all that number crunching yields is a picture of just which markets have the greatest potential for gain, and just how cheap that potential is at any given time.
What advice does Weddington have for individual investors? First off, he feels that they can target as much as 50% of their portfolios for overseas investing. That might be a bit much, especially if international investing is new to you. Start slowly, since on average, professional portfolio managers stateside have now positioned approximately 10% of their assets abroad. Weddington recommends that you look at country markets first and foremost, since his research points to the highest gains being made on a market-by-market basis and not necessarily from individual stock picks. Weddington currently likes the U.K., where gross domestic product has been very strong the last six months. He figures a rebound in the Japanese market should last the rest of the year. Malaysia, he says, continues to grow at a very rapid rate, while the Netherlands, his last market pick, is showing positive signs.
Weddington advises individual investors to go for open-ended country- based mutual funds. So, taking his country picks, we turned to Lipper Analytical Services and had the research firm screen for mutual fund picks that focused on Weddington’s favorite nations. We looked for funds with the heaviest weightings in Weddington’s countries, then ranked them according to annual returns. Wright Equity: Netherlands Fund was the top pick in the Netherlands with a 36.25% for 1996 and a 14.69% average annual return on a five-year basis. In the U.K., Alliance New Europe beat all comers with a 14.09% average annual return over the last five years. The two Asian plays have lesser track records. In Japan, Merrill Lynch’s Pacific Fund came out on top with a 6.54% average annual return on a five-year basis. Remember, Japan’s a comeback play, with potential we’re all aware of. The fund with the best ranking in Malaysia was Vanguard International Index for Emerging Markets with a 7.38% annual return in 1996.
COUNTRY WEDDINTON’S VIEW
UNITED KINGDOM The equity markets remain inexpensive. The last two quarters’ GDP growth is in excess of long-term trend.
JAPAN Recent rebound should extend through 1997.
MALAYSIA Strong growth potential.
THE NETHERLANDS Positive outlook due to cyclical upswing.