HomeBusinessHere's how to to buy shares in the foreign brands we love

Here’s how to to buy shares in the foreign brands we love

Some of us are old enough to remember when Remington shaver company owner Victor Kiam advertised his wares on television with the catchphrase ‘I liked the product so much, I bought the company’. 

It was an advertising sensation in 1979, but Kiam’s strategy remains an attractive one for investors today. 

Buying shares allows investors to own a slice of the businesses they use every day. And being a customer gives investors an advantage as they have personal experience of the company and a window into what it is getting right and wrong. 

Big screen: It is possible to buy shares listed abroad, such as Disney who make films like Encanto, if you’re based in the UK

But what can investors do when so many of the brands we know and use daily, from Disney to Apple and Samsung, are listed on overseas stock markets? 

The good news is that it is possible to buy shares listed abroad if you’re based in the UK. The less good news is that you pay more in charges, and may have extra administration to contend with. 

Pick of the household names from overseas 

The UK stock market is packed full of world-class energy companies and banks. But to gain access to a wider range of sectors, investors have to look further afield. For example, European exchanges are home to some of the best luxury goods firms – including LVMH, maker of Louis Vuitton bags – while Japan has strengths in electronics and robotics. The US hosts most of the world’s big tech firms. 

We asked investment experts for their top picks of companies that are household names in the UK, but that are not listed here – businesses they believe will continue to thrive on the back of a powerful brand. 

Keith Bowman, analyst at investment platform Interactive Investor, is excited about the future of US motor business Ford, which is competing with Tesla for market share of electric cars. 

‘I think Ford will emerge as the clear number two electric vehicle maker in North America,’ he says. Ford is investing more than $30billion (£22billion) in electric car production. Its shares are up 82 per cent in the past year, but still look cheap when compared with Tesla, up 6 per cent in the past year. 

Bowman also likes Disney, and believes investors currently have a good opportunity to buy as shares are down 13 per cent this year after it missed its earnings forecasts. 

Investors in Disney own a slice of superhero franchise Marvel, animated films giant Pixar and the Star Wars movies and merchandise – all of which now fall under the Disney company umbrella. 

It has also reopened its theme parks and relaunched its cruise ships after closures during the pandemic. ‘Subscriber growth and a broader recovery are likely to continue longer term,’ says Bowman. Russ Mould, investment director at platform AJ Bell, says investors should look towards Western Europe for global leaders. ‘Some of the high-quality names investors should be looking at just roll off the tongue,’ he says. 

‘France’s LVMH is a leader in luxury goods and Switzerland’s Nestlé in consumer brands.’ He adds that the Continent is also a good source of dividends for income seekers. 

Jason Hollands, managing director at investment platform BestInvest, likes US-listed trainers brand Nike. Due to its loyal customer base, Nike has the power to pass on costs when it needs to – and to cut the number of retailers that sell its products to refocus instead on selling through its own website and stores where profits are higher. 

Darius McDermott, managing director of investment platform Chelsea Financial Services, says that investors need to look to the US for the big tech companies we use every day. 

Alphabet – which owns Google – and delivery giant Amazon are both US-listed picks. Neither are cheap options. Alphabet’s share price is up 39 per cent in the past year, while Amazon’s is down 16 per cent over the same period – having fallen 17 per cent in the last month alone.

The best ways to buy stocks listed abroad 

Most investment platforms and stockbrokers allow you to buy stocks abroad but there may be extra charges. 

These come in two forms – a charge from the platform for buying the shares themselves, and a foreign exchange ‘margin rate’, which is a percentage added on to the exchange rate between the currency you are using and the one that the stock is listed in to make profit for the company doing the trade. 

If you frequently trade in stocks listed abroad, these charges can add up. For example, although Interactive Investor charges the same for investors to buy US shares as it does for UK shares (up to £7.99 a trade), it charges investors on two of its subscription plans £19.99 to buy shares listed outside of the UK. 

Not every platform charges extra to buy overseas shares. AJ Bell charges £9.95 to trade international shares online, and £29.95 to buy them by phone, which is the same as UK listed shares. 

Hargreaves Lansdown also charges the same amount – £11.95 online or one per cent if you deal over the telephone. 

However, the extra costs associated with foreign exchange conversion can still weigh on investment performance. The foreign exchange ‘margin rate’ means you lose money every time you convert currency with your broker to buy overseas shares. 

Generally, the more currency you can convert at once, the lower the margin rate you are charged, which means that you may want to buy large amounts of overseas shares at one time. 

Interactive Investor has a margin rate of 1.5 per cent – which means you’ll be charged 1.5 per cent more than the interbank rate, which is what large institutions charge among themselves. This rate tapers down if you buy big amounts of shares. 

You can also hold cash in an overseas account and use it later, meaning that you can avoid the higher charges by converting large amounts at once. 

Hargreaves only allows you to hold sterling cash balances, and when you buy overseas shares you will be charged up to 1.5 per cent above the interbank rate, depending on how big your deal is. 

You should also watch out for costs when you receive dividends in a foreign currency which have to be converted back into sterling before being paid to you. 

In the bag: Luxury brand LVMH’s stable includes Louis Vuitton handbags

In the bag: Luxury brand LVMH’s stable includes Louis Vuitton handbags

Investors may also have to pay withholding tax, which is levied by some countries on overseas shareholders who receive dividend income. It may be possible to reclaim this tax from some countries, where the UK has an agreement known as a double-tax treaty in place. 

The US government charges non US residents a withholding tax of 30 per cent on any income received from US investments. 

UK investors can claim a rebate so the most they pay is 15 per cent. Germany also has a 25 per cent to 30 per cent withholding tax charge, but you can also reclaim some of this so that you pay 15 per cent. 

You use different forms to reclaim for each country. For example, a W-8BEN form in the US. 

Hollands reassures: ‘The good news is that the W-8BEN isn’t onerous and covers you for three years.’ 

Investors in overseas shares also need to be aware of what the experts call ‘currency risk’. 

If a share is traded in a different currency, the movement of that currency against the pound can erode or magnify your returns. For example, if you invested in a fund that tracked the S&P 500 (the US’s major stock index), the returns you receive will differ depending on whether you look at them in pounds or dollars. 

In pounds, total returns for the last five years are 103 per cent, but in dollars they add up to 120 per cent.

Funds can hedge currency risk 

If the thought of extra charges and currency fears put you off buying overseas household names directly, you might want to consider investment funds that hold them. 

These still carry currency risk, but some use a strategy known as ‘hedging’ to keep it in check. 

The principle of hedging is simple. It is a way of managing risk by taking an opposite position in something related to the risk you are holding in order to offset it. 

Life insurance is a way we ‘hedge’ the risk of a major earner in our family being unable to provide for us. A fund manager might use a financial instrument known as an ‘option’ so they can mitigate the risk of any currency movement having an adverse impact on the portfolio they manage. 

James Carthew, head of investment companies at QuotedData, likes Polar Capital Technology for those who believe the recent slump in tech company shares is temporary. 

Its biggest holdings include Microsoft, Apple, Alphabet, Facebook’s parent company Meta, and graphics giant NVIDIA. Shares in Polar Capital Technology have fallen 11 per cent in the last six months, but profits are up 90 per cent overall in the past three years. 

A less racy tech option might be Alliance Trust, which has exposure to Alphabet, Visa, Microsoft, Amazon and Facebook. But they only account for 15 per cent of its portfolio. Ryan Hughes, head of investment research at AJ Bell, picks investment trust Fidelity European for access to European brands. It is up 33 per cent over three years.

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