3 Cheap International Stocks to Buy and Hold

Each year, Morningstar’s director of personal finance and retirement planning Christine Benz surveys some of the largest and most successful asset managers to find out what their asset-class forecasts are for the next decade or so.

The forecasts from BlackRock, J.P. Morgan, Research Affiliates, Schwab, Vanguard, and Morningstar Investment Management all suggest that international stocks will outperform U.S. stocks over the next decade.

With that in mind, here are three quality international stocks that Morningstar’s analysts cover that look undervalued today.

3 Cheap International Stocks to Buy and Hold

1. Tencent TCEHY
2. BMW Group BMWYY
3. GSK GSK

The first is China’s Tencent. Tencent is an internet giant. It’s the world’s largest video game vendor, runs China’s largest social-media super app, and is one of the world’s largest venture capital and investment corporations, with sizable ownership stakes in leading tech companies like JD, Snap SNAP, Epic Games, and others. Given its market dominance, we assign Tencent a wide economic moat rating and exemplary marks for management’s allocation of capital over time. Challenges from U.S. regulators dampened enthusiasm for Chinese stocks and ADRs last year. As such, we think Tencent’s ADRs have attractive upside potential for long-term investors and are worth $90 apiece.

Next is Germany’s BMW Group. In addition to being one of the world’s leading premium light-vehicle manufacturers with brands that include BMW and Rolls-Royce, BMW Group also produces motorcycles and provides financial services. We assign BMW a narrow economic moat rating, given the strength of its brand and intellectual property that allows the company to demand premium pricing across its products. As a result, BMW generates revenue increases above global vehicle growth rates. In fact, despite the chip shortage, supply chain disruptions, and inflationary cost pressures, BMW’s margins last year were solid, thanks in part to strong pricing. We think BMW’s ADRs are worth $50 each.

Lastly, there’s the U.K.’s GSK. GSK is one of the biggest pharmaceutical and vaccine companies by total sales. Its portfolio spans several therapeutic classes. Thanks to the company’s innovative new product lineup and sizable list of patent-protected drugs, we assign GSK a wide economic moat rating. Plus, the company has developed next-generation drugs in the respiratory and HIV areas that we think should help mitigate both branded and generic competition, and it’s strategically branching out from developed markets into emerging markets. We think GSK’s ADRs are worth $50.

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Sector director Damien Conover and senior equity analysts Richard Hilgert and Ivan Su provided the research behind this segment.

Watch “Everything You Need to Know About Roth IRAs” for more from Susan Dziubinski.