# International Investing



## systematic (5 April 2015)

Pure curiosity, so I thought I'd post and ask.

Assuming you are:
- an equity investor 
- hold trades for a longer period than a day trader (i.e. you work off perhaps daily, weekly or monthly data and your average hold period is more than one month, say)

Do you invest in international shares?

If so, then US shares or elsewhere as well?

Or do you stick with Australia?



If I ask the question, I should answer it.  I am ASX only, at this point in time.


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## Triathlete (5 April 2015)

systematic said:


> Pure curiosity, so I thought I'd post and ask.
> 
> Assuming you are:
> - an equity investor
> ...





If you can or are making money in the Australian market why would you need to invest in overseas markets? 

I guess some would say for diversification as it lowers your risk but that was really initiated by the finance industry during the nineties when much money was and still is being invested into superannuation and since Australian markets are only 2% of Global markets they had to find other areas to invest. It was just another avenue for them to push another product to help there bottom line as far as funds go. 

If you do decide to invest overseas then you would also need to manage the currency risk as well as what risk is involved with that country you are investing in as this risk will also be in your portfolio now.

You would also need to see how that effects your tax position as well so this would also need to be considered  to see if it is to your advantage to invest overseas.

As for me I will stick to the Australian market making enough from that ,no need to worry about going overseas.
Just my own personnel opinion though.

I have looked at tables between Australian and Global markets for my own benefit previously as to the average returns as a guide for the individual markets and I did not see any real benefit myself but others may be different.

As I said before if you can make money here no need to bring more risk into your portfolio.


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## DeepState (5 April 2015)

Of all the listed equity investments in the world, what is so special abt Australia that you should restrict your universe to just this location?  To extend this, assume you live in NSW...should you only invest in NSW companies?  Or, if you worked as a baker, only invest in companies that harvest wheat etc.. The moment you step out of this restriction, why stop at Customs and Immigration? You don't need a visa to invest elsewhere, for the most part. Are the next best ideas likely to only be located in Aust?

If you came from outer space as an explorer from the constellation Investment and started to invest on planet earth, it would be the dumbest idea going to say "let's restrict myself to Aust listed companies only, loaded full of loss makers, spec mining and a couple of large banks and bulk exporters". Yes, there is franking, but you are describing trade activity as opposed to buy-hold.

You can build your knowledge about companies in just abt any location.  I would hv thought it was best to go wherever you find the best opportunity. This is different to saying adequate opportunity.  If that happens to only be in Australia, though that would be very odd indeed, then fine.

It's not just abt diversification.  It's about opportunity. You can hedge currency risk if that matters to you.


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## Triathlete (5 April 2015)

DeepState said:


> Yes, there is franking, but you are describing trade activity as opposed to buy-hold.
> 
> You can build your knowledge about companies in just abt any location.  I would hv thought it was best to go wherever you find the best opportunity. This is different to saying adequate opportunity.  If that happens to only be in Australia, though that would be very odd indeed, then fine.
> 
> It's not just abt diversification.  It's about opportunity. You can hedge currency risk if that matters to you.




I take your point Deep State...

My main point being it does not matter where we decide to invest or where the best opportunities may be it is still about making a decent return on your investment and being  profitable wherever that may be.


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## hhse (5 April 2015)

whatever engages you and encourages you to learn the domain skills and become financially successful.


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## So_Cynical (5 April 2015)

systematic said:


> Pure curiosity, so I thought I'd post and ask.
> 
> Assuming you are:
> - an equity investor
> ...




A large part of the rationale for opening my IB account was access to foreign markets, since the dollar has tanked i've given it a low priority...also a factor is the comfort level, looking at HK and US stocks i have found the reporting to be a bit different and harder to understand..and that leads to discomfort.

All ASX for now, but that will change.


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## Tooth Faerie (5 April 2015)

I am currently ASX only due to comfort and a small capital base. Thinking further ahead, I believe I will go down the ETF route for investing overseas.


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## TPI (5 April 2015)

DeepState said:


> Of all the listed equity investments in the world, what is so special abt Australia that you should restrict your universe to just this location?  To extend this, assume you live in NSW...should you only invest in NSW companies?  Or, if you worked as a baker, only invest in companies that harvest wheat etc.. The moment you step out of this restriction, why stop at Customs and Immigration? You don't need a visa to invest elsewhere, for the most part. Are the next best ideas likely to only be located in Aust?
> 
> If you came from outer space as an explorer from the constellation Investment and started to invest on planet earth, it would be the dumbest idea going to say "let's restrict myself to Aust listed companies only, loaded full of loss makers, spec mining and a couple of large banks and bulk exporters". Yes, there is franking, but you are describing trade activity as opposed to buy-hold.
> 
> ...




