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FA Center: Buy these stocks if you think the U.S. dollar will keep getting weaker

Non-U.S. stocks will be particularly attractive to U.S. investors if the U.S. dollar continues to fall against foreign currencies. Many are predicting such a decline. One analyst even expects the dollar to “wipe out all its post-pandemic gains.”

A declining dollar DX00, +0.01% benefits U.S. investors in non-U.S. stocks for two reasons: The local-currency gains of the non-U.S. stocks themselves, and the increased value of those local currencies in U.S. dollar terms.

U.S. investors who own non-U.S. stocks have been enjoying this double-barreled gain since last September, when the U.S. Dollar Index DXY, +0.20% hit a high of nearly 115. It stands at around 100 now. Since that September high, non-U.S. stocks have beaten U.S. equities by more than three percentage points, as judged by the Vanguard Total International Stock ETF VXUS, +0.16% and the Vanguard Total Stock Market ETF VTI, -0.01%.

While there’s no guarantee the U.S. dollar will continue declining, a bet in favor of non-U.S. stocks has a non-currency-related factor in its favor as well: relative valuation. The U.S. stock market is the most overvalued in the world right now, as judged by the Cyclically-Adjusted Price/Earnings ratio (CAPE), which was made famous by Yale University professor (and Nobel laureate) Robert Shiller. In contrast to a 30.8 CAPE for the U.S, Europe’s is 17.4 and Asia’s is 13.8. (See chart below.)

The easiest and cheapest way for U.S. investors to bet on non-U.S. stocks is via an index fund. Vanguard Total International Stock ETF is one of the cheapest, with an expense ratio of just 0.07% — $7 per $10,000 invested.

If you want to try betting on individual stocks, below are those of non-U.S. companies that currently are recommended for purchase by any of the top-performing newsletters that my auditing firm monitors. They are grouped by the countries in which they are headquartered, and then in alphabetical order.

Stock Country
BROOKFIELD REINSURANCE LT (BNRE) Bermuda
STONECO LTD (STNE) Cayman Islands
COMPANIA CERVERCERIAS UNI (CCU) Chile
NOKIA CORP (NOK) Finland
AXA SA (AXAHY) France
SANOFI (SNY) France
TOTALENERGIES S E (TTE) France
ALLIANZ SE (ALIZY) Germany
BASF SE (BASFY) Germany
BAYER A G (BAYRY) Germany
DEUTSCHE POST AG (DHLGY) Germany
SIEMENS A G (SIEGY) Germany
VOLKSWAGEN A G (VWAGY) Germany
AERCAP HOLDINGS NV (AER) Ireland
CIMPRESS PLC (CMPR) Ireland
EATON CORP PLC (ETN) Ireland
MEDTRONIC PLC (MDT) Ireland
SEAGATE TECHNOLOGY HOLDIN (STX) Ireland
ITURAN LOCATION & CONTROL (ITRN) Israel
PERION NETWORK LTD (PERI) Israel
HONDA MTR LTD (HMC) Japan
TOSHIBA CORP (TOSYY) Japan
KONINKLIJKE PHILIPS NV (PHG) Netherlands
NXP SEMICONDUCTORS NV (NXPI) Netherlands
HOLCIM LTD NEW (HCMLY) Switzerland
NOVARTIS AG (NVS) Switzerland
BP P L C (BP) United Kingdom
HENDERSON GROUP PLC (JHG) United Kingdom
RIO TINTO (RIO) United Kingdom
VODAFONE GROUP PLC NEW (VOD) United Kingdom

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

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