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3 Dominant International Opportunities: Arcos Dorados Holding Inc (ARCO), Guangshen Railway Co. Ltd (GSH)

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After buying in to many bad international investments on my CAPS account, and even a couple smaller plays in my own personal portfolio, I am extremely hesitant to jump into many foreign markets, particularly China.  Having lost money and many valuable CAPS points over the last 2 or 3 years due to scams, creative accounting, and “reverse mergers,” I never thought I’d find myself interested in Chinese stocks or internationally based companies anytime soon.

Well, it turns out I was dead wrong.  With the SEC on the prowl, and a trio of stocks who have a dominant position in their market, I can’t help but take a deeper look. With, Inc. (ADR) (NASDAQ:BIDU) growing up as the Chinese Google Inc (NASDAQ:GOOG)Arcos Dorados Holding Inc (NYSE:ARCO) making its run as the Latin American franchisee for McDonald’s Corporation (NYSE:MCD), and Guangshen Railway Co. Ltd (ADR)(NYSE:GSH) being the only major Chinese railway stock, I can’t help but consider making a new international investment.

Arcos Dorados Holding Inc (NYSE:ARCO)Without further ado, here’s a look at my 3 dominant international stocks, starting with my favorite of the group, Baidu.

It’s a Mobile World

Valuations: Simply put — there aren’t many better valuations out there — it’s just a matter of whether or not their accounting can be trusted.  With a clean slate so far, however, I don’t want to stand on the sidelines simply out of fear.  Yes I know, fool me once shame on you, fool me twice shame on me, but I would hate see Baidu’s stock continue growing exponentially while I wait for bad news that may never come.

Posting a Forward P/E of 18 and 5 Year PEG of 0.66, Baidu’s growth potential is selling for a huge discount.  Pair that up with over $3 billion in cash and this is a company with a fully loaded growth gun.  Compared to its 5 year P/E average of 44, Baidu is trading at valuations it hasn’t seen since the ’08 crash.  Versus Google’s lower growth rates and higher peg of 1.2, Baidu looks flat out cheap.

Catalysts: They literally are everywhere; it is just a matter of time for investors.  With less than 50% of China having internet access, compared to America’s 80% mark, Baidu’s first growth runway is blatantly apparent.  Second, only 20% of Baidu’s views came from mobile searches, a number it hopes to greatly expand upon.  According to Trefis, 33% of Google’s share price comes from its mobile search capabilities, showing the two search giants future mobile potential.  Similarly, its mobile maps unit reported daily user growth of 1,000% in 2011 alone.  Much like Google, Baidu is leaning on its maps to drive local searches and stronger Revenues.

Finally, Baidu is a true Rule Maker, something I was pounding on the table about in a previous blog elaborating upon Baidu’s long-term prospects.  Boasting amazing margins and ridiculous growth rates, the company’s growth story speaks for itself.

It’s Not Mexican Food; It’s McDonald’s in Latin America

Valuations: Trading with a P/E of 25, Arcos Dorados may seem to be an expensive stock, but its 5 year PEG of 0.5 says otherwise.  While an investment in a company based solely on its future growth can be dangerous, the McDonald’s of Latin America has the brand recognition to propel investors to large returns.  Furthermore, with a 1.7% dividend, Arcos Dorados gives investors something in return for waiting on the company’s future growth.

Catalysts: Once again we’ve got catalysts everywhere, as the “junior McDonald’s” looks to follow in its elder’s footprints with its march across Latin America.  As Fool contributor Maxx Chatsko explains, “McDonald’s has over 14,000 locations in the U.S. alone, or about one restaurant for every 22,000 people. Arcos Dorados has 1,880 locations total, or about one restaurant for every 269,000 people in the countries it serves.”  A growth runway couldn’t be more apparent in simpler terms.

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