Here’s our Club Mailbag email [email protected] — so you send your questions directly to Jim Cramer and his team of analysts. We can’t offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries. This week’s question: Hello, do you believe an international fund or international stocks are required for diversification or can diversification be accomplished domestically Thanks! The Club is great and the best gift I ever got! – Steve Diversification can take on many forms. So, we don’t view owning international stocks as a requirement to gain the benefits of geographic diversification. Rather, we would focus more on the geographic sales mix of a company. After all, we don’t need to own a Chinese company for China exposure, with Club names like Apple with 35% of revenue coming from the Asia/Pacific region, including 18% in China, or Starbucks (SBUX) at 17% revenue exposure to the Asia/Pacific region and 9% in China or Wynn Resorts (WYNN) with 19% of revenue from its operations in Macau, a special administrative region of China. Generally, the Investing Club likes to own U.S.-based companies. Sure, there’s some pride in that. The bigger reason, however, is that U.S. companies operate based on the rule of law in the United States. As such, the government here can’t simply change the rules of the game at will to fulfill the political desires of regulators or politicians. That’s not the case in many countries. A prime example is China where a CEO or a wealthy individual who steps out of line may simply disappear from the public eye for months on end. (The saga around the whereabouts of Alibaba founder Jack Ma at times in recent years sparked international interest. In June , Alibaba President Michael Evans said, “Jack is alive. He’s well, he’s happy.”) Yes, a U.S. company that operates internationally is subject to the rules in the country in which it is operating. However, it’s ultimately the home country that’s going to have the greatest influence on how a company can build and operate its business. Apple, for example, has to abide by Chinese laws for its China operations. However, CEO Tim Cook is still free to say whatever he believes appropriate without fear of retaliation from the president of the U.S. A Chinese executive, such as Ma, may not enjoy that same freedom. That’s not to say you can’t or shouldn’t own foreign companies. There are many great foreign companies that may be worth investing in, and we certainly don’t strictly limit our investing options to companies located in the U.S. Industrial gas and engineering giant Linde (LIN) is one of our holdings. It was founded in Germany – but now, it’s domiciled in Ireland with headquarters in the United Kingdom. Sometimes, it can be good to own companies based outside the U.S., especially if there are regulations in those countries that make doing business more favorable. For example, if a country offers subsidies to spur business activity there, then companies domestic to that country may have some advantage. Or, in the case of Ireland, it has a low corporate tax rate to entice companies to domicile there. These types of situations need to be considered on a case-by-case basis. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Here’s our Club Mailbag email [email protected] — so you send your questions directly to Jim Cramer and his team of analysts. We can’t offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries.
This week’s question: Hello, do you believe an international fund or international stocks are required for diversification or can diversification be accomplished domestically Thanks! The Club is great and the best gift I ever got! – Steve
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