One of the smartest strategies for successfully managing a long-term investment portfolio is to use the concept of diversification to your advantage. It’s a fairly easy technique to understand, as you don’t want to have all of your investment eggs in one basket. Diversification can help investors to reduce their exposure to market volatility, minimize their losses, and provide them with more opportunities to generate returns. While there’s nothing wrong with allocating more of your capital to areas of the market that you are confident in, overlooking the power of diversification can eventually become a big mistake.
Most investors recognize the value of building a diversified portfolio but aren’t sure of the best way to make it happen. One area to look is in international equities, as these stocks can help you take advantage of growing economies outside of the United States and spread out your risk. That’s why I’ve put together a list of 3 strong international stocks to buy for diversification. Keep reading on to learn more.
SAP SE (NYSE:SAP)
Buying international stocks can be intimidating for newer investors, as there are several intricacies such as currency exchange rates, geopolitical risks, and more to consider before adding a company to your portfolio. That’s why SAP is an attractive option for investors looking to diversify, as it’s an established company based in a stable country with a strong currency. SAP is a Germany-based company that is a leading provider of enterprise application software used for accounting, customer relationship management, and supply chain management.
This stock is worth a look because there is a good chance investors are undervaluing SAP as it transitions from a traditional licenses revenue business model to cloud software. The company should see its margins expand greatly as a result of improving scale in its cloud offerings, which is certainly appealing. In Q1, SAP’s cloud revenue growth was up 7% year-over-year to €2.14 billion and the company had the highest order entry growth across cloud and software in five years. The stock also offers investors a 2.86% dividend yield and recently reclaimed all of the major moving averages, offering an attractive entry point for long-term investors at this time.
Vale S.A. (NYSE:VALE)
This Brazil-based company offers exposure to emerging markets as well as iron ore, a material that is essential in steelmaking. Steel should remain in high demand as the world’s economy recovers from the impacts of the pandemic, and that bodes well for Vale. It’s one of the world’s largest iron ore miners and one of the world’s largest nickel producers. We know that commodity prices including iron ore have been steadily rising this year, which is a trend that should translate to strong earnings throughout the year for Vale.
While Vale has had some problems with safety issues over the last few years, including a dam collapse that resulted in a $7 billion payment to settle claims, the company is taking the right steps to prevent these types of catastrophes from occurring going forward. Vale also recently reinstated its strong dividend payout and has a healthy balance sheet to support the stock’s current 3.42% dividend yield. Finally, the fact that Vale reported a record Q1 adjusted EBITDA of $8.4 billion could be a sign of good things to come.
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