June 14, 2026 · 13 min read
For the first time since 2017, international stocks are outperforming the S&P 500 — MSCI ACWI ex-US is up +14% YTD versus +9% for the S&P. US stocks trade at 22× earnings; international trades at 14×. European defense spending is surging post-Ukraine, India is the fastest-growing G20 economy, Japan's corporate governance reforms are unlocking shareholder value, and the US dollar has weakened meaningfully. The case for going global in 2026 has rarely been this compelling.
The structural case for international diversification was strong going into 2026. Several 2025–2026 macro developments have made it even more compelling. These catalysts are not subtle — they are regime-level shifts that historically precede multi-year international outperformance.
European equities trade at roughly 16× earnings — a near-40% discount to US equivalents. Despite this discount, Europe houses some of the world's most dominant businesses. European defense is a decade-long secular tailwind. ETF exposure via VXUS or EFA provides broad developed-market Europe allocation; individual ADRs allow concentration in the best franchises.
ASML is the only company on Earth that manufactures extreme ultraviolet (EUV) lithography machines — the equipment required to pattern the most advanced semiconductor chips at 3nm and below. Every cutting-edge chip from TSMC, Samsung, and Intel requires ASML machines. This is not a near-monopoly — it is a complete monopoly with zero credible substitutes. ~$280B market cap. Trades at a discount to US semiconductor equipment peers despite a stronger competitive position.
SAP is the world's dominant enterprise resource planning (ERP) software company — essentially the operating system for the back-office of large corporations. Its migration from on-premise to SAP S/4HANA cloud is creating a recurring revenue transformation similar to what Microsoft executed. ~500,000 enterprise customers globally with extraordinarily high switching costs. Growing cloud ARR at double-digits.
Novo Nordisk makes Ozempic and Wegovy — the blockbuster GLP-1 drugs now the fastest-growing class of medicines in history. Novo represents roughly 50% of the entire Danish stock market. Despite a setback from CagriSema Phase 3 data, Novo's manufacturing scale and pipeline depth keep it competitive with Eli Lilly. Trades at a compelling discount to LLY. ~$400B market cap.
Ferrari is not a car company — it is a luxury goods business that happens to use cars as its primary product. Intentional production limits (fewer than 14,000 cars per year), multi-year waiting lists, and a 27%+ EBITDA margin make Ferrari unique in automotive. The electrification transition is an opportunity, not a threat: Ferrari's Purosangue SUV and upcoming hybrid/EV platform will command premium pricing.
Hermès is the most defensive luxury company in the world. The Birkin bag has a multi-year waitlist regardless of economic conditions. Unlike peers LVMH and Kering, Hermès has resisted pricing declines during China slowdowns. Family-controlled with a 40%+ EBITDA margin, Hermès is the definition of a business that gets better with age.
Deutsche Telekom is the majority owner of T-Mobile US (TMUS) — the fastest-growing major US wireless carrier. This German-listed holding company gives investors exposure to T-Mobile's US 5G network growth plus Deutsche Telekom's European telecom operations, at a discount to directly holding TMUS. ~4% dividend yield.
The Nikkei 225 is near all-time highs driven by a structural story: the TSE's pressure on companies to improve capital efficiency and ROE. Corporate Japan is buying back stock, paying dividends, and divesting non-core assets at a pace not seen in generations. Japan offers developed-market stability with emerging-market-style reform catalysts.
Toyota is the world's largest automaker by volume and the undisputed leader in hybrid vehicle technology. Its hybrid powertrain advantage (Prius lineage + THS technology) positions it better than full-EV-only competitors in markets where charging infrastructure remains limited. Toyota's hydrogen fuel cell R&D adds another long-term optionality layer.
Sony is the world's largest image sensor manufacturer — virtually every smartphone camera uses a Sony CMOS sensor, a near-monopoly in a growing market. Beyond sensors, Sony dominates gaming (PlayStation), music (world's largest music publisher), and movies (Columbia Pictures). A deeply undervalued conglomerate trading at a fraction of the sum-of-parts value of its businesses.
