You can diversify your portfolio into international markets without actually investing in world markets or owning an ADR. What you do is invest in famous U.S. brand names that do a substantial amount of their business overseas.
For example, soft drink and fast food companies, computer hardware and software companies, and specialized manufacturers, such as Harley Davidson, may expand abroad at a faster rate than they grow at home in certain periods. The sales and earnings from all of these markets affect the company’s bottom line and its stock price.
Of course, just as growing demand may enhance a company’s prospects, slowing demand for its products abroad, either because of a downturn in those economies or the high cost resulting from a strong U.S. dollar, can depress the stock price.
You may also end up with exposure to international markets if a U.S. company in which you own stock is acquired by an overseas company. That’s one more example of the growing interdependency of financial markets.
