5 Global Stocks for Bargain Hunters

American investors transfixed by domestic debacles might not have noticed that foreign markets have fallen too, in many cases further than ours. But in the eyes of some savvy investors, stocks of well-run, long-standing foreign firms have gone from pretty expensive to awfully cheap in mere months--and that free fall is creating the opportunities they’ve been waiting for. “When valuations are this extreme, people should just be buying,” says David Herro, manager of the Oakmark International fund, who has scooped up shares of French advertising firms and Swiss banks.

It wasn’t that long ago that some analysts were pushing the theory of “decoupling,” the idea that smaller foreign countries would no longer be beholden to the giant American economy for their own growth. Consider decoupling debunked by the ongoing crisis. Many foreign firms found they could not increase profits quickly when their best customers—us—started to rein in spending.

The pullback in exports to the U.S. exposed other problems in foreign economies: lax lending standards, an overreliance on commodity goods such as oil, even corruption. The result has been an expected retrenchment in worldwide economic growth, from 3.7 percent in 2007 to less than 1 percent in 2009, according to the World Bank. As the prospects for growth disappeared, world stock markets tanked.

But some analysts think foreign stocks have fallen too far. The Leuthold Group, which tracks market data worldwide, estimates that stocks in 17 of the 23 developed economies now trade near their all-time lows. Companies such as Canon, the Japanese camera company, and French advertising firm Publicis are sitting on a ton of cash with little debt and outstanding competitive positions—and they’re paying healthy dividends as they wait for a turnaround.

Of course, investing abroad carries more risk than investing in the good ole U.S.A. Foreign economies are often less stable—even in stodgy Old World places like France. And if the world’s economy sinks into a depression, stocks everywhere could drop further. But some investors think those risks are worth taking at today’s prices. To find the best values, we zeroed in on stocks from only the developed economies. Sure, Russian and Indian stocks have gotten cheap too, but they pose more risk than firms from places like Japan.
Below, five picks—all easy to buy on U.S. stock exchanges.