Buying International Stocks

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 3

The following is a good article from DailyWealth about buying international stocks.  I personally just stick to ADR’s and ETF’s but if you’re interested in buying international stocks directly "like a local" this article might be helpful to you.

By Tom Dyson
I just had a long chat with Howard Goldstein and Dave Sjuggerud. Dave is Steve’s dad. He and his business partner, Howard, are international stockbrokers. They’ve dealt international stocks for more than 17 years.
I called them up because a reader e-mailed me yesterday… He wanted to buy a stock I recommended last month in my income advisory, The 12% Letter. The stock has a large market capitalization, and there’s plenty of liquidity… but it trades in Canada.

The reader told me E*Trade refused to buy shares for him because "the stock is only open to Canadian residents."

I called Dave and Howard because I wanted to find out the cheapest way to buy international stocks like this one. Today, there are more opportunities to make money outside the U.S. than inside. So to be successful, an investor must know how to buy international stocks.

The stock my reader wants to buy, for example, pays a 12% dividend, and its business situation makes for a compelling investment opportunity. I want all my readers to buy this stock.

Here’s what I learned:

First of all, E*Trade misinformed my reader. Some Canadian stocks are unavailable to U.S. investors. Limited partnerships are one example. But this stock is not one of those. U.S. investors may buy this stock.

So the problem arose because discount brokers, like E*Trade, are lazy. They don’t want to buy international stocks. It’s hard work for them. And the commissions are lower. I’ve had this problem with Fidelity before, too. Fidelity wouldn’t purchase a Toronto stock for me last year.

Because they are lazy, the discount brokers either tell you the stock is unavailable or they force you to buy the pink sheet listing of the stock instead.

The pink sheets make up a sort of mirror market. It’s like the difference between Sotheby’s and eBay. It’s not an exchange. It’s more like a bulletin board where brokers offer securities for sale. Stockbrokers call this market "over-the-counter."

If you search for international stocks in Yahoo, it’ll often bring up a pink sheet listing. You can spot them by their symbols, which have five letters and often end in the letter "Y" like SGAPY for SingTel or BAIRY for British Airways. They also have the suffix .PK or .OB.

Pink sheet dealers give bad deals. Take the stock my reader asked about. Howard could buy and sell this stock with a 2-cent bid-ask spread in Toronto. (A bid-ask spread is the difference between the price a seller will accept and the price a buyer will pay. The narrower the bid-ask spread, the closer you’re paying to a fair market price.) We called up a quote from the pink sheet market. They quoted us a 40-cent bid-ask spread.

If you must use the pink sheets to buy a stock, look up your stock’s price in the local market, convert it to dollars, and then place a limit order a couple of pennies above that price in the pink sheet market.

But I just don’t think you should buy pink sheet stocks. And in the future, when I recommend an international stock in one of my reports, I’m going to advise you not to buy the pink sheet, even if your broker won’t get the stock on the true international exchange.

Instead, I recommend you use one of three international stockbrokers our readers have worked with before. I don’t receive any compensation for mentioning these guys, nor does Stansberry Research (DailyWealth‘s publisher). I recommend them because I know them and I trust them. They have excellent reputations in the industry. And they’ll give you fantastic service, too… You can’t buy international stocks cheaper anywhere else.

Take an Australian stock for example. The Australian market trades during the night. When the U.S. market is open, the Australian market is closed. But a pink sheet dealer will give you a quote on an Australian stock during normal U.S. market hours. How can he do this? He’ll make you pay a wide spread to cover his risk. His risk is that the Australian stock moves sharply when the market opens the next day.

But when you use Howard and Dave, they’ll keep your order open until the international market opens, and buy the stock direct… even if it means they have to wait until midnight to fill your order.

"Tell your readers to call us after they’ve called all their other brokers," said Howard. "Why? Because I know we’ll give them the best deal."

Howard says he pays spreads on shares in Australia, Hong Kong, and China that are so small, you can’t even calculate them.

It’s easy to do business with these guys, too. They can have your account open in about 24 hours… and loaded with your favorite international shares… at the same prices the local brokers in those foreign countries pay.

Related Articles

The One List You Need to Profit from "Chimerica"

These Canadian Income Trusts Will Keep Paying Huge Dividends

You can call Howard at 1-877-539-1004 or e-mail Hgoldstein@lasallest.com. Our readers have also done well with Rick Rule, who specializes in commodity stocks (1-800-477-7853, www.gril.net) and Jeff Winn (1-800-432-4402, Jwinn@iaac.com).

The discount brokers have their place… but for the cheapest trades on international stocks, you should work with brokers who know what they’re doing and can provide you with the best prices. Investors who know how to buy international stocks have many more opportunities open to them. Make sure you’re not missing out.

Good investing,

Tom

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Comments on Buying International Stocks »

June 3, 2008

Tom Sheldon @ 9:58 am

Buying international stocks is so difficult. Most times I never know the TRUE cost until after the trade. The “middleMan then gets his
cut.

I am new at this so please be patient. I was quoted a commision fee of $19.95 +15 BASIS POINTS. I don’t know what or how to figure that STAT in. The stocks asking price will be $33.20.
Could you show me how to calculate that.

I am looking to by of the Oslo Exchange, do you have a recommendation for a broker?

Thank You, Tom Sheldon

Tate Dwinnell @ 11:00 am

Tom, 15 basis points is equivalent to .15%.. that gets to be a mighty expensive commission! Sorry, but I have no recommendations at this time.

July 2, 2010

Tonja @ 1:36 am

Hi, this may be a stupid question but I am completely in the dark about the stock market.

Can you lose more than you invest?

Thanks!

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