Yes but what if you are sleeping when a market sensitive announcement is released due to the time difference?


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## The Falcon (5 April 2015)

From an investors, rather than a traders viewpoint I am looking for holdings in consumer staples and discretionary companies with durable brands, capacity to reinvest and both developed and emerging market exposure to hold very long term. I can't buy NSRGY, JNJ, PM, UL or CFR on the ASX. I'm not concerned with currency over the long term, but hitching the wagon to growth engines outside OZ.


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## The Falcon (5 April 2015)

TPI said:


> Yes but what if you are sleeping when a market sensitive announcement is released due to the time difference?




Same on the ASX when you are working, going to lunch, in a meeting etc ?

If you are trading then you trade in real time. If you are a long term investor and one announcement changes your thesis and you miss it, then there is always tomorrow. Market usually overreacts both ways, so you will get a chance.


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## DeepState (5 April 2015)

TPI said:


> Yes but what if you are sleeping when a market sensitive announcement is released due to the time difference?




You catch up with it after you wake up.  

Any stops you had active would operate as if in your time zone.  If the movement related to a news event of consequence the stock price gaps.  If you think you can then outgame the market on movements in micro seconds, minutes or hours after that relative to seeing how things looked a day later then....the investor must be pretty awesome and should have alarm bells set for any corprate announcement worldwide.  In three days, they will be super rich, and can sleep. 

The really big news announcements of a stock specific nature have suspensions prior to announcement, after which the thing gaps anyway. To the time of the first tic post re-open, it doesn't matter if you are asleep or awake.   Please see above if the next few hours is seen to be the difference between success and failure.

Most macro announcements of consequence take place outside of the Aust session.  Much of the Aust market movements flows on from the overnight sessions....when you are asleep.

Run of the mill events break both ways.  Over time, it averages out.  You would risk manage via stops which are active whilst you sleep and the market is open.

The OP was talking about mid-horizon trading which, over time, is less influenced by newsflow trading of the type that requres hypervigilence in real-time.  If you were algo and the algo required you to be awake for some reason, then I concede the issue.  Otherwise, the relevance of being awake pre-supposes that those extra hours after a gap are highly profitable or highly deleterious.  I clearly discount this.  But my argument hinges on it and can thus be swept aside if you were to disagree.


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## luutzu (5 April 2015)

DeepState said:


> Of all the listed equity investments in the world, what is so special abt Australia that you should restrict your universe to just this location?  To extend this, assume you live in NSW...should you only invest in NSW companies?  Or, if you worked as a baker, only invest in companies that harvest wheat etc.. The moment you step out of this restriction, why stop at Customs and Immigration? You don't need a visa to invest elsewhere, for the most part. Are the next best ideas likely to only be located in Aust?
> 
> If you came from outer space as an explorer from the constellation Investment and started to invest on planet earth, it would be the dumbest idea going to say "let's restrict myself to Aust listed companies only, loaded full of loss makers, spec mining and a couple of large banks and bulk exporters". Yes, there is franking, but you are describing trade activity as opposed to buy-hold.
> 
> ...




Ey, you actually do make sense sometimes.


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## luutzu (5 April 2015)

systematic said:


> Pure curiosity, so I thought I'd post and ask.
> 
> Assuming you are:
> - an equity investor
> ...




Currently ASX only but looking to buy a couple US-based ones.

ASX market cap is $1.7 trillion [?], the US is some $17 trillion? More opportunities there. But to paraphrase Buffett (referring to the US market), if you can't do it in a $1.7 trillion market it's not probable you could move a few thousand miles away to then show your stuff.

As the Chinese say, danger and opportunity are interchangeable.


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## luutzu (5 April 2015)

TPI said:


> Yes but what if you are sleeping when a market sensitive announcement is released due to the time difference?




You ought to already know all the news there is to know about your company 


There's this great scene in "The Emperor and the Assassin" where the Assassin, as an envoy, went to present to the First Emperor a map of his state - as a sign of their submission to Qin.

The assassin's plan was to kill the emperor as he couched over admiring the detailed map, stabbing him with a dagger hidden at the end of that scroll. But...

When the emperor heard it's a map, he wave them away, saying I don't need your map. I already know your entire country like the back of my hand.


Anyway, the assassin tries to sell the antique and calligraphic qualities, just so he could scroll to get to the dagger... then he chased the emperor around court with it.  

Great movie.


