Let’s use an example of a publicly traded Australian company.
As we've discussed recently, the Aussie dollar has been beaten down, and is very likely to continue appreciating against the US dollar.
If you hold your savings in US dollars (USD), you could diversify internationally by purchasing
shares of a company that trades in Australian dollars.
And in doing so, you could open yourself up to solid returns in three different ways:
1. Currency Appreciation: As the currently overvalued USD corrects and the Aussie dollar
appreciates, your return will increase.
2. Income: Simultaneously, the company whose stock you purchase pays you a consistent
dividend …which means you’ll receive a solid return year after year in the form of dividend
3. Capital Appreciation: And finally, by purchasing a well-managed, growing company trading
at a discount to its tangible assets, your overall return will increase as the share price increases.
Here's why this is so important:
It's typical for companies listed on a stock exchange to be trading for several times their book value (which is essentially a way of measuring a company's net worth --- all of its assets subtracted by all of its liabilities).
However, rather than buying some US company trading at 16X book value (like McDonalds), you can buy companies on the Australian or Singapore stock exchanges selling for a massive discount on book value (in some of these deep value cases, less than half of book value).
That means we make money on these investments if the company simply makes it to its book value, let alone if it makes to back to a logical market valuation of several times book value.
PLUS, we make money when the currency of the stock appreciates...
PLUS, we make money because we invest in well run companies that generate positive cash flow (which means they pay us dividends).
Frankly...it's hard to lose with this strategy. You're taking on limited risk while exposing yourself to a significant upside opportunity.
As far as risk-adjusted returns go, this is one of the greatest options available.
Here's a great example of the type of deals available to rational investors like you and me today: