Five Foreign Stocks To Buy Now

In order to diversify portfolios and reduce exposure to one particular country, it is generally a good idea for retail investors to buy shares of companies which generate a major chunk of their revenues overseas. Keeping this in mind, we decided to formulate a list of the top five such companies that are most popular among the over 700 hedge funds that we track. The fact that these firms have earned the trust of professional money managers who spend significant resources researching stocks before they make an investment decision, goes to show that they are definitely worth a look.

Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 118% over the last 36 months and outperformed the S&P 500 Index by over 60 percentage points (see the details here).

5. Perrigo Company plc Ordinary Shares (NYSE:PRGO)

Investors with Long Positions (as of June 30): 83

Aggregate Value of Investors’ Holdings (as of June 30): $4.83 Billion 

At the end of the second quarter the total value hedge funds’ holdings represented about 17.9% of the Ireland-based manufacturer of over-the-counter pharmaceutical products, the world’s largest. Even though Perrigo Company plc Ordinary Shares (NYSE:PRGO)’s stock has depreciated by over 7.3% so far this year, hedgies piled into the company during the second trimester, as their total number increased from 37 funds with $1.58 billion in total holdings at the end of March. James Dinan‘s York Capital Management is the largest stockholder of Perrigo Company plc Ordinary Shares (NYSE:PRGO) within our database, holding over 3.31 million shares valued at $612.60 million.

4. Alibaba Group Holding Ltd (NYSE:BABA)

Investors with Long Positions (as of June 30): 85

Aggregate Value of Investors’ Holdings (as of June 30): $4.77 Billion 

The China-based e-commerce juggernaut has seen its stock crater by more than 44% year-to-date and the current weakness in the Chinese economy isn’t exactly helping its cause either. Hedge funds are generally staying put with their investments, as the number of firms that held Alibaba Group Holding Ltd (NYSE:BABA) in their portfolios at the end of March was just one higher. Rob Citrone’s Discovery Capital Management is currently the largest shareholder of the company among these firms, owning more than 6.52 million shares valued at $536.73 million. As of the end of June, total hedge fund holdings accounted for 11.80% of the company’s common stock. Jonathan Liang recently published a bearish piece on Alibaba Group Holding Ltd (NYSE:BABA) claiming that the company’s stock has a downside possibility of 50% owing to an egregiously high earnings multiple as compared to industry peers and doubtful GMV per user figures. Investors might want to be cautious about this pick.

3. Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK)

Investors with Long Positions (as of June 30): 88

Aggregate Value of Investors’ Holdings (as of June 30): $9.67 Billion 

The hedge funds we track owned 21.7% of Liberty Global’s shares at the end of June. The total number of professional money managers holding the UK-based provider of video, broadband internet and mobile services in their portfolios fell by two during the June trimester with the total value of their holdings sliding by $470 million. Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK)’s stock is down by nearly 16% so far this year. Boykin Curry’s Eagle Capital Management reduced its holding in the company by 8% during the June quarter to 30.16 million shares valued at $1.53 billion. Recently Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) made a strategic investment in data analytics expert Gauvus Inc, whose products provide cable operators with a comprehensive view of their network state in real-time.

2. Mylan NV (NASDAQ:MYL)

Investors with Long Positions (as of June 30): 92

Aggregate Value of Investors’ Holdings (as of June 30): $4.59 Billion 

The world’s leading generics and specialty pharmaceutical company operates in about 140 countries. As far as hedge fund interest in the company is concerned it rose sharply, by 31 funds and $2.17 billion in holdings’ value during the second quarter. The aggregate value of investor’s holdings at the end of June amounted to 8.4% of Mylan NV (NASDAQ:MYL)’s outstanding shares. Jamie Zimmerman‘s Litespeed Management initiated a position in Mylan NV (NASDAQ:MYL) during the second trimester amounting to 425,000 shares valued at $28.84 million.

1. Allergan PLC (NYSE:AGN)

Investors with Long Positions (as of June 30): 151

Aggregate Value of Investors’ Holdings (as of June 30): $20.73 Billion 

The $99.24 billion Dublin-based manufacturer and distributor of biosimilars and over-the-counter pharmaceutical products has operations in more than 100 countries. Hedge fund’s total holdings in Allergan PLC (NYSE:AGN) amounted at 17.4% of its common shares at the end of June. However, the total number of hedgies holding the company in their portfolios dipped by six during the second quarter, with the value of their holdings sliding by $1.24 billion. John Paulson‘s Paulson & Co is the largest stockholder of Allergan PLC (NYSE:AGN) among the investors that we track, as it raised its stake in the company by 28% during the April-June quarter to 7.17 million shares valued at $2.18 billion. Following the sale of its generics unit to Teva Pharmaceutical Industries Ltd (ADR)(NYSE:TEVA), Allergan recently raised its financial projections for the second half of the year, increasing its expected branded revenue by 10%.

Disclosure: None