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## Triathlete (6 April 2015)

luutzu said:


> Currently ASX only but looking to buy a couple US-based ones.
> 
> ASX market cap is $1.7 trillion [?], the US is some $17 trillion? More opportunities there. But to paraphrase Buffett (referring to the US market),* if you can't do it in a $1.7 trillion market it's not probable you could move a few thousand miles away to then show your stuff.*
> As the Chinese say, danger and opportunity are interchangeable.




*Exactly my point*....!!

and to quote Buffet further...

"Diversification is a protection against ignorance . It makes very little sense to those that know what they are doing"

Happy investing / trading everyone


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## DeepState (6 April 2015)

On the futility of investing offshore if you don't know what you are doing + 



Triathlete said:


> *Exactly my point*....!!
> 
> and to quote Buffet further...
> 
> ...




So...

if you don't know what you are doing, stick to Australia because to invest offshore is protection against ignorance only for you will not be able to show your stuff in offshore markets anyway.

However, if you do know what you are doing, like, say Buffett, investing offshore is fine, as is holding a portfolio of companies. Because he was referring to over-diversification as opposed to diversification per se.

To my knowledge, Buffett doesn't have a major investment on the Australian listed market.

What does the above imply for someone who only invests in Australia?  Someone who does not know what they are doing but yet fearful of accusations of diversification against ignorance? For if they do know what they are doing...they would not be doing this...according to Buffett's own deeds and words.  Even if ignorant, Buffett would advocate high levels of diversification as a countermeasure.

That would be my point....and Buffett's.  If you know what you are doing, you would open your mind to investing offsore where more opportunities exist - as Buffett does.  If you don't know what you are doing, you should diversify a lot ...  Like, say, offshore, particularly for a narrow market like Aust.  Either way, you find yourself offshore.  That's unless you really know what you are doing, but your knowledge stops at the border for some reason despite the fact that the companies you invest in strut their stuff thousands of miles away even if you can't.

What am I missing?

Interestingly, the long term portfolio Buffett wants for his wife after he is deceased is passively invested in the US alone.  So, a portfolio with no idea what to buy is heavily diversified, but not offshore in terms of listing domicile.  Methinks the US market is somewhat broader in scope than the Aust market though...Can you imagine him saying 95% Aust equities and 5% cash?  I have some doubts...because you can't even make an argument that Aust index equities is a representative basket against Aust future consumption. That argument is much stronger, though for major markets like the US.

Happy Easter Monday.


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## luutzu (6 April 2015)

DeepState said:


> On the futility of investing offshore if you don't know what you are doing +
> 
> So...
> 
> ...




I think investors ought to only go overseas for better opportunities, not for diversification - aka risk reduction.

The idea that offshore diversification is also, or even a better, form of protection against ignorance... I don't think that's true. Say a person is a bad Australian driver... it's crazy to suggest that he'll drive better or safer if he's also on the roads in Asia or anywhere else.

Just about all big Australian companies have operations overseas. An Australian investor owning those will first be protected by him knowing at least something about those big Australians; and his need for non-Australian diversification can be met through these holdings' foreign operations. So if the investor is "ignorant", owning just Australian stocks is safer as well as geo/diversified.

But yea, if we're selective, know what we're doing... 

Buffett does invest in Australia: his subsidiaries, and their subsidiaries, do have operations here.


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## Triathlete (6 April 2015)

luutzu said:


> I think investors ought to only go overseas for better opportunities, not for diversification - aka risk reduction.




We are all talking about better opportunities overseas and I agree the world is a big place to invest.

But should we also be thinking about what returns we can generate for our portfolios whether in Australia or overseas.?

We all know the great man Buffet was able to generate a 20%pa return for over 40 years.

So if we are only investing long term in the ASX and are generating this type of return or greater is there a reason to go overseas?

I would have thought that if your portfolio became so large that you where no longer able to generate this than that may be a time to look elsewhere.


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## DeepState (6 April 2015)

Triathlete said:


> We are all talking about better opportunities overseas and I agree the world is a big place to invest.
> 
> But should we also be thinking about what returns we can generate for our portfolios whether in Australia or overseas.?
> 
> ...




Out of our population of 23+ million, could you please tell me maybe three names whose record matched or exceeded Buffett over the forty year period investing long only, with long horizon, in Aust equities, as a portfolio investor? If these names are hard to come by or not particularly numerous in any case, presumably the rest of the population, ignorant or otherwise, might have something to gain from offshore investment on a natural extension to your point?

Let's not get into opportunity and the direct link to probability just yet, before we know those names and consider how they achieved it with a restricted universe.


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## Smurf1976 (6 April 2015)

My super is in a fund managed by others but at present I have chosen to have it invested in overseas equities. So the Australian exposure of my super is zero.