SoftBank's crown jewel is its 90%+ stake in ARM Holdings — the chip architecture that powers virtually every smartphone on Earth and is becoming foundational for AI chips. SoftBank's Vision Fund has suffered high-profile losses, but the ARM stake alone is worth more than SoftBank's entire market cap at most methodologies — a structural discount to NAV.
Keyence makes the sensors, vision systems, and measurement instruments used in factory automation globally. It operates with a ~55% operating margin — one of the highest in all of manufacturing — achieved through a direct-sales model and deeply engineered products. Japan's answer to the US instrumentation monopolies.
India is growing at 6.8% GDP in 2026E — the fastest of any major economy. With 1.4 billion people, a median age of 28, and a government aggressively incentivizing manufacturing via Production Linked Incentive (PLI) schemes, India is in a multi-decade growth phase. Individual ADRs in IT services and banking provide targeted exposure; INDA and FLIN ETFs offer broad-market access without single-stock ADR risk.
Infosys is India's second-largest IT services company, generating ~$19B in revenue by helping global enterprises manage technology outsourcing. Infosys has been one of the most aggressive in embracing AI-assisted development, launching Infosys Topaz (its generative AI platform). Trades at a reasonable 25× earnings for a company with high visibility recurring revenue and dividend growth.
Wipro is a diversified IT services and consulting firm competing directly with Infosys and TCS across enterprise technology outsourcing. More value-priced than Infosys (~20× P/E) with recent management changes aimed at re-accelerating growth. Good entry for broad India IT exposure.
HDFC Bank is India's largest private sector bank and one of the highest-quality financial franchises in any emerging market. Post-merger with HDFC Ltd, the bank has a massive mortgage and retail banking franchise across India's growing middle class. Consistent 18–20% ROE, low NPAs, and secular tailwind from India's underpenetrated banking sector.
Tata Motors owns Jaguar Land Rover — whose Range Rover and Defender models are surging in global premium SUV markets — plus a fast-growing Indian domestic passenger vehicle and EV business (Nexon EV). JLR electrification and the Indian EV market give Tata two distinct growth vectors.
China is the most controversial market in global investing. US-listed Chinese ADRs face VIE structure legal risk, potential forced delisting, and geopolitical escalation. Yet Tencent trades at 16× earnings, Alibaba near 12×, and BYD — the world's largest EV company — at ~18×. The KWEB ETF (KraneShares CSI China Internet) provides single-ticker access. Sizing matters: treat China as a satellite position rather than core.
Tencent operates WeChat (1.3B users; China's everything-app), the world's largest gaming business, and one of the largest fintech operations (WeChat Pay). Despite regulatory pressure in 2021–2022, Tencent's business has recovered and the stock trades near 16× earnings — a dramatic discount to Meta, which has a weaker moat. Tencent's investment portfolio (holding stakes in 700+ companies including Sea, Epic Games) provides additional upside.
Alibaba is the dominant Chinese e-commerce operator (Taobao, Tmall), cloud services provider (Alibaba Cloud), and logistics network (Cainiao). Post-Jack Ma regulatory crackdown, the stock is ~75% below 2020 highs and trades near 12× earnings. Business has stabilized; cloud AI investment is accelerating. Key risk: VIE structure, potential forced ADR delisting, US-China tensions.
JD.com is China's second-largest e-commerce company, distinguished by owning its own delivery network (unlike Alibaba's marketplace model). This enables next-day delivery for most of China. JD's Jingdong Logistics arm is independently valuable. Trading at 12× P/E with improving margins and consistent free cash flow generation.
BYD surpassed Tesla in global EV sales in 2023 and has maintained the lead. Its vertically integrated model (making its own batteries, chips, and vehicles) gives it structural cost advantages. Now expanding aggressively into Southeast Asia, Europe, and Latin America — markets where Tesla faces less of a cost advantage. ~18× P/E for the world's fastest-growing auto giant.
Latin America is an underpenetrated digital economy with 700M+ people, growing smartphone penetration, and a young population. MercadoLibre and Nu Holdings are two of the best-executed growth businesses in the world — not just in LatAm. Both are direct beneficiaries of the region's structural shift from cash to digital.
