Given the spectacular results of small foreign companies over the past few years, instinct may tell you that now isn't the best time to invest in this group. But there is a case for reserving a slice of your portfolio for a diversified mix of these kinds of stocks. Even more so than stateside companies, tiny firms abroad receive scant analyst coverage -- which means there are plenty of undiscovered gems to be mined.
Swollen with a flood of new money, many of the best international small-company funds have closed to new business. One that hasn't is Forward International Small Companies, and it's a fund well worth considering. Over the past five years to November 1, its institutional share class returned 23% annualized, beating the typical foreign small-company fund by an average of two percentage points per year. Yet assets, at about $500 million for all classes combined, remain relatively modest (there's another $1 billion in separate accounts).
Forward is one of the more conservative funds in its category. Run by Switzerland's Pictet Asset Management, the fund focuses on developed markets. Western European and Japanese stocks account for about 85% of the portfolio, with the rest mainly in other Asian companies.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Pictet uses computers to identify companies with market values of less than $3 billion and accelerating profit growth that other investors haven't yet come to appreciate. Then the six managers, who are split between offices in London and Geneva, study the companies to understand their strengths and weaknesses and the ability of their executives. Each manager covers a region where he or she has extensive experience. "In getting to know these companies, it's important to speak the language and know the local culture," says lead manager Aylin Suntay.
From the roughly 250 companies that the computer typically spits out, the managers select about 100 stocks. Holdings fall into such categories as emerging-growth companies that are churning out annual earnings gains of 20% to 40%, more-established companies that normally generate earnings improvements of 15% or so a year, and cyclical growth companies that are expanding because of strength in the economy. The fund is well diversified, with no stock accounting for more than 1.2% of assets.
Forward's four-year-old investor class (symbol PISRX; 800-999-6809) requires $4,000 to start and charges 1.56% annually. That's not cheap, but it compares favorably with the average expense ratio of 1.73% for all small-company overseas funds.
Forward favorites
Valentino Fashion Group, based in Italy, is a play on the increased demand for luxury products in Eastern Europe and Asia. Major labels include Valentino and Hugo Boss.
Europeans also like shopping at the low end, which explains the fund's holdings in Germany's Bijou Brigitte, a company that sells inexpensive accessories in stores throughout Western Europe.
Forward owns several real estate investment trusts, including Singapore's UOL Group, which invests in commercial property throughout Asia. It is the only one of these three firms that trades in the U.S.
-
Take Charge of Retirement Spending With This Simple StrategyTo make sure you're in control of retirement spending, rather than the other way around, allocate funds to just three purposes: income, protection and legacy.
-
Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
-
Best Banks for High-Net-Worth Clients 2024wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2024 and 2025: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2024 and 2025.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Until May Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
-
As the Market Falls, New Retirees Need a Planretirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
