Indulging a Yen

For Global Investing

Every adventure begins with an inspiration. This adventure was inspired by a dishwasher.

In the fall of 1995, I set out to become a global investor, convinced that limiting my investments to the U.S. stock market -- though certainly home to some truly great corporations -- restricted my ability to profit from the growth of companies building the products, selling the goods and providing the services responsible for the economies expanding beyond America's shores.

Adapted from "The World Is Your Oyster: The Guide to Finding Great Investments Around the Globe," by Jeff D. Opdyke. Copyright 2008 by Dow Jones & Co. Published by Crown Business, an imprint of the Crown Publishing Group, a division of Random House Inc., New York.

I'm convinced that as great as the opportunities are in America, they're not the only ones the world provides. I'm convinced the U.S. dollar, despite its global reach, is not the world's only worthy currency. That compels me to seek opportunities far removed from Wall Street.

Think back to the 1990s. U.S. stocks were rocking. Barbershops became centers of investment counsel. U.S. indexes racked up double-digit gains seemingly yearly. Yet not once did the Standard & Poor's 500-stock index top the list of the world's best-performing markets.

The current decade is little different. In 2003, when the S&P bounced back from three consecutive years of bear-market losses with a 29% gain, Thailand improved by 145%. When the S&P eked out a single-digit return in 2005, more than 40 other countries' stock markets performed better.

The fact is, the U.S. market, as measured by the S&P, has never led the list. In years the S&P flagged, other markets flourished. In years the S&P flourished, other markets flourished more. The New York Stock Exchange may sit upon an island, but it's surrounded by a wide world of investment opportunities unrelated to America.

Now, I am not a professional investor. I am a journalist -- an average investor, with access to the same tools available to other average investors, namely the Internet and an email account.

New Opportunities

At the time my adventure began, international-minded investors had no Lonely Planet guide to going global. Stateside brokerage firms offered no real options, either. Those that would transact in foreign markets either demanded large purchases to justify their effort, or marked up the share price to cover their costs. Neither option appealed to a small-time investor unable to trade multi-thousand-share blocks and unwilling to pay usurious charges.

No, if I wanted to go native -- if I wanted to trade as locals do, on local stock exchanges, in local currencies -- I'd have to bushwhack the trail myself. So I did, ultimately opening accounts over the years that, combined, provide access to more than a dozen stock exchanges.

That's how I found that dishwasher.

Fisher & Paykel Appliances Holdings Ltd. is not a company many Americans knew about in the mid-1990s. However, the maker of kitchen and laundry appliances was a leader in its home country, New Zealand, and Australia, and was growing in Asia. Any investor specifically searching for consumer-oriented Pacific Rim companies likely to benefit from Asia's multidecade economic expansion would likely stumble upon Fisher & Paykel.

Yet even if they did, Fisher & Paykel wasn't a stock American investors could easily buy. To own the shares required transacting on the New Zealand Stock Exchange, nearly 9,000 miles from Wall Street. Accomplishing that would require a local brokerage account, funded with New Zealand dollars.

Equipped with a slow laptop computer and an even slower dial-up Internet connection, I trolled the Web for weeks, dispatching emails to brokerage firms Down Under, asking if they might accommodate an American. One -- just one -- welcomed me: New Zealand's now-defunct Ord Minnett Securities, where a local broker helped me open an account via emails and applications faxed across 17 time zones.

"All that remains," the broker ultimately wrote, "is wiring your funds" to a particular account, routing it through a particular bank ... on the other side of world ... to a country I've never visited.

Eagerly, I complied.

Then heard nothing.

For days.

My enthusiasm waned; worry swelled. Might this seemingly affable broker have just pocketed my thousands of dollars?

Four days later, the notice arrived by fax: The broker, who'd been away, had received the money, funded the account and purchased my shares. And, he informed me, the sum I'd wired was precisely 10 New Zealand dollars too few. On my first overseas transaction, I'd muffed my first currency conversion.