MercadoLibre is the dominant e-commerce and digital payments platform across Latin America. Mercado Pago — its fintech arm — has 50M+ active users and is processing $100B+ in payment volume annually. 2025 revenue was ~$22B, growing 38% YoY. The company has reached sustainable profitability while continuing to invest at scale. At ~50× earnings it is not cheap, but the growth rate justifies a premium for a category-defining business.
Nu Holdings is the world's largest digital-only bank outside China with 100M+ customers across Brazil, Mexico, and Colombia. It offers credit cards, savings accounts, personal loans, and insurance — all via app — with customer acquisition cost near zero (99%+ via word-of-mouth). Cost-to-serve is 15–20× lower than traditional Brazilian banks. Approaching profitability with a cost structure incumbents cannot match.
US investors can access international stocks two ways: individual ADRs (American Depositary Receipts, which trade on US exchanges) or ETFs. Neither is universally better — the choice depends on your conviction, risk tolerance, and how much research you want to do.
Five high-conviction international ADRs across different regions and sectors. Note: P/E ratios and growth rates are forward-looking estimates based on mid-2026 analyst consensus.
| Ticker | Company | Region | Fwd P/E | Rev Growth | Moat | Key Risk |
|---|---|---|---|---|---|---|
| ASML | ASML Holding | Europe | ~28× | +18% | Absolute monopoly (EUV) | Geopolitical / China export controls |
| SAP | SAP SE | Europe | ~32× | +12% | Enterprise switching costs | Cloud transition margin pressure |
| NVO | Novo Nordisk | Europe | ~22× | +22% | GLP-1 manufacturing + pipeline | CagriSema setback; LLY competition |
| MELI | MercadoLibre | LatAm | ~50× | +38% | LatAm network effects, fintech | LatAm macro / FX / political risk |
| NU | Nu Holdings | LatAm | ~35× | +45% | Lowest cost-to-serve digital bank | Brazil macro; credit cycle risk |
For investors who prefer broad diversification over individual stock selection, these five ETFs cover the major international categories. Expense ratios matter significantly for international funds — a 0.5% ER difference compounds meaningfully over a 10-year holding period.
| ETF | Name | Exp. Ratio | Geographic Tilt | 1-Yr Return | Best Use Case |
|---|---|---|---|---|---|
| VXUS | Vanguard Total Intl Stock | 0.07% | All ex-US (7,000+ stocks) | +16% | Core total international exposure |
| EFA | iShares MSCI EAFE | 0.32% | Developed markets only | +13% | Europe, Japan, Australia — no EM |
| EEM | iShares MSCI Emerging Mkts | 0.69% | China, India, Taiwan heavy | +17% | High-growth EM broad exposure |
| INDA | iShares MSCI India | 0.65% | India large/mid cap | +21% | Pure India growth story |
| KWEB | KraneShares CSI China Internet | 0.69% | China tech/internet | +28% | Concentrated China tech; high risk |
Currency is often the largest source of variance in international stock returns. When the US dollar weakens, your international holdings get a double benefit: equity gains plus currency translation gains. When the dollar strengthens, the reverse happens — even a 10% equity gain can be wiped out by a 10% currency loss.
International stocks carry risks that US stocks do not. Before buying any international ADR, run it through these five criteria to understand what you are accepting.
There is no universal answer, but these general frameworks are used by professional allocators. Global market cap weight (ex-US is roughly 40% of world market cap) is the theoretically unbiased starting point.
International stocks are outperforming the S&P 500 for the first time since 2017, yet still trade at a 35% P/E discount to US equities. This is not a speculative call — it is a reversion toward historically normal valuations, driven by genuine catalysts: dollar weakness, Europe's defense rearmament, India's secular growth, and Japan's corporate governance transformation.
For most US investors, the biggest international mistake is underexposure — the average US retail investor holds under 10% international despite ex-US stocks representing ~40% of global market cap. Even a modest 20–30% international allocation provides meaningful diversification and captures the current valuation opportunity.
Our highest-conviction picks: ASML for the only EUV lithography monopoly on Earth, NVO for the GLP-1 drug cycle at a discount to Eli Lilly, MELI for LatAm's Amazon-and-PayPal-in-one, and INDA for broad India exposure to the fastest-growing G20 economy. For the broadest foundation: VXUS at 0.07% expense ratio.
Use our stock comparison tool to dig deeper into these international picks side-by-side.