Every once in a while people ask about foreign companies and commodities, like Chris does below. Read on.
Phil,
I've been reading (very dangerous) about Iran's plans to start trading its oil in Euros and not dollars - they plan to start doing this some time around 03/23 - 03/28 of 2006. This information got me thinking (also very dangerous) about the Rule # 1 principles and investing/trading in other markets.
- Do you trade in international securities or do only trade in U.S. markets?
- Generally speaking, does Rule # 1 and associated investment strategies and principles apply to international trading or just to U.S. exchanges?
I'm still very new to these investment principles and not yet ready to involve myself with international trading, but out of academic curiosity, I thought I'd run this question by you and ask.
Thanks again Phil!
Christopher
Here's what I think:
Rule #1 is a universal strategy for investing. We're not prevented from finding a wonderful business at an attractive price by a national border.
In the US stock markets there are lots of international businesses for sale. Many are ADR businesses that are listed in the US markets. But many businesses that are listed as being based in the US are actually only US in name.
For example, Cognizant is pretty much an Indian business. Garmin is run from Taiwan. So we can invest in great businesses that are from anywhere. But remember the definition of a wonderful business: It is predictable well into the future.
(A wonderful business has Meaning, Moat and Management and, if we buy it cheap, it is also one that we are certain to make money on, although we may not know exactly when. For more on the 4 Ms, listen to my podcasts. You can get them on my website or in the Podcast section of the iTunes music store.)
So should you buy businesses that are owned in another country?
Just remember Meaning: Do you understand this business? If you are from France or have lived there you may be totally comfortable with buying French businesses in the French stock market. Or Argentine businesses in the Argentine stock market.
But be sure -- just like with every business -- you understand what you are buying. You've got to know it well enough to be okay with it being the sole support of your family for the foreseeable future.
Buffett tells his CEOs to run their businesses as if it's the only way their families will make money for the next 100 years. Think about it like that, whatever country you are buying into.
Now go play.
Phil
