These Foreign Stocks Are Medalist Fund Favorites
More than a dozen analyst-approved foreign large-cap funds own these names.
In recent weeks we've taken a look at domestic stocks that are widely held among large-cap medalist funds as well as those that are widely held by small-cap medalists. The idea was to identify stocks that some of our fund analysts' favorite managers own and to look especially for overlapping names. It's an approach similar to that taken by our popular Ultimate Stock-Pickers articles, but applied more broadly across all medalist funds within certain categories.
This week we set our sights overseas in search of stocks that are widely held among medalist foreign large-cap funds. As with our domestic small-cap exercise, we've combined all the foreign large-cap categories (growth, blend, and value) together in the interest of identifying stocks that are widely owned by quality funds. Many of these companies have Morningstar Ratings for stocks, meaning our equity analyst team has assigned fair value estimates to these firms' shares. Stocks with 4- or 5-star ratings are considered undervalued, those with 3 stars are considered fairly valued, and those with 1 or 2 stars are deemed overvalued.
As with our previous screens we are using the portfolios of actively managed funds only and thus excluding index funds whose managers do not make active calls on whether to own specific stocks. Also, the number of medalist funds owning each stock is based on each fund's most recent portfolio disclosure, so some funds may have sold out or added positions in these stocks since then. Finally, the ticker symbols you'll see with each stock represent share classes available on the major U.S. exchanges or through the over-the-counter market, usually in ADR form. (For more on trading foreign stocks on U.S. exchanges, read this article.)
This week's list includes a few notable points. First is the prevalence of pharmaceutical companies in funds that Morningstar analysts favor. Four of the top nine names here are drugmakers, including Roche Holding (RHHBY), owned by nearly three out of four medalist foreign large-cap funds. Even so, the stock carries a 2-star rating as of this writing, indicating that our equity analyst covering it believes it to be somewhat overpriced. For stocks on the list that have not been assigned a fair value estimate, "N/A" appears in the Star Rating column in the following table.
Also as part of our table we've included each stock's rank in the MSCI EAFE index, a widely used performance measure of large- and mid-cap stocks in more than 20 developed nations outside the U.S. and Canada. Because foreign large-cap funds often use the MSCI EAFE as a benchmark, it should come as no surprise that many of the cap-weighted index's biggest names are among the categories' most widely held stocks.
However, a few surprise names do creep in here and there, such as specialty chemicals maker Akzo Nobel (AKZOY), the index's 164th largest stock yet owned by nearly one third of our medalist foreign large-cap funds. Also making the list are insurance company AXA (AXAHY) and power equipment maker Schneider Electric (SBGSY), at numbers 63 and 58 in the index, respectively. (Neither Akzo Nobel nor Schneider Electric is currently under Morningstar analyst coverage, but you can find financial and performance information for them and all the stocks on our list by using the Search box at the top of this site or clicking on the ticker link next to the company name).
As with our previous exercises, the names below are not intended as an endpoint but rather a basic screening tool for those interested in identifying individual foreign large-cap stocks that may be suitable for their portfolios. The fact that quality fund managers like these stocks is a plus, but that's no substitute for putting them through your own personal vetting process. Make sure you understand the business, how the stock has performed in the past, how its current trading price relates to its valuation, and how it fits into your portfolio before investing.
|Most Widely Held Stocks Among Foreign Large-Cap Medalist Funds|
|Stock||# of Funds Owning|| Top |
|Rank in MSCI EAFE Index||Industry||Star Rating|
|Roche Holding (RHHBY)||36||Blend||2||Drug Mfr.|
|Novartis (NVS)||30||Blend||3||Drug Mfr.|
|HSBC Holdings (HSBC)||27||Blend||4||Banks-Global|
|Toyota Motor Corp. (TM)||25||Blend||5||Auto Mfr.|
|Nestle (NSRGY)||24||Blend||1||Pkgd Foods|
|Vodafone Group (VOD)||24||Blend||14||Telecom Svcs|
|Bayer (BAYRY)||23||Blend||11||Drug Mfr.|
|BNP Paribas (BNPQY)||23||Blend||26||Banks-Eurpe||N/A|
|Sanofi (SNY)||23||Blend/Value||10||Drug Mfr.|
|Royal Dutch Shell (RDS.A)||20||Value||7||Oil/Gas Intg.|
|Samsung Electronics (SSNLF)||19||Blend||N/A||Cnsumer Elct.||N/A|
|Schneider Electric (SBGSY)||19||Blend||58||Industrials||N/A|
|GlaxoSmithKline (GSK)||18||Blend/Value||8||Drug Mfr.|
|Akzo Nobel (AKZOY)||16||Blend||164||Chemicals||N/A|
|BG Group||16||Growth||41||Oil/Gas E&P|
|Lloyds Banking Group (LYG)||16||Value||37||Banks-Eurpe|
|Total (TOT)||16||Value||9||Oil/Gas Intg.|
|Data as of March 3.|
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Adam Zoll does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.