWAC. This essentially means that the management of Alumina Limited is controlled entirely by outside entities. AWAC makes up about 17% of the global aluminum oxide market. With its 7.76% dividend yield, Alumina Limited could be considered the Alcoa for dividend-seeking income-investors.
5. Genetic Technologies is a small biotech company in the business of genetic diagnostics. One of their products is BREVAGen, a DNA test used to detect a patient’s increased risk of developing breast cancer. Positive news at the end of May sent shares soaring 157% within a few days. Currently shares have fallen about 45% from that May-high. Genetic Technologies is the speculative and volatile stock of this bunch. Like most small-cap biotech companies, binary-events make or break the stock. Any good news will cause the share price to soar, while any bad news will send it tumbling in a spectacular fashion.
Are these five Australian and New Zealand companies suitable for your own diversified portfolio? That I cannot say. Use this list a good stepping-off point for your own research into good companies in Australia, New Zealand and elsewhere in the world. Please contact a tax professional about the suitability of international companies in your portfolio.
WhichStocksWork has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Vodafone Group Plc (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.