Reason for this is my expectation of better returns, noting that I moved it all overseas when the AUD was near the peak. In due course I'll likely change it to something else.

For my non-super assets (aside from PPOR) it's Australian shares, ETF's and cash. Nothing foreign unless it's listed on ASX.


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## luutzu (6 April 2015)

Triathlete said:


> We are all talking about better opportunities overseas and I agree the world is a big place to invest.
> 
> But should we also be thinking about what returns we can generate for our portfolios whether in Australia or overseas.?
> 
> ...




I agree. The aim is absolute return, not travel and foreign adventures.

I don't think Buffett bought any foreign companies while running his partnerships; didn't buy any in first 20 or 30 years of Berkshire's 50 under him either. His subsidiaries and his holdings does operated everywhere, but from memory I'm pretty sure he didn't directly go overseas until quite recently (last 20 years, max).

I'm sure he looked at overseas, and have no problem with brokerage if he's interested... So it's quite obvious that him, and any investor, ought to go overseas if the opportunity and the return there is better for them than whatever market they're in at the moment... But if you're doing fine here, going into new markets is in itself not risk reduction.


Say you want to buy Wal-Mart. It has some 10x WOW's sales [?] ... just think of countless other countries with countless potential "associates" it could also exploit, haha. WOW could barely open a chain of hardware stores.

There's companies that expand overseas and do great... then there's your AMP and NAB a while back. Same with individual investors.


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## Triathlete (7 April 2015)

DeepState said:


> Out of our population of 23+ million, could you please tell me maybe three names whose record matched or exceeded Buffett over the forty year period investing long only, with long horizon, in Aust equities, as a portfolio investor?




I see your point DeepState 

Obviously with his size of portfolio he needs to be in the biggest markets.

Let us bring this back to a more realistic level and say that the average ASX investor starts out with a modest 
100K portfolio and because they have the right knowledge they can generate a 20%pa return over a 20 year period that is only around 4 million dollars.

Is this portfolio going to move the Australian market?
Have they generated a 20% return?
Did they go overseas?
Would you know there names?

As I said if your portfolio warrants you to go overseas then of course by all means.
For me it is about generating the returns on the portfolio and if I can do it  on the ASX for now that is what I will do and keep repeating that process untill it no longer works.

I have said enough on the topic...thanks for everyones contribution it has been an enjoyable thread.

Happy investing / Trading everyone


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## DeepState (7 April 2015)

Triathlete said:


> I see your point DeepState
> 
> Obviously with his size of portfolio he needs to be in the biggest markets.
> 
> ...




Actually, the issue arose for the OP, who likely has somewhat less than the capitalization of BRK in personal assets.  This isn't to do with outgrowing a market in terms of market impact.  It is to do with opportunity, if skilled, or diversification, if not.  

Conservatively, even a concentrated portfolio consisting of Australian equities only has a chance of about 1:250k of achieving the outcome you seek.  A celebratory dinner at the end of twenty years, if held, could be housed in a very small restaurant. If anything, that figure is a fairly gross over-estimate of the likelihood. Not impossible.  Hardly a central case.  Of those who manage to pull it off, I'd say we'd hear of at least some of their names.  After all, those who pull off a 10-15 year record like this usually charge around 3% pa and 25% of upside for their services.  They would have next to no problem, if skilled, raising a mere $50m and receiving fees of $3m per annum straight up and getting to their target wealth a whole lot quicker and with more certainty. That AUM is hardly constraining for a truly skilled investor.  At the end of the twenty year period, if sustained, you'd know who they are because they would be mentioned every second paragraph in industry mags and everything they do will be scrutinized and copied to some degree, somewhere.  

Right now, having worked in the industry for over twenty years at the end of town which mixes with such people, I know of none. Not even close. I would have thought a person setting out an investment plan ought not just assume they have the skills of the world's richest man and, likely, most successful investor, as a basis for operation.  But, that's me and I'm not you.  

I agree that this has been an enjoyable exchange.  I feel confident that Systematic is data rational given all prior posts he has made.  Whatever decision he makes will be peculiar to his circumstances, but will undoubtedly be well considered and, perhaps, richer for this exchange.

For info, it is more likely that the position you have espoused would be related to what is known as a 'home country bias'.  It is a tendency for investors around the world to invest disproportionately in their home market, whatever its characteristics.  It has more to do with comfort than investment.  Nothing wrong with a bit of comfort, but the question was investment related.  Over time, these home country biases have been eroded as the investment case asserts itself over the visceral concerns.  In Australia, most institutional investors have around half of their equities held offshore...some much more.  HNW clients also have a lot held offshore.  Even the top professional fund managers usually have some of their personal wealth held offshore.  In general, the more comfortable with investment, the less the home country bias becomes for the investor.  It is instructive that basically all of the world's richest security traders invest offshore (eg. Buffett, Soros, Dalio, Fink, Yass, Gross, etc..) despite living in countries with exceptionally liquid markets.  

