Finding the best international stocks to buy can be tricky. With a few rare exceptions, overseas markets have trailed United States. indices for more than 25 years now. Also, market regulations and reporting requirements are lax in many foreign jurisdictions. Corporate fraud can run rampant in many regions of the world. Earnings statements and financial reports are often not worth the paper on which they’re printed. Additionally, many markets and economies are heavily regulated and controlled by governments, making corporate progress difficult. These factors often conspire to make it difficult for investors to realize healthy returns when investing outside of the U.S.
That said, there are some good stocks of foreign firms out there for investors willing to search and do some due diligence. Diamonds can be found in any place if people are willing to dig. Here are the three best international stocks to buy in 2023.
To China, where we have leading technology firm Baidu (NASDAQ:BIDU). Currently, Baidu is regarded as China’s leading artificial intelligence (AI) company. Baidu just announced that it has developed a generative AI system that matches the technology used in the ChatGPT and GPT-4 chatbots. Until now, the AI systems developed in China have paled in comparison to those produced by U.S. firms such as OpenAI. However, that could be about to change with the new technology that Baidu claims to have developed and is now making available to companies on a limited basis.
Baidu Chief Executive Officer (CEO) Robin Li said at a public presentation that the company’s newly released ERNIE 4.0 chatbot is “on par with GPT-4 in terms of overall performance.” Earlier iterations of Baidu’s ERNIE chatbot were ranked as the best among China’s technology companies based on their algorithms and ecosystems. The new AI developed by Baidu has occurred despite strict government controls on the development of artificial intelligence within China. And Baidu isn’t the only Chinese company racing ahead with AI. Other companies, such as Alibaba (NYSE:BABA), are also creating advanced AI technologies. BIDU stock has increased 35% throughout the last 12 months.
Its initial public offering (IPO) didn’t go as hoped, but there’s still reason to like German sandal maker Birkenstock (NYSE:BIRK). The IPO was a dud, with BIRK stock falling 13% on its first trading day on the New York big board. The shares began trading at $41, down 11% from the IPO price of $46 per share. By the end of the first trading day, the stock was down 13% at $40.20. The closing price on the first day of trading gave Birkenstock a market value of $7.55 billion. While disappointing, the poor performance of the IPO was mostly due to bad timing rather than anything fundamentally wrong with Birkenstock.
Investors should keep in mind that Birkenstock has been a going concern since 1774, and has made its world famous sandals for that entire time. The company also looks to have a strong balance sheet, reporting in its IPO prospectus that its revenue grew from $770 million in fiscal 2020 to $1.3 billion in fiscal 2022. Net profits at Birkenstock have risen by $91 million throughout the last two fiscal years. Since its IPO, BIRK stock has stabilized and is now trading at $38 per share. It will take some time for the company to report financial results and win the trust of investors, but Birkenstock has potential. This easily earns its spot on our list of the best international stocks to buy.
Mercado Libre (MELI)
Now to Argentina where we have e-commerce giant MercadoLibre (NASDAQ:MELI). South America’s answer to Amazon (NASDAQ:AMZN) has been on a big tear lately. MELI stock is up 43% year to date and has gained 300% throughout the last five years. The big moves in the share price reflect the company’s strong growth trajectory. In 2022, MercadoLibre’s revenue grew 49% from a year earlier to $10.5 billion. Its full-year profit increased nearly 500% to $482 million from $83 million in 2021. Now that the company has turned profitable, its profits are accelerating at breakneck speed.
Additionally, MercadoLibre has a popular online payments system called Mercado Pago that is also growing fast, with payment volumes up 60% year-over-year in 2022. Of course, the big rise in the share price has left MELI stock with a sky high valuation. The company’s stock currently trades at a price-earnings (P/E) ratio of 79, which is expensive even for a fast growing tech company. The share price itself isn’t cheap at nearly $1,200 for one share. However, for investors who prize growth over all else, it might be worth it to pay the premium required to take a position in MELI stock.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.