Should we diversify into international stocks?
For some time, Dock Street stock portfolios have avoided companies domiciled outside the United States. Should that continue or are there opportunities we are missing in Europe and Asia?
The chart below emphatically states that for the last 10 years, Staying Home in the USA has been the right decision. The chart compares the S&P 500, the Stoxx-50 (large European companies), and the FXI (large Chinese companies). The S&P is up 205% for 10 years, vs 97% for Europe and a loss of 21% for China. (Dock Street stock portfolios are up over 300% for this period.)
So far, so good.
But will these trends continue? Looking around the world, where can we find another Visa, MSCI, or Nvidia? Businesses like these are few and far between outside the US. And the dominance of these businesses makes it unlikely that a non-US company will come along to tempt us. China has created large technology companies that compete with Google and Amazon, but China has walled off its slice of the Internet, and these companies have failed to compete successfully outside of China.
Our efforts at finding and understanding a small collection of extraordinary businesses have resulted in our focus on the USA. If some powerful international companies show up in our search, we will take a hard look and maybe add them to portfolios.
However, the US remains unique in the world as a competitive and dynamic economy, and the result has been the creation of world-beating businesses. We don’t think this will change much over the next three to five years. Stay Home.
Best regards,
Daniel A. Ogden
Disclosure: Dock Street Asset Management, Inc. and our clients own Nvidia (NVDA), MSCI (MSCI), Amazon (AMZN), Alphabet (GOOG), and VISA (V). This article is not intended to be used as investment advice.
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