More generously, it may have to do with 'preferred habitat' which is where people just have a zone they focus on and become more expert at.  A national boundary or an economic sector are natural habitats...as is equity, bonds, currency or property for example, as asset classes. Other habitats exist, these being more common examples only.  One of the best I ever came across was a cunning guy who kept strong tabs on the incoming salmon fishermen and arbed the on-shore salmon market.  Now that's investing. These, in combination, can lead to pure Australian equity portfolios being the sole exposures in equities.  Still, you will find that virtually all professional investors or HNW will find their way offshore in a direct listing sense, with an operating sense being a given.  

In Australia, the cyclical nature of the AUD makes unhedged offshore equity exposure particularly appealing.  When you add this with the narrow nature of our market and poor quality composition (by and large), you can see the strongest drivers towards offshore investment of some stripe.

FWIW, my offshore equity exposure is approximately 40% of my overall equity exposure. I have other foreign listed stuff which is not equity related in addition to that.   I am presently underweight my 'strategic' offshore  exposures for various reasons.

Have a good day.


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## craft (7 April 2015)

DeepState said:


> Actually, the issue arose for the OP, who likely has somewhat less than the capitalization of BRK in personal assets.  This isn't to do with outgrowing a market in terms of market impact.  It is to do with opportunity, if skilled, or diversification, if not.
> 
> Conservatively, even a concentrated portfolio consisting of Australian equities only has a chance of about 1:250k of achieving the outcome you seek.  A celebratory dinner at the end of twenty years, if held, could be housed in a very small restaurant. If anything, that figure is a fairly gross over-estimate of the likelihood. Not impossible.  Hardly a central case.  Of those who manage to pull it off, I'd say we'd hear of at least some of their names.  After all, those who pull off a 10-15 year record like this usually charge around 3% pa and 25% of upside for their services.  They would have next to no problem, if skilled, raising a mere $50m and receiving fees of $3m per annum straight up and getting to their target wealth a whole lot quicker and with more certainty. That AUM is hardly constraining for a truly skilled investor.  At the end of the twenty year period, if sustained, you'd know who they are because they would be mentioned every second paragraph in industry mags and everything they do will be scrutinized and copied to some degree, somewhere.
> 
> ...




Very interesting discussion.

Deepstate - your post makes me feel like a total anomaly.


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## DeepState (7 April 2015)

craft said:


> Very interesting discussion.
> 
> Deepstate - your post makes me feel like a total anomaly.




You are.  But for excellent reasons.  Will you please bring me to the dinner in twenty years time?


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## The Falcon (7 April 2015)

luutzu said:


> Say you want to buy Wal-Mart. It has some 10x WOW's sales [?] ... just think of countless other countries with countless potential "associates" it could also exploit, haha. WOW could barely open a chain of hardware stores.
> 
> There's companies that expand overseas and do great... then there's your AMP and NAB a while back. Same with individual investors.




To your example, here is the point, WMT is selling at same P/E as WOW. Which company has a greater potential runway for growth? Oz market ex ASX20 is sub scale. When they make international forays (as you mention) they are commoditised as none of them have durable brands outside of Oz. Home country bias probably not a big issue for US investors, as the S&P constituents are global leaders across all industries. ASX20 is some domestic banks and miners with a few odds and sods thrown in. This is very much a bet on Oz, rather than global growth. 

Now, probably not of interest to a trader, who can participate in any market. But, personally with a large Oz exposure in the form of real estate, ASX stocks, and an operating business, I want to take a larger tilt to global markets and in particular businesses that can compound wealth over the very long term.


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## craft (7 April 2015)

The Falcon said:


> To your example, here is the point, WMT is selling at same P/E as WOW. Which company has a greater potential runway for growth? Oz market ex ASX20 is sub scale. When they make international forays (as you mention) they are commoditised as none of them have durable brands outside of Oz. Home country bias probably not a big issue for US investors, as the S&P constituents are global leaders across all industries. ASX20 is some domestic banks and miners with a few odds and sods thrown in. This is very much a bet on Oz, rather than global growth.
> 
> Now, probably not of interest to a trader, who can participate in any market. But, personally with a large Oz exposure in the form of real estate, ASX stocks, and an operating business, I want to take a larger tilt to global markets and in particular businesses that can compound wealth over the very long term.




