Here’s how to find the best U.S. stocks to buy for international portfolio diversification

Look for blue chips with a history of paying dividends to find the best U.S. stocks to buy for increased portfolio returns

We recommend that most Canadian investors look for the best U.S. stocks to buy and invest, say, 20% to 30% of their portfolios in those stocks in order to improve the diversification and growth potential of their investments.

You pay more in Canadian dollars when you buy U.S. stocks, of course. But on the other hand, you get more Canadian dollars back when you sell.

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Look in the Consumer sector to discover many of the best U.S. stocks to buy

One of the five main economic sectors for investing is the Consumer sector—and the U.S. provides Canadian investors with some great picks. Companies like Procter & Gamble, McDonald’s and the spice company McCormick and Co. are all in the Consumer sector. Most top consumer stocks benefit from continuous, habitual use and have a steady core of sales, regardless of the economy and business cycles. These companies typically make products like soap or soup.

Furthermore, top consumer stocks can help provide protection against economic downturns because they are apt to fall in the middle, between the more volatile resources and manufacturing companies and the more stable Canadian finance and utilities companies.

At the Successful Investor, we like high-quality blue chip consumer-product companies because they can provide stability during economic or stock market slowdowns.

Strong consumer product companies share a number of characteristics. These include geographic diversity to protect them from regional economic difficulties, a record of rising cash flow and strong balance sheets. All these are also characteristics of top blue chip stocks.

Look for blue chips with a history of paying dividends to find the best U.S. stocks to buy to strengthen your portfolio

You can still look at blue chips as the strongest and most secure stocks on the market.

When assessing blue chip companies that are good companies to invest in, you need to ask: What are they doing to remain vital? These companies hold strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace. Below is a look at more criteria of top blue chip stocks.

  • Blue chip investments should have industry prominence if not dominance: Major companies can influence legislation, industry trends and other business factors to suit themselves.
  • Blue chip investments should pay dividends: Review a company’s 5 to 10 year record of paying dividends. Companies can fake earnings, but dividends are cash outlays. If you only buy dividend-paying value stock picks, you’ll avoid most frauds.
  • Good blue chips have low debt: It doesn’t matter if you’re investing in blue chip stocks or penny stocks, the company under consideration should have manageable debt. When bad times hit, debt-heavy companies often go broke first.
  • Good blue chip investments have the freedom to serve (all) shareholders: High-quality stock picks must be free of excess regulation, free of dependence on a single customer, and free from self-dealing insiders or parent companies. Canada-wide is good; multinational better. There’s extra risk in firms confined to one geographic area.

Look for the best U.S. stocks to buy and you will have all the international exposure you need

Our view on foreign investing is that U.S. stocks can provide all the foreign exposure most investors need. We also feel that virtually all Canadian investors should have, as mentioned, say, 20% to 30% of their portfolios in the U.S. stocks we recommend in Wall Street Stock Forecaster.

If you do want to add more foreign content, you could buy individual stocks from other countries. But for most investors, directly investing in foreign stocks can add an extra layer of risk and expense. As well, timely and accurate information about overseas companies is not always available, and securities regulations vary widely between countries. It can also be hard for your broker to buy shares on foreign markets without paying a premium. Tax rules and restrictions on transferring funds between nations add further uncertainty and cost.

Use our three-part Successful Investor approach to pick the best U.S. stocks to buy

  1. Invest mainly in well-established, dividend-paying companies, with a history of rising sales if not earnings and dividends.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities.
  3. Downplay or avoid stocks in the broker/media limelight.

Some investors believe in crash-proof blue chips stocks. How do you feel about this descriptor?

Aside from blue chips, what do you think are some of the best U.S. stocks to buy right now?


  • Normand

    Remember Eastman Kodak when it lagged every single competitor in acknowledging the digital revolution? I was hard hit when they crashed and I learned two lessons: there is no such thing as a crash-proof blue chip stock, and a prudent investor should very, very rarely average down when a stock turns sour. And how about Bethleem Steel, Citigroup, GE, Sears, or GM? Blue chip stocks can fall like any other stock when management fails to recognize that the times are changing, invests heavily in business ventures they know nothing about, have a rubber-stamp board of directors, or are more preoccupied with short term profits, lavish salaries, perks, and bonuses than the company’s long term growth. No company is immune to such ills. But in the end, blue chips are great, if none of them individually represents more than say, 5% of your portfolio.

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