14 Undervalued ADRs Worth Considering Investing In

Many stock watchers I respect are worried about a bubble in the US stock markets. Normally I look for valuation-price anomalies in individual securities but macro economic trends sometimes help me in sectoral allocation in my portfolio. If you are worried that the US markets are too rich, it may be a good idea to look overseas. To keep this process simple, I have listed below 14 undervalued American Depository Receipts (ADRs) that trade in the US and the first screen indicates that there may be some great values to be found among these. Of course, you might want to pick and choose based on your current exposure (too heavy in Japan? Ignore the Japanese ADRS in this list. You get the idea).

The idea behind this screen was to look for stocks that may be at an attractive valuation compared to their past year earnings as well as the book value. Some pay dividends and some do not. At this point, with the lack of good values in the US markets, I feel it is a great idea to have international exposure.

American Depository Receipts to Consider

ADR Company Country Industry Market Value P/E Dividend Yield (%) P/B
ELP COMPANHIA PARANAENSE DE ENERGIA – COPEL Brazil Electric Utilities 3.90B 9.96 1.8 0.62
HSBC HSBC HOLDINGS PLC United Kingdom Banking 223.30B 12.9 3.6 1.25
OIBR OI SA Brazil Diversified Communications 2.50B 7.04 15.6 0.49
CIG COMPANHIA ENERGETICA DE MINAS GERAIS CEMIG Brazil Electric Utilities 8.11B 3.52 1.6 1.27
ASMI ASM INTERNATIONAL NV Netherlands Semiconductor Equipment 2.11B 1.2 1.7 0.88
FLY FLY LEASING LTD Ireland Rental and Leasing Services 630.83M 6.74 5.9 0.85
PBR PETROLEO BRASILEIRO SA PETROBRAS Brazil Integrated Oil and Gas 104.81B 8.5 0 0.66
MTU MITSUBISHI UFJ FINANCIAL GROUP Japan Banking 92.68B 5.65 2 0.58
PAM PAMPA ENERGIA SA Argentina Electric Utilities 348.03M 14 0 0.68
BSBR BANCO SANTANDER BRASIL SA Brazil Banking 23.97B 10.08 4.4 0.6
BVN COMPANIA DE MINAS BUENAVENTURA SA Peru Gold 2.79B 8.72 0.2 0.78
SHG SHINHAN FINANCIAL GROUP CO LTD South Korea Banking 19.74B 12.32 1.1 0.8
UMC UNITED MICROELECTRONICS CORP Taiwan Semiconductor Equipment 4.80B 10.43 2.4 0.69
NTT NIPPON TELEGRAPH & TELEPHONE CORP Japan Telecom Services 57.98B 8.52 3.2 0.55

 

As usual, do your due diligence. Not listed in this screen are the stocks for the companies based in China. I have also not included any ADRs that trade on the otc. So for example, Samsung and Volkswagen are not included. Neither is my favorite long term play on Asia (which is a current premium stock pick)

Comments

  1. JPNY says

    Surprised I didn’t see ZA (Zuoan Fashion Limited) on the list. Chinese clothing manufacturer and retailer, selling at 900% discount to book.

    • says

      Hi James, I avoid Chinese stocks since I do not have enough confidence in the accuracy of their financial reports. There have been a number of cases where many of these companies have been shown up as frauds (look up Muddy Waters Research http://www.muddywatersresearch.com/). I could look at the likes of Alibaba or Baidu as they are more intensely scrutinized but the smaller companies are not worth the risk

  2. says

    I agree with you to look for stocks that may be at an attractive valuation compared to their past year earnings as well as the book value. I notice that you are placing a high weighting on the PE ratio. Do you not think that high growth ADRs in the technology space with high P/E ratio (justified by consistent quarterly growth) are worth taking a look as well?

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