Hi Falcon - some reading for you.

https://hbr.org/2005/09/all-strategy-is-local


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## The Falcon (7 April 2015)

craft said:


> Hi Falcon - some reading for you.
> 
> https://hbr.org/2005/09/all-strategy-is-local




Re; WMT, I was making a lazy response more as a conceptual rather than actual example. BUT, I am keen to follow that up with some analysis less than 10 years old. A capacity to suffer is required when entering new markets, so not sure that success of otherwise can be judged so quickly. 

Stocks I am talking about along the lines of NSRGY/PM/KO/JNJ/BRK/CFR/UL/DEO/SAB/MA/GE/PG/HEIO/CFR.VX/MKL/FFH.TO. This is the stuff I am interested in addition to ASX stocks. 

This kind of discussion on a forum like ASF will reach no consensus, as each will be convinced their position is correct.


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## craft (7 April 2015)

The Falcon said:


> Re; WMT, I was making a lazy response more as a conceptual rather than actual example. BUT, I am keen to follow that up with some analysis less than 10 years old. A capacity to suffer is required when entering new markets, so not sure that success of otherwise can be judged so quickly.
> 
> Stocks I am talking about along the lines of NSRGY/PM/KO/JNJ/BRK/CFR/UL/DEO/SAB/MA/GE/PG/HEIO/CFR.VX/MKL/FFH.TO. This is the stuff I am interested in addition to ASX stocks.
> 
> This kind of discussion on a forum like ASF will reach no consensus, as each will be convinced their position is correct.




Does it need to reach consensus?

Conviction of being right is a very dangerous thing. 

Much too be taken from this discussion from *both* perspectives if you have an open mind.  The cogitative dissonance though of accommodating opposing views is probably too much for most to handle.


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## The Falcon (7 April 2015)

No it doesn't. Fair point.


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## luutzu (7 April 2015)

The Falcon said:


> To your example, here is the point, WMT is selling at same P/E as WOW. Which company has a greater potential runway for growth? Oz market ex ASX20 is sub scale. When they make international forays (as you mention) they are commoditised as none of them have durable brands outside of Oz. Home country bias probably not a big issue for US investors, as the S&P constituents are global leaders across all industries. ASX20 is some domestic banks and miners with a few odds and sods thrown in. This is very much a bet on Oz, rather than global growth.
> 
> Now, probably not of interest to a trader, who can participate in any market. But, personally with a large Oz exposure in the form of real estate, ASX stocks, and an operating business, I want to take a larger tilt to global markets and in particular businesses that can compound wealth over the very long term.




If same PE, WalMart is currently cheaper than WOW. And from memory, at $29.50, WOW is at same price level back in 2000 or so.

I'm with you regarding exposure and greater potential growth of, say, US businesses compare to Australians. But at the same time, we shouldn't think that simple exposure to other markets automatically reduce portfolio risk and access to greater gains than just this home bias tendency.

Investment returns correlate with buying good businesses at nice prices, not with timezone of the head office or place of incorporation.


Saw a slide from one of DeepState's posting - there's some chart saying diversification into emerging markets equities reduces a portfolio's equities risk by 30% or something. That seems to be the thinking behind the fund management industry, that if you put cash everywhere, it's more gain and less risk. I don't think that's the case at all.

The brokers and consulting firms would think so (and tell you why and how when you pay them), the MBA factories have got to find work for their grads... and fund managers got to look like they're doing something smart to collect the 2% of AUM a year - can't be too clever or work too hard and do something dumb like investing in businesses you know very well operating in jurisdictions you grew up in - got to be able to diversify and have things to point to when it goes wrong (everyone else does it; what is wrong with the US economy, man; that's what they taught us in our MBA...)

Read, some 10 years ago, how UBS closes shop after a couple of years in Vietnam. Losing some $250million for the dream of investment banking in an emerging market with a growing blah blah. Turns out the comrades changes the law every couple of weeks, and the new laws supersede the previous ones, and you could be found guilty under the new laws for things that were perfectly legal before the changes. Maybe the communists there don't know international banking practices, they sure know how to take your cake and eat your lunch too. 

But yea, best to invest in the likes of GE and WMT... those guys there know how to deal with the government and their "taxes"


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## DeepState (7 April 2015)

For those who like to work off facts and data, I thought this was interesting in the context of this discussion:




Might ring some bells.  Might not.


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## DeepState (7 April 2015)

The Falcon said:


> Re; WMT, I was making a lazy response more as a conceptual rather than actual example. BUT, I am keen to follow that up with some analysis less than 10 years old. A capacity to suffer is required when entering new markets, so not sure that success of otherwise can be judged so quickly.
> 
> Stocks I am talking about along the lines of NSRGY/PM/KO/JNJ/BRK/CFR/UL/DEO/SAB/MA/GE/PG/HEIO/CFR.VX/MKL/FFH.TO. This is the stuff I am interested in addition to ASX stocks.
> 
> This kind of discussion on a forum like ASF will reach no consensus, as each will be convinced their position is correct.




