International Stocks

Capture a World of Opportunities with Internationl Equities


The best values in stocks may be outside the U.S. – and can provide much-needed global balance to the average portfolio.


It's a Big World Out There

Over 60% of the world’s stock market capitalization is located outside the U.S. Yet investors here allocate only a small part of their portfolio to international investments.


Proportion of world's equity market capitalization
 

Value in Trillions


Source: Bloomberg, as of March 31, 2019. World market capitalization represented by Bloomberg World Exchange Market Capitalization Index, ex-U.S. U.S. market capitalization represented by U.S. portion of Bloomberg World Exchange Market Capitalization Index.

 

Names Worth Knowing

It’s important to recognize that some of the world’s best-known brands are managed by companies overseas – Nestle, Samsung, LG, Toyota, Good Humor, 7-Eleven and more.

Yet for each of these, there are many more firms on the rise with the potential for rapid growth – but they are relatively unknown in the U.S. Some have dominant positions in large home markets, like premium jeweler Titan, in India. Others are leaders in niche markets, but lack widespread brand recognition due to the focused nature of their business, such as Cochlear, the Australia-based global leader in cochlear implants, or Benefit One, Japan’s largest human resources outsourcing firm.

 

Different Market Cycles

Market cycles aren’t the same everywhere around the world. The U.S. is currently outpacing the world in terms of equity performance, but a look back at history shows this hasn’t always been the case. When international stocks do outperform, investors who’ve allocated to them may enjoy a diversification advantage.

International and U.S. Stocks Have Alternated Periods of Leadership

U.S. vs. International Stocks: Rolling 3-Year Returns


Source: Bloomberg, as of 12/31/18. International stocks are represented by the MSCI EAFE Index. U.S. stocks are represented by the MSCI USA Index. The MSCI EAFE Index is an unmanaged index of equity securities from developed countries in Western Europe, the Far East, and Australia. The MSCI USA Index is a market capitalization-weighted index that measures the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.

Elisa Mazen
Managing Director, Head of Global Growth, Portfolio Manager

A Stock Fund Challenges the Definition of Growth. It's Paying Off.

capturing-opportunity-in-international-stocks-video-thumbnail

Capturing Opportunity in International Stocks

Watch portfolio managers from ClearBridge Investments, Martin Currie, QS Investors and Royce & Associates discuss what’s driving opportunities in international markets.

Insights


Martin Currie

Are Emerging Markets on Your Radar?

EM equities can help enhance long-term portfolio growth, supported by positive trends and new corporate leadership. 


Royce & Associates

Putting International Small Caps on the Map

The case for a strategic allocation to international small caps is well supported by historical data.


 


 

3 Ways to Tap into International Opportunities

Maintaining a core international allocation within a total portfolio makes it possible for investors to participate in the success of a broader range of firms. What’s more, it can diversify the political and economic risks associated with overreliance on one market. 

These active strategies take a selective approach to investing in three key international sectors. 

Martin Currie Emerging Markets Fund (MCEIX)

Did you know that by the year 2030, nine out of the world’s top 10 cities will be in emerging markets? From Mexico City to Beijing, the expanding urban population is contributing to the rise of cities and the middle class.1

 


Projected GDP growth, 2019-2023

 

Source: International Monetary Fund, World Economic Outlook Database, October 2018.

 

Fund Highlights:

  • Seeks to take advantage of long-term demographic trends by investing across emerging market countries and sectors
  • Overall 5-star Morningstar Rating (Class I); Overall 4-star Morningstar Rating (Class FI), as of 3/31/19
  • Offers the potential for greater returns for those investors comfortable with a higher degree of volatility

Class I and FI shares rated among 707 Diversified Emerging Markets Funds, based upon the risk-adjusted returns derived from a weighted average of the performance figures associated with 3-, 5- and 10-year (if applicable) Morningstar ratings2

 

International Equity Insight

Are Emerging Markets in Your Growth Plan? 


Many investors have historically been hesitant to invest in emerging markets, concerned about currency volatility, political instability and an overreliance on commodities. Yet this view is increasingly outdated as the sector evolves.

ClearBridge International Growth Fund (LMGNX)

One size definitely does not fit all when it comes to international stocks, given rapidly changing market and economic environments.

 


A Differentiated Approach to Growth May Enhance Potential
for Success in Many Environments

 

 

Source: ClearBridge: For informational purposes only, and is not representative of any specific allocation. Allocation percentages fluctuate over time.

