Best International Companies to Own: 2024 Edition

Investors from almost every part of the world exhibit a certain amount of home bias: the tendency to prefer domestic equities to international ones. This makes sense. Investors are likely more familiar with these brands and consequently are more comfortable putting their money toward them.

But in today’s investing world “adding international exposure is one of the first steps toward a diversified portfolio,” according to Morningstar portfolio strategist Amy Arnott. If, for example, the US dollar weakens, exposure to European or Asian equities can soften the impact.

With that in mind, how can stock investors tackle international investing?

First, it’s important to remember that at Morningstar, we don’t view investing through the lens of daily price movements or hot tips. We see owning a single stock as similar to owning a small part of the company or the underlying business itself.

Consider the amount of effort we devote to researching and comparing options before buying a car. It tends to be a lot, and it tends to work out well for our needs, exceeding expectations and providing a reliable form of transportation. This is the same approach we take to buying a stock.

One of the best ways to identify high-quality companies is by checking out the Morningstar Economic Moat Rating, which assesses a company’s competitive advantage. The term “economic moat” was coined by Warren Buffett, who said, “The key to investing is ... determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.”

We used the moat rating as a starting point to compile a list of the best companies you can own. As the best companies in our coverage, they have wide economic moat ratings, the strength of their competitive advantages is either steady or increasing, they have predictable cash flows, and they allocate their capital effectively. (You can learn more about this methodology here.)

Here are the 33 companies based outside of the United States, but available to US investors, that made the cut.

Industrials is the most represented sector on this list with 10 companies. Consumer defensive and healthcare are close behind with nine and seven, respectively.

A note of caution: This list is not a call to action for you to buy all these companies immediately. Rather, it is a list of stocks you should keep an eye on and look for attractive entry points. Even the greatest company can be a bad investment if you overpay, and many firms on this list are currently overvalued.

That said, we note two of the stocks on the list that earned Morningstar Ratings of 5 stars as of April 19, 2024, meaning they are undervalued according to Morningstar‘s fair value estimates.

They are Switzerland-based Roche Holding RHHBY, a global pharmaceutical and diagnostic company, and Belgium-based Anheuser-Busch InBev BUD, the largest brewer in the world. Here’s what our analysts have to say about these two undervalued names from the list.

Roche Holding

“We think Roche’s drug portfolio and industry-leading diagnostics conspire to create maintainable competitive advantages. As the market leader in both biotech and diagnostics, this Swiss healthcare giant is in a unique position to guide global healthcare into a safer, more personalized, and more cost-effective endeavor. Strong information sharing continues between Genentech and Roche researchers, boosting research and development productivity and personalized medicine offerings that take advantage of Roche’s diagnostic expertise.

“Roche’s biologics focus and innovative pipeline are key to the firm’s ability to maintain its wide moat and continue to achieve growth as current blockbusters face competition. Blockbuster cancer biologics Avastin, Rituxan, and Herceptin are seeing strong headwinds from biosimilars. However, Roche’s biologics focus (more than 80% of pharmaceutical sales) provides some buffer against the traditional intense declines from small-molecule generic competition. In addition, with the launch of Perjeta in 2012, Kadcyla in 2013, and Phesgo (a subcutaneous coformulation of Herceptin and Perjeta) in 2020, Roche has somewhat refreshed its breast cancer franchise. Gazyva, approved in CLL and NHL and in testing in lupus, as well as new bispecific antibodies Columvi and Lunsumio will also extend the longevity of the Rituxan blood cancer franchise. Roche’s immuno-oncology drug Tecentriq launched in 2016, and we see peak sales potential above $5 billion. Roche is also expanding outside of oncology with MS drug Ocrevus ($9 billion peak sales) and hemophilia drug Hemlibra ($6 billion peak sales).

“Roche’s diagnostics business is also strong. With a 20% share of the global in vitro diagnostics market, Roche holds the number-one rank in this industry over competitors Siemens SIEGY, Abbott ABT, and Ortho. Pricing pressure has been intense in the diabetes-care market, but new instruments and immunoassays have buoyed the core professional diagnostics segment.”

—Karen Andersen, strategist

Anheuser-Busch InBev

“Anheuser-Busch InBev, or AB InBev, has been acquisitive, having made transformative deals for Interbrew and Anheuser-Busch, and more recently acquiring Grupo Modelo, Oriental Brewery, and SABMiller. Management’s strategy is to buy brands with a promising growth platform, expand distribution, and ruthlessly squeeze costs from the business.

“Previous acquisitions have created a monster with vast global scale as well as regional density. AB InBev has one of the strongest cost advantages in our consumer defensive coverage and is among the most efficient operators. Vast global scale, along with its monopolylike positions in Latin America and Africa give AB InBev significant fixed cost leverage and procurement pricing power. This plays out in the firm’s excess returns on invested capital and best-in-class operating and cash cycles, asset turnover ratios, and working capital management. AB InBev delays payments to trade creditors more than 20% longer than its closest rival Heineken, and its free cash flow conversion has been consistently higher than peers in recent years.

“Central to the investment case are the deleveraging of the balance sheet and rebuilding of margins in Latin America. On deleveraging, some progress has been made. Net debt/EBITDA peaked (excluding the coronavirus disruption) at 5.0 times in 2017, the year after the SABMiller acquisition, but despite road bumps in EBITDA growth since then, it was reduced to 3.5 times at the end of 2023. Nevertheless, leverage of this magnitude still increases financial risk and earnings volatility, and we think expansion will be subdued until leverage is reduced to a more manageable level.

“On the margin rebuild, we expect a reversion to mean in commodities costs and the US dollar against other major currencies would go a long way to improving profitability. Mix and operating leverage should also drive margins. In Latin America and Asia, combined almost two thirds of consolidated EBIT, the consumer is trading up to premium global brands, and AB InBev holds a strong portfolio with Budweiser, Corona, and Stella Artois, all strong brands in the premium segment.”

—Ioannis Pontikis, senior equity analyst

Editor’s Note: This article is based on the 2024 edition of Morningstar’s Best Companies to Own. Find the full list of companies and read about our selection methodology.