Yep. This is good.  Let's pursue this.  

Assume, for illustration, that there are ony 20 stocks in the Aust market of scale.  A key part to successful investing is comparison of relative value.  There are Combo(20,2) = 190 pairs you can compare against in Aust alone.  If you are any good at all, that's 190 inestment decisions from which you can take to improve your circumstances.  Before the Buffett quoters get going yet again, you can compare against cash or zero as well if you want.  

If you then add 10 stocks from offshore, kind of like the above, you now have Combo(30,2) = 435 pairwise choices.  If you are skilled, that's more than twice the wiggle room to profit.  To give you some notion of the value of this, a very rough illustrative ballpark of your ability to generate risk adjusted returns improves by around sqrt(2) by this additional flexibility.  That's pretty massive.  The better you are, the more it is worth.  If you are no good at all, and everything is random choice anyway (even if you assess different stock as having meaningful disounts etc, maybe even talk a lot about moats and stuff... but these choices don't turn out that way when it comes down to it), you will still have greater opportunity to reduce the risk taken as you profit soley from equity risk premium. Given the choice of reducing my risk of getting a seriously bad outcome and keeping it as is, I'd make the choice to reduce it.  However, I appreciate that others might like a more entertaining route or find that concept too radical.  Ex Ante, adding furter opportunity to diversify cannot be worse than having less opportunity.

If you have bandwidth restrictions, if you are any good, you'd know where to concentrate your efforts.  Of the 435 pairs you now have as an international investor, it would be a total freak if the best X pairs that you can monitor are found within the domestic 190.  If you are no good, at least you'll have more entertaining war stories of the bull and bear variety by randomly selecting some pairs involving offshore investment.

For the anomalies of the very positive idiosyncratic variety out there, staying within the domestic 190 can make sense if that's where all their efforts and experience have been concentrated and they are genuinely good. They may assign zero (or otherwise very low) ability to any pairs involving offshore stock.  However, even for these rare birds, there may be opportunities to increase earning power for any given level of risk of any description by progressively prioritising towards offshore opportunities that they find more prospective as sources of mispricing.  Ex ante, the ability to do so implies the only way is up...or staying where you are.

For reasons apparent in behavioural finance, some may find it especially odious to lose money on an offshore expedition than to lose the same amount in a domestic stock.  All the best with that.  It won't keep you warm at night when the bills come in.


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## luutzu (7 April 2015)

DeepState said:


> For those who like to work off facts and data, I thought this was interesting in the context of this discussion:
> 
> View attachment 62216
> 
> ...




You got facts and data on returns by those fund managers diversifying overseas and across asset classes? Maybe a breakdown of performance from home-base investments vs performance of foreign investments.

I'll wager that if the fund manager is good at home, they'll do equally well or slightly better overseas; if they are no good, they'd either suk at both or do worst abroad. Average returns over 5 to 10 years, not short term returns.

Does any of them come close to Buffett or any of his fellow students learning from Graham and Dodd?

Hostility I sense


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## DeepState (18 April 2015)

An interesting example of how home country bias manifests itself (from WSJ)...even if the underlying is a domestic index :




http://www.wsj.com/articles/this-is...-up-1429274625?mod=WSJ_hps_MIDDLE_Video_Third


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## noirua (29 August 2019)

Univision Engineering Limited LSE  AIM:UVEL   Http://www.uvel.com
Company is based in Hong Kong and all interests are based there.
Univision Analyses: Https://simplywall.st/stocks/gb/tech/aim-uvel/univision-engineering-shares?utm_medium=finance_user&utm_source=post&utm_campaign=CTA_ticker&blueprint=315133

Annual results will be out by 31 August 2019 UK London time. Market Open 8am to 4-30pm UK BST

Half Year Results: 07/12/2018 - Interim Results to September 30 2018: https://uk.advfn.com/stock-market/l...sion-Engineering-Ltd-Interim-Results/78841590


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## Value Hunter (31 August 2019)

Most Australian investors  will have some kind of international exposure whether that be through their industry or retail super fund, through the offshore earnings of ASX listed companies such as Cochlear, BHP Billiton, CSL, Seek, Xero, etc or through listed investment companies or managed funds that invest offshore. I have never had a deliberate strategy of gaining international exposure but I have gained some in any case. I think in most cases it ends up being a question of the degree of international exposure rather than having any or not.

