Recession fear? Give portfolio some non-u.s. stocks

MOST economists predict a recession for the U.S. in 2023. No one is good at foretelling the future, but the recession threat may be one reason to consider adding some non-u.s. stocks to your portfolio.

Here are five foreign stocks I like currently. All of them trade in the U.S., either through direct listings or through American Depositary Receipts.

Itochu

In Japan, Itochu Corp. (ITOCF) deserves consideration. It’s an import-export company that handles trade in textiles, machinery and many other industries. In the past decade, it has grown its revenue at about a 12 percent annual clip and profits at about an 11 percent clip.

By my lights, the stock is still attractively cheap, selling for less than eight times earnings and 0.5 times revenue.

Ahold

In the Netherlands, I like Koninklijke Ahold Delhaize NV (ADRNY), often known as Ahold. It’s the largest supermarket chain in the Netherlands and Belgium and the fourth largest in the U.S. Its U.S. brands include Stop & Shop, Hanover and Food Lion. It has more than 7,000 stores in 11 countries.

In the past year, Ahold shares have dropped about 10 percent, even as sales and earnings rose. The stock seems attractively priced to me at 11 times earnings and 0.32 times sales.

And, ah, the dividend. The yield is 3.5 percent, and the company isn’t straining to pay it, as it pays out less than half of profits in dividends. The dividend growth rate the past five years is about 12 percent.

Total

In France, I favor Total Energies SE. Total is the largest oil company in France, but it also is serious about solar and wind power, with large-scale projects in both.

As with Ahold, the dividend is appealing, and the portion of profits paid out in dividends is moderate. Total sports a dividend yield of 4.5 percent. But the dividend growth rate the past five years is snail-like at 1.5 percent.

After years of stock price stagnation, Total shares have popped 11 percent in the past year, while the U.S. stock market was down.

Aurubis

A small-cap stock that interests me is Aurubis AG, based in Germany. It’s a copper recycler that has wildly variable earnings from year to year. Lately, profits have been strong, but investors don’t trust the good times to last. Hence, the stock sells for only six times earnings.

Demand for copper is highly sensitive to the economy, so whether you want this stock depends partly on your economic outlook.

My guess is that Europe will do a little better than the consensus expects and that Aurubis will have a good year.

China Yongda

Xi Jinping now rules China as an absolute autocrat. In recent years, he has become more hostile to the West and more anti-capitalist. I worry about expropriation and probably will not invest in China during 2023.

If the political risk troubles you less than it bothers me, several Chinese stocks are attractively valued. One is China Yongda Automobiles Services Holdings Ltd. (CYYHF). It sells luxury cars such as BMW, Bentley and Jaguar. It also rents cars, services them and finances them.

China Yongda has been consistently profitable and often highly so.

Record

International investing carries risks. Disclosure standards are generally looser abroad than in the U.S., regulation is often lighter, economic swings are often wider, and currency fluctuations can sometimes wipe out gains.

But there’s also one big advantage. By considering a wider range of potential investments, you may stumble on some great companies that other people overlook.