The U.S. is a center of innovation, and investors and governments worldwide follow its stock market and its economy. Hence, one can understand why many of the most engaged investors don’t often venture outside the U.S. to find potential stocks.
Unfortunately, that attitude can lead to missed opportunities. There are plenty of international companies rapidly growing as new industries and markets emerge. And fortunately, the stocks for many of these companies trade at a discount.
Investors who want to capitalize on such opportunities should look at stocks from companies like Nu Holdings (NYSE: NU), StoneCo (NASDAQ: STNE), and Sea Limited (NYSE: SE). Let’s look at why these are three great foreign companies to invest in right now.
According to TopMobileBanks, Nu Holdings has emerged as the world’s largest digital bank, as measured by capital raised. In its native Brazil, The NuBank parent has brought previously unbanked residents into the financial system, issuing the first credit card to nearly 6 million Brazilians in a one-year period.
Image source: TopMobileBanks.
Now, with nearly half of Brazil’s adult population holding at least one NuBank account, it has begun to repeat this strategy in Mexico and Colombia. The approach has taken NuBank’s customer count to 84 million, rising 28% in one year.
Such growth caught the attention of Warren Buffett’s Berkshire Hathaway, which was an early investor in Nu. And little wonder, as its revenue of $3.5 billion for the first six months of 2023 rose 71% versus the same period in 2022. Also, keeping operating expense growth in check allowed it to earn a net income of $367 million in the year’s first half. Nu lost $75 million in the first six months of 2022.
After declining at the beginning of this year, Nu stock is trading up significantly. Additionally, its forward P/E ratio of 38 makes it a bargain, given the digital bank’s massive revenue growth and rising popularity.
StoneCo is another Brazilian stock that drew a pre-IPO investment from Berkshire Hathaway. The fintech stock resembles Block‘s Square ecosystem in many respects, providing fintech services and enterprise software to business customers in Brazil.
StoneCo prospered until 2021 when the once high-flying fintech stock lost more than 90% of its value during the pandemic. High inflation, loan defaults, and lockdowns devastated the stock as growth reversed course.
However, at least as a company, StoneCo has returned to growth. Its revenue of 5.7 billion reais ($1.2 billion) for the first half of 2023 rose 30% compared to the same period last year. Also, with a limited increase in operating expenses, it generated 533 million reais ($110 million) in net income during the first six months of 2023. StoneCo lost 802 million reais during the same time frame last year.
Despite that recovery, the stock has experienced little growth year to date. This lack of movement has left it with a forward P/E ratio of 15, even though management forecasts a 23% year-over-year revenue increase in Q3. Given that low cost, prospective buyers may want to buy now before more investors start to notice.
Like StoneCo, Singaporean conglomerate Sea Limited’s stock price is down over 90% from all-time highs. The stock plunged as mounting losses and a slowdown in its gaming and e-commerce segments led to a massive sell-off.
Nonetheless, throughout the downturn, SeaMoney, its fintech segment, continued to grow revenue. Moreover, the e-commerce segment Shopee has returned to growth after it retrenched in most markets outside of Southeast Asia.
Still, the gaming segment Garena suffered through a 47% revenue decline in the first half of 2023, in stark contrast to the 41% revenue growth for the rest of the company. Consequently, overall revenue of $6.1 billion rose only 5% compared with the same time frame last year.
The good news for Sea is its cutbacks in non-core markets allowed it to turn profitable. It earned $418 million in the year’s first half, up from a $1.5 billion loss in the year-ago period.
Furthermore, Garena received good news when it gained approval to resume operations in India. This could help reverse the revenue declines that have weighed on the stock.
Additionally, Sea Limited sells near its 52-week lows despite a forward P/E ratio of 18. If Garena resumes its revenue increases, the entertainment stock could return to its rapid growth of past years.
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Will Healy has positions in Berkshire Hathaway, Block, Nu, and Sea Limited. The Motley Fool has positions in and recommends Berkshire Hathaway, Block, Sea Limited, and StoneCo. The Motley Fool has a disclosure policy.
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