3 Cheap International Stocks to Buy

These names are among the most undervalued stocks we see abroad right now.

Susan Dziubinski 19 October, 2023 | 4:13AM
Facebook Twitter LinkedIn

Person holding globe

Limiting your search for compelling investments to Canadian and U.S. companies only limits your opportunity set. Granted, international stocks carry currency risk, and, especially in emerging markets, they carry geopolitical risk, too. But for patient investors with long enough time horizons, international stocks can be compelling opportunities.

Today we’re taking a look at three undervalued non-North American stocks from the Morningstar Global ex-US Moat Focus Index. The index includes 50 wide- and narrow-moat stocks with the lowest price/fair value estimates. These stocks are good choices for investors who want exposure to international companies with solid competitive advantages at a cheap price.

3 Cheap International Stocks to Buy

  1. Tencent TCEHY
  2. Bayer BAYRY
  3. Millicom International Cellular TIGO

The first stock on our list of undervalued international stocks is Tencent. Tencent runs China’s largest social media app. Tencent is also the world’s largest video game vendor and is among the world’s largest venture capital and investment firms. Given its massive user base and its related network effects, we think the company has carved out a wide economic moat—that means we expect the company to remain competitive for at least two decades. We forecast Tencent to record a five-year adjusted earnings compound annual growth rate of 17%. We think the stock is worth $90, and it trades significantly below that.

The next name on our list of undervalued international stocks is Bayer. Bayer is a German conglomerate. Its healthcare segment provides close to half of its sales and includes pharmaceutical drugs as well as vitamins and other consumer healthcare products, most notably, the Aleve and Aspirin brands. The firm’s crop sciences business includes seeds and pesticides. Bayer significantly expanded its competitive position in the field with the acquisition of Monsanto. However, the acquisition also increased Bayer’s exposure to litigation around potential side effects of glyphosate, which is the active ingredient in Roundup. We think the company has carved out a wide economic moat in both businesses, and we expect a 4% five-year compound annual growth rate for sales. We think shares are significantly undervalued and worth $22.50 each.

The final cheap but quality international stock we’ll cover today is Millicom International Cellular. Millicom is a collection of telecom businesses serving nine countries in Latin America. We think the company has carved out a narrow economic moat thanks to its cost advantages and scale. While economic and political challenges in some of its markets have hurt recent results, we expect that ongoing smartphone and broadband adoption will lead to solid growth and cash flow in the coming years. We expect revenue to grow 3% annually during the next five years. We value the stock at $30 but shares trade well below that.

Get the Latest Stock Insights in Your Inbox

Subscribe Here

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Bayer AG ADR7.31 USD-3.43Rating
Millicom International Cellular SA23.91 USD-3.00Rating
Tencent Holdings Ltd ADR47.40 USD-1.92Rating

About Author

Susan Dziubinski

Susan Dziubinski  Susan Dziubinski is director of content for Morningstar.com.

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy       Disclosures        Accessibility