 

Fund Highlights:

  • Seeks to enhance diversification by allocating across market caps and three distinct types of growth companies - Structural, Secular and Emerging
  • Overall 5-star Morningstar rating (Class I as of 3/31/19)2
  • Can provide a core international allocation for investors seeking to take advantage of global growth potential

Class I shares rated among 373 Foreign Large Growth Funds, based upon the risk-adjusted returns derived from a weighted average of the performance figures associated with 3-, 5- and 10-year (if applicable) Morningstar ratings2

 

International Equity Insight

Diversifying Risk in International Stocks


ClearBridge's Elisa Mazen explains why an active approach to diversifying international growth stocks may make more sense.

Royce International Premier Fund (RIPNX)

International small caps may seem like a surprising choice for diversifying your stock allocation. But these stocks outnumber U.S. stocks by more than 2:1, creating an investment universe too big to ignore.

 


Compared with U.S. and Small-Caps, there are:


Source: FactSet, as of 12/31/18. ”U.S. Small-Cap” is represented by the Russell 2000 Index, an unmanaged list of common stocks that is frequently used as a general performance measure of U.S. stocks of small and/or midsize companies; “International Small-Cap” is represented by the Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) ex USA Small Cap, an unmanaged, capitalization-weighted index of global small-cap stocks, excluding the United States. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.

 


Fund Highlights:

  • Invests in premier smaller-cap companies across both developed and emerging market countries
  • Complements a core international allocation through exposure to a much wider and diverse asset class

 

International Equity Insight

Putting International Small Caps on the Map


The case for a strategic allocation to international small caps is well supported by historical data.

 
Footnotes:

1Source: "World’s Cities in 2016 - Data Booklet"; by United Nations, Department of Economic and Social Affairs, Population Division.

2The Morningstar Rating™ for funds, or “star rating”, is as of March 31, 2019 and is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history, and subject to change monthly. Current monthly ratings can be found at leggmason.com. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total return, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total return. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Ratings do not take into account the effects of sales charges and loads. Class I shares of ClearBridge International Growth Fund were rated against 373, 314 and 228 Foreign Large Growth funds over the 3-, 5- and 10-year periods, respectively. With respect to these funds, Class I shares of the Fund received Morningstar Ratings of 5, 5, and 5 for the 3-, 5- and 10-year periods, respectively. Class I shares of Martin Currie Emerging Markets Fund were rated against 707, N/A and N/A Diversified Emerging Markets funds over the 3-, 5- and 10-year periods, respectively. With respect to these funds, Class I and FI shares of the Fund received Morningstar Ratings of 5, N/A, and N/A and 4, N/A, and N/A for the 3-, 5- and 10-year periods, respectively. Ratings shown are for the highest and lowest rated share classes only, when available. Morningstar Rating is for the specified share class(es) only; other classes may have different performance characteristics. A 4- or 5-star rating does not necessarily imply that a fund achieved positive results for the period. Overall ranking shown for Class I shares which are not generally available to retail investors.


Disclosures

International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.

Bloomberg World Exchange Market Capitalization Index calculates the market capitalization from all shares outstanding. WCAP data does not include ETFs and ADRs as they do not directly represent companies. It includes only actively traded, primary securities on the country’s exchanges to avoid double counting as well. Therefore the values will be significantly lower than market capitalization values of a country’s exchanges from other sources. The Bloomberg World Exchange Market Capitalization, ex U.S. index excludes U.S. securities.

 

IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s web page for specific details regarding investment objective, risks, performance and other important information. Review this information carefully before you make any investment decision.

Carefully consider a fund’s investment objectives, risks, charges and expenses before investing. Please view the prospectus or summary prospectus for this and other information. Read it carefully.

FINANCIAL ADVISORS: Please note that not all share classes may be available for sale at your firm. Please call the Legg Mason Sales Desk 1-800-822-5544 or your Legg Mason Sales contact for more information.

Active management does not ensure gains or protect against market declines.

Equity securities are subject to price fluctuation and possible loss of principal.

Diversification does not guarantee a profit or protect against loss.

Outperformance does not imply positive results.

The information presented here is general in nature and does not constitute legal advice on any particular matter. Please note that all references to third-party corporations and websites do not constitute a recommendation or endorsement by Legg Mason Investor Services, LLC.