4 minute read
My Love Affair with Global Investing
You’ve probably heard the advice… invest in your own backyard.
You know the companies. You’ve used their products. You can phone up management.
Makes sense doesn’t it?
Well the problem with investing in your own backyard is… so can your neighbors.
And often that means more eyeballs, more competition, and higher prices – which as an investor is the last thing you want.
I’ve lived my whole life in the United States. And I’ll let you in on a secret… I haven’t owned a US-listed stock in over 11 years.
My love affair with global investing started in 2013 with an obscure Swedish stock. The company was called Kopparbergs Bryggeri. They brewed hard pear cider and I knew this could be a very good business at scale.
And here was Kopperbergs trading at 4 times free cash flow, growing double-digits each year. I even found their pear cider at a pub in town – it was darn good.
The company’s reports were all in Swedish. It traded on an obscure exchange called the Nordic Growth Market (NGM) – a collection of mostly 30 Nordic biotech companies. And when I phoned my broker at Fidelity, I was told he’d have the order delivered… by hand. I’d hear back in a few days if I got a fill.
This was all music to my ears. I had a good feeling why the stock was so mispriced. Kopparbergs went on to 10x that year on strong results and market discovery. I was hooked.
Next my interest turned north, to Canada. Same language, same time zones, and mispriced stocks? What’s not to love!?
This time it was a small company called XPEL Technologies (XPEL). My colleague Paul Andreola mentioned he’d found it at $.14. It now traded around $1.15. The company was growing triple digits and still trading at a single-digit P/E ratio.
1) LESS coMpETiTion
The US is the largest stock market in the world. Nearly every US-based investor invests in domestic stocks (well except me of course). But on top of that, many foreign investors will buy in their home market and in the US. This dynamic piles on the competition and is why you shouldn’t be afraid to look elsewhere.
2) accESS To EarLiEr STaGE coMpaniES
While the US Venture Capital industry has been a boon for tech entrepreneurs – it’s been bad for the average investor.
Intel (INTL) went public in 1974 at a 4 million valuation. It was a microcap (even in today’s dollars). You don’t see many opportunities like that in the US these days.
But in other markets like Canada with less developed VC industries, promising growth companies often have no choice but to fund themselves in the public markets.
And that means you the investor has access to growth companies far sooner than you’d typically find in the US.
This company was literally in my backyard. I was living in Houston at the time, they were down the road in San Antonio. I visited management and felt their growth was just beginning.
I went to buy, delighted to find them trading with an obscure listing in Canada (DAP.U). I bought all I could at the time.
Though I sold far too soon, XPEL touched over $100 last year after uplisting to the NASDAQ and continuing to execute – a 700+-bagger for anyone fortunate enough to find it early and hold on for dear life.
Then it was Hamilton Thorne (HTL), an innovative Boston-based life sciences company. The company’s ticker was stuck in Canada where it was left for dead by the analysts. I liked the growth potential and participated in a small private placement at $.10 CAD in early 2014.
A few years later the company attracted a few sophisticated US-based life science investors and the company began getting attention. It now trades around $2.00 CAD. I still own all my shares.
I went on to start a newsletter Smallcap Discoveries with Paul called Small Discoveries – all about highlighting the global investing opportunity in nonresource Canadian stocks. And yet after all these years, and after discovering many more 10-baggers, it amazes me how few investors give global investing a serious look.
3) accESS To GrowinG MarkETS
The US has seen fabulous growth over the last 100 years. But will it continue?
With real GDP growth in the low single-digits, other global markets – particularly in Asia – can offer investors access to higher growth rates.
As they say, a rising tide lifts all boats. And when you invest in a growing market, picking winning stocks becomes that much easier.
Happy hunting. And happy translating!
-Brandon
I’ll leave you with 3 reasons why global investing can beat the market – if you’re willing to leave the comfort of your backyard.
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