When it comes to investing, many people think that simply spreading their money across a few different companies is enough for diversification. However, true diversification is more nuanced. Recent global economic and geopolitical challenges have raised important questions about how much international exposure investors should have in their portfolios.
While U.S. stocks are influenced mainly by domestic factors, international stocks tap into diverse economic trends across different regions that can enhance returns and mitigate risks. Below, I have highlighted three global stocks, namely, SAP SE (SAP), AstraZeneca PLC (AZN), and Alibaba Group Holding Limited (BABA), that provide exposure to international equities for portfolio diversification by offering opportunities in expanding economies and emerging markets.
As countries focus on building their own capabilities and becoming less reliant on foreign markets, new opportunities are emerging. This shift can lead to greater competition and economic independence, meaning that while the U.S. economy might struggle, some international markets could be booming, and vice versa. Such diversification can be beneficial for long-term investors.
Currently, inflation levels across many countries are hovering close to central bank targets, which could pave the way for easier monetary policies. Moreover, the global economy has shown resilience, with growth expected to maintain a steady pace of 3.2% in 2024 and 2025. Emerging markets, in particular, are projected to grow at around 4.2% this year and next, buoyed by strong performance in emerging Asia.
In addition, emerging market equities have recently outperformed their developed market counterparts, achieving gains of 8.7% compared to 6.4%. This marks a significant trend, as it is the first time since 2020 that emerging markets have outperformed for two consecutive quarters.
Considering these conducive trends, let’s discuss the fundamentals of the featured stocks in detail:
SAP SE (SAP)
SAP is a Germany-based company that offers enterprise application software. It operates through three segments: Applications, Technology & Services; the SAP Business Network; and the Customer Experience.
On September 12, the company completed its acquisition of WalkMe Ltd. (WKME) for $1.5 billion in an all-cash deal. WKME’s digital adoption platform will enhance SAP’s Business Transformation Management portfolio, including SAP Signavio and SAP LeanIX, by improving workflow execution and user experience. Its AI technology will also power SAP’s Joule copilot, offering context-aware assistance to boost workflow productivity.
SAP’s total revenue for the third quarter (ended September 30, 2024) increased 9.4% year-over-year to €8.47 billion ($9.16 billion). Its gross profit grew 10.2% from the year-ago value to €6.21 billion ($6.72 billion).
The company’s cash inflow from operating activities amounted to €1.47 billion ($1.59 billion), representing a 31.2% improvement from the same period last year. Also, its free cash flow stood at €1.25 billion ($1.35 billion), up 44.3% year-over-year.
Analysts expect SAP’s revenue for the fourth quarter (ending December 2024) to grow 7.3% year-over-year to $9.86 billion, while its EPS for the same period is estimated to come in at $1.51. Also, it topped the revenue estimates in three of the trailing four quarters.
The stock has gained 77.8% over the past year to close the last trading session at $237.69.
SAP’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
It has a B grade for Stability, Sentiment, and Quality. Out of 132 stocks in the Software – Application industry, SAP is ranked #27. Click here to see SAP’s Growth, Value, Momentum, and Sentiment ratings.
AstraZeneca PLC (AZN)
Headquartered in Cambridge, the United Kingdom, AZN is a renowned biopharmaceutical company focusing on discovering, developing, manufacturing, and commercializing prescription medicines. Its marketed products treat oncology, COVID-19, respiratory, cardiovascular, renal, and metabolism diseases, etc.
On June 4, AZN acquired Fusion Pharmaceuticals Inc., a clinical-stage biopharmaceutical company specializing in next-generation radioconjugates (RCs). The acquisition strengthens the company’s oncology portfolio with Fusion’s innovative RC pipeline, including FPI-2265 for metastatic castration-resistant prostate cancer (mCRPC). It also enhances AZN’s expertise in RCs and expands its R&D, manufacturing, and supply chain capabilities while bolstering its presence in Canada.
For the second quarter that ended June 30, 2024, AZN’s total revenue increased 13.3% year-over-year to $12.94 billion, while its gross profit rose 13.7% from the year-ago value to $10.76 billion. The company’s profit after tax and EPS amounted to $1.93 billion and $1.24, representing increases of 5.9% and 6% from the prior-year quarter, respectively. In addition, its operating profit stood at $2.75 billion, up 11.8% year-over-year.
The consensus EPS estimate of $1.05 for the third quarter (ending September 2024) represents a 20.9% improvement year-over-year. The consensus revenue estimate of $13.11 billion for the same period indicates a 14.1% increase from the prior-year period. The company has an impressive surprise history; it surpassed the consensus revenue estimates in three of the trailing four quarters.
AZN’s shares have gained 16.2% over the past year to close the last trading session at $75.05.
It’s no surprise that AZN has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Growth and Stability and a B for Value and Quality. Among 163 stocks in the Medical - Pharmaceuticals industry, it is ranked #7.
In addition to the POWR Ratings we’ve stated above, we also have AZN’s ratings for Momentum and Sentiment. Get all AZN ratings here.
Alibaba Group Holding Limited (BABA)
Based in Hangzhou, China, BABA offers technology infrastructure and marketing reach to help merchants, brands, and retailers connect with international users and customers. Its segments include China Commerce; International Commerce; Local Consumer Services; Cainiao; Cloud; Digital Media and Entertainment; Innovation Initiatives and Others.
On September 5, BABA partnered with Mastercard Incorporated (MA) and Cardless to introduce a co-branded credit card that rewards businesses for cross-border and domestic purchases on Alibaba.com. The partnership would simplify shopping, boost customer loyalty, and strengthen BABA’s global presence.
For the fiscal 2025 first quarter that ended June 30, 2024, BABA’s revenue increased 3.9% year-over-year to $33.47 billion. Its income from operations amounted to $4.95 billion. Plus, the company reported its adjusted EBIDTA at $6.20 billion for the quarter. Moreover, its non-GAAP net income and non-GAAP EPS came in at $5.60 billion and $0.28 for the quarter, respectively.
Analysts expect BABA’s revenue for the fiscal third quarter ending December 2024 to increase 9% year-over-year to $39.45 billion. Likewise, its EPS for the ongoing quarter is expected to grow by 3.5% from the prior year to $2.73.
Shares of BABA have gained 30.5% over the past six months and 25.7% year-to-date to close the last trading session at $97.42.
BABA’s POWR Ratings reflect its positive outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It also has a B grade for Quality. In the 41-stock A-rated China industry, it is ranked #18. To see BABA’s Growth, Value, Momentum, Stability, and Sentiment ratings, click here.
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SAP shares . Year-to-date, SAP has gained 55.15%, versus a 22.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 Global Stocks to Diversify Your Portfolio StockNews.com
