All of the most exciting developed-market companies to invest in are located in the US, right? Think again. Yes, the US stock market has dominated the global landscape for years, but there’s a catch. In terms of performance, US stocks have returned 73% in the five-year period ended 7/31/20 (USD), leaving all but the small New Zealand market (which only includes seven stocks) in its wake (see FIGURE 1).
The US Stock Market Has Powered Ahead of the Competition
Returns over the five-year period ended 7/31/20 (USD)
Past performance does not guarantee future results. | Chart shows all constituent countries in the MSCI World Index1 of developed-market stocks. | The level of each market’s return would be different when expressed in a different base currency, but the ranking and relative performance would be the same. Source: Refinitiv.
Most of the Top-Performing Companies Are From Outside of the US
Companies such as the FAANGs—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—dominate headlines.
But, investors may be surprised to learn that, over the past five years, seven of the top-10-performing developed-market stocks in the MSCI World Index and 16 of the top 25, in dollar terms, have been located outside of the US. Countries of origin include Canada, Japan, New Zealand, Sweden, Australia, Germany, and Denmark. Stocks in the Index span sectors as diverse as milk production, mining, and, of course, technology (see FIGURE 2).
The Top 25 Best-Performing Stocks in Developed Markets
Excluding the FAANGs, 16 out of 25 companies are located outside of the US
|Country||Company||Business||Five-Year Return (USD)|
|US||Advanced Micro Devices||Semiconductors||3,912%|
|Canada||Kirkland Lake Gold||Gold mining||3,183%|
|New Zealand||The A2 Milk Company||Protein-free milk||2,449%|
|Sweden||Evolution Gaming||Digital casinos||2,370%|
|Canada||Cronos Group||Cannabis producer||2,174%|
|US||Nvidia||Graphics processing units (GPUs)||2,091%|
|Canada||Canopy Growth||Cannabis producer
|Australia||Fortescue Metals Gp.||Iron and steel||1,087%|
|US||Veeva Systems||Cloud computing||883%|
|US||Paycom Software||Online payroll and HR||789%|
|Australia||Northern Star||Gold mining||695%|
|US||Teladoc Health||Virtual healthcare||653%|
|Germany||Sartorius Pref. (Xet)||Medical equipment||626%|
|Japan||Daifuku||Materials handling systems||568%|
|Japan||Gmo Payment Gtwy.||Payment processing services||550%|
|Denmark||Ambu B||Medical equipment||548%|
|Australia||Evolution Mining||Gold mining||543%|
Past performance does not guarantee future results.
Data as of 7/31/20. Source: Refinitiv.
Particularly noteworthy is that, despite the fact that Japanese stocks in aggregate have underperformed their US counterparts by 55% over the past five years, four of the top 25 performing stocks are Japanese.
So, although US companies have made most of the headlines and international markets have lagged the US market, investors should ignore international stocks at their peril.
To do so could mean missing out on some of the best-performing companies in the world.
1 The MSCI World Index captures large- and mid cap representation across 23 Developed Markets countries. With 1,601 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization in each country. Source: MSCI.com. Indices are unmanaged and not available for direct investment.
Important Risks: Investing involves risk, including the possible loss of principal. • Foreign investments may be more volatile and less liquid than US investments and are subject to the risk of currency fluctuations and adverse political and economic developments.
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