"But no worries," he wrote. "I'll cover that cost for you. Welcome to New Zealand."

With that, I was a financial globetrotter.

Lacking Purity

Certainly, you don't have to physically send your money across borders to gain international exposure. You can own American mutual funds and exchange-traded funds that hold foreign securities. You can buy American depositary receipts, the U.S.-listed shares of foreign companies such as Sony Corp., British Airways PLC and Nokia Corp., which trade in the States. You can buy shares of U.S. multinational companies such as Coca-Cola Co., Wal-Mart Stores Inc., even Starbucks Corp., expecting their presence in foreign markets will translate into meaningful exposure to overseas economies.

All those strategies are worthwhile. Yet each lacks purity. All too often, buying international mutual funds, ETFs and ADRs means owning the biggest companies in a country, ones that already are large, global corporations. That's not necessarily bad. But they typically have a sizable portion of their business tied to the U.S. consumer, making them as much a bet on America as on local economies. The same holds for multinational American firms. Sure, they generate bushels of sales overseas, but they're more often tied to movements in the U.S. economy and the U.S. stock market.

To profit from expanding local economies requires owning the small and medium-size companies rarely tied to the U.S. And the way to own those companies is to invest directly in their home markets.

When I first ventured overseas, that effort took time. Today, those opportunities are as convenient as trading stocks in America. Opening brokerage accounts in places like Hong Kong, Egypt, Australia and even Vietnam is generally no more difficult than ordering a book online.

As for researching and tracking foreign companies, consider this: A dozen years ago, researching companies required nothing more than a slow Internet connection and email. I'd sit in my office for an hour or two after work, plugging into a search engine phrases such as "banks and Scandinavia," searching for financial firms in Norway and Sweden. I'd search for hometown newspapers with online content in places such as Auckland, New Zealand, or Sydney, Australia, reading local business sections to unearth publicly traded companies.

To those that seemed interesting, I'd shoot an email to the investor-relations department requesting the most recent few years' of financial reports, which would arrive weeks later.

Today, that process is magnitudes faster because the quantity of information available online has exploded. Almost all public companies -- even those in farflung locales -- have a Web presence, and financial reports are easily downloaded. Research is available all over the Internet, ranging from brokerage firms, independent research houses and financial Web sites to industry trade associations and various stock exchanges.

Doing Due Diligence

Indeed, prior to 1995, I knew nothing about Fisher & Paykel. I first happened upon the name while reading the New Zealand Herald newspaper online. I found the company's address and sent off an email requesting the last three years of financials. After due diligence, I invested.

More than a decade later, I still own the shares.

In that time, the stock has escalated sharply, and the company has spun off a highly profitable health-care division. Along the way, Fisher & Paykel has paid a stream of dividends and special distributions that cumulatively exceed my original cost by more than 40%. All told, the investment has gained an average of more than 17% a year.

For all the years I've covered financial markets for The Wall Street Journal, I've routinely heard the investment industry counsel that owning individual stocks, much less individual foreign stocks, is not a game small investors like you and I should play. Many pros argue that individual investors should avoid fording the oceans because they haven't got the necessary skills to analyze unfamiliar companies in unfamiliar lands, operating in unfamiliar industries, according to unfamiliar accounting rules and governmental policies.

While Wall Street experts certainly agree with the need to diversify internationally, it's best, they insist, to stick your money in a mutual fund or ETF here in America. If you promise not to hurt yourself, they might suggest you deploy some "play money" in big-name ADRs.

The simple fact is that you, the average U.S. investor, can succeed in buying stocks directly overseas. You can succeed in locating brokerage firms that will gladly work with you, and in managing the little headaches that inevitably arise. And you can succeed in researching companies that today you don't even know to think about. Even if you've never set foot out of this country, you can take advantage of opportunities the bulk of American investors will never realize exist, from Ireland to New Zealand and beyond.