If you look at people like Buffett he never had a plan to have a certain percentage of international exposure. Rather he took things one investment opportunity at a time and ended up with some international exposure. That is the same way I have always operated. I never saw the sense in having some prescribed asset allocation model. One should invest wherever and whenever they see opportunity and let the chips fall where they may.

The other point that people like Deepstate seem to miss about having more opportunities is that retail investors are not a large funds management company with dozens of full time analysts. The ASX alone has over 2000 securities how many securities can a part time retail investor analyse?

According to this investopedia article below there are an estimated 630,000 + listed securities in the world.
https://www.investopedia.com/financial-edge/1212/stock-exchanges-around-the-world.aspx
Does anybody expect a retail investor to comb through hundreds of thousands of securities to find the absolute best in the world. 

This is aside from the admin, tax, and foreign currency issues with having direct overseas exposure to stocks.


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## Value Hunter (31 August 2019)

Besides as I pointed out in my first paragraph investors can and likely will have some foreign exposure without ever having to directly purchase a security on a foreign exchange. All of my international exposure is through a combination of an industry super fund and investments listed on the ASX (foreign focused listed investment companies, ASX companies with some foreign earnings and ASX listed companies which are actually based and domiciled offshore and have the majority of their earnings in other countries but are merely listed on the ASX).


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## Garpal Gumnut (31 August 2019)

I was looking at spending a few kopeks on Saudi Aramco when it listed. 

I believe from a Korean friend ( who hates the Japanese ) that it is to be listed on the Nikkei.
via Australian brokers

Has anyone on ASF had experience with trading stocks on the Nikkei via Australian brokers.

gg

ps My Korean friend is quite racist and hateful but seems to like me for a reason which I am at a loss to explain. I imagine he may become useful if the Vegans take over.

gg


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## noirua (31 August 2019)

noirua said:


> Univision Engineering Limited LSE  AIM:UVEL   Http://www.uvel.com
> Company is based in Hong Kong and all interests are based there.
> Univision Analyses: Https://simplywall.st/stocks/gb/tech/aim-uvel/univision-engineering-shares?utm_medium=finance_user&utm_source=post&utm_campaign=CTA_ticker&blueprint=315133
> 
> ...



RNS - UniVision (AIM: UVEL), the Hong Kong based group whose principal activities are the supply, design, installation and maintenance of closed-circuit television (CCTV) and surveillance systems, and the sale of security related products, announces that, further to the announcement on 15 July 2019, the Company will now release its Final Results, for the year ended 31 March 2019, in the next week.


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## noirua (31 August 2019)

Garpal Gumnut said:


> I was looking at spending a few kopeks on Saudi Aramco when it listed.
> 
> I believe from a Korean friend ( who hates the Japanese ) that it is to be listed on the Nikkei.
> via Australian brokers
> ...



'Think Markets' are quite astute. Pepperstone for CFDs. However, some say that it is best to have a Japanese broker as they must keep to all the countries regulations and can sort out possible problems on the ground.

Both Japanese and Hong Kong markets think differently and HK has a lunch break. One of my shares in Hong Kong, 575, went wrong and it took my broker 26 months to put me in a position to trade the shares again - kept saying there was nothing they could do.  Japanese shares are often highly priced and one share could cost as much as $2,000 - the reason many shares are only traded by Institutions.  A Japanese broker may ask the equivalent of $50,000 to be held on an account with them. Some Japanese companies on the Mothers Market might have only 3,000 shares in issue and delivery can be tight.

Companies in Japan often merge causing foreigners difficulties.


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## Garpal Gumnut (1 September 2019)

noirua said:


> 'Think Markets' are quite astute. Pepperstone for CFDs. However, some say that it is best to have a Japanese broker as they must keep to all the countries regulations and can sort out possible problems on the ground.
> 
> Both Japanese and Hong Kong markets think differently and HK has a lunch break. One of my shares in Hong Kong, 575, went wrong and it took my broker 26 months to put me in a position to trade the shares again - kept saying there was nothing they could do.  Japanese shares are often highly priced and one share could cost as much as $2,000 - the reason many shares are only traded by Institutions.  A Japanese broker may ask the equivalent of $50,000 to be held on an account with them. Some Japanese companies on the Mothers Market might have only 3,000 shares in issue and delivery can be tight.
> 
> Companies in Japan often merge causing foreigners difficulties.



Thanks mate. 

It's all a bit difficult for me and it's for the superfund so my accountant/auditor may not be happy if things go arse up with an exchange. Excuse the phrase arse up. I meant to say arse up. 

It's Fathers Day and I'm having a ball with the kids and grandchildren. lol.

gg


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