Many methods exist to help you diversify your overall portfolio. One way is to increase your international exposure and participate in profits abroad through foreign-owned stocks or ADRs (American depositary receipts).

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

In many rapidly growing developing countries, a lack of transparency and a dearth of regulations make it difficult to ensure the legitimacy of companies you're interested in. Furthermore, issues related to trade execution and currency conversion can make the process of purchasing foreign stocks problematic. But buying ADRs of foreign-owned companies that trade on major stock exchanges in U.S. dollars is a good solution. These companies would have had to meet tough listing and transparency standards in order to be accepted onto a major exchange. Therefore, the information you learn about these stocks is probably reliable.

SEE: ADR Basics: What Is An ADR?

Some good companies to consider for international exposure include: Telefonica S.A. (NYSE:TEF), Aluminum Corp. of China (NYSE:ACH) and Suncor Energy (NYSE:SU).

Telefonica Shows Promise
Telefonica looks very attractive from a valuation standpoint. The company has a forward P/E ratio of 5.71, $8.7 billion in cash and short-term investments and a market cap of approximately $50 billion. This is one of the best investment ideas for those seeking exposure to the telecommunications industry in Spain, Europe and Latin America. Over the long-term, it would not be surprising to see profits increase, given Telefonica's sizable market position. For investors interested in long-term international growth, Telefonica is worth a good look.

Aluminum Corp. of China Shines
Whether or not the world cares to admit it, China will continue to be a great long-term growth story, even if the country experiences an eventual slow down in the short-term. Aluminum Corp. of China is a great way to get involved in Chinese expansion. As of the latest quarterly earnings, a supply glut and higher prices pressured margins, which has resulted in some short-term pressure. For long-term investors seeking to gain exposure in Chinese growth, this could prove to be a great time to get involved. Shares may be volatile over the short-term, but Aluminum Corp. of China should have future staying power. Smart investors who purchased shares in Aluminum Corp. of China during the period of market weakness should reap future rewards.

SEE: International Financial Reporting Standards: What You Need To Know

Suncor: Attractive Valuation
Shares of Suncor Energy are attractive from a valuation standpoint. The company has a forward P/E of 7.16 and is trading with a decent price to book ratio. The strengthening oil and gas sector and last year's acquisition of Petro Canada has provided investors a good reason to give this stock a second look.

Bottom Line
For investors who want to diversify their portfolios by participating in the long-term growth some international countries are seeing, ADRs are a liquid, more transparent, and easy way to get involved. However, investing in ADRs requires that you look beyond the current challenges plaguing the world economy. If you are patient and willing to ride out the ups and downs, ADRs are a great way to diversify your overall portfolio long-term.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing Basics

    Diversify with These Four Alternative Assets

    In times of market volatility, investors add alternative assets to their portfolios--highly illiquid, but profitable investments like art, land or precious metals.
  2. Investing

    How To Build a Currency Hedged Strategy?

    We are still unsure of how to implement a currency hedge strategy based on the dollar's movement. So let’s focus on what’s easier to measure: time horizon.
  3. Investing

    Which Economy Is Larger - The United States or China?

    China's economy may be larger than the U.S. economy, but it all depends on which exchange rate method you use to make the GDP comparisons.
  4. Stock Analysis

    8 Solid Utility Stocks for a Bear Market

    If you're seeking modest appreciation, generous dividend payments and resiliency, consider these eight utility stocks.
  5. Stock Analysis

    Why Phillips 66 (PSX) is a Solid Long-Term Bet

    Here's why Phillips 66 will likely remain one of the world’s largest and most profitable companies for a long time to come.
  6. Investing

    What a U.S. - Asia Trade Deal Means For Business

    The U.S. and 11 other countries, comprising 40% of the world’s total economic output, have finally reached agreement on the Trans-Pacific Partnership.
  7. Mutual Funds & ETFs

    Top 3 Emerging Markets Bond Mutual Funds

    Discover detailed analysis of the top three mutual funds offering exposure to the emerging markets bonds, and learn about the suitability of these funds.
  8. Investing

    What a Fed Delay Means for the ECB & BoJ

    The Fed’s continued delay has repercussions for more than just the U.S. economy and markets. The ECB and the BoJ may support the case for stocks in Europe.
  9. Investing

    How Worried Should We Be About China?

    An economic slowdown, a freezing up in trade and plunging markets and currencies are casting a shadow across Asia—and the globe. How worried should we be?
  10. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  3. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  4. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